2012-13 Nanuet School Budget Projects $600,000 in Cuts

Despite the holiday season, there was dismal news at Tuesday’s School Board meeting. Phil Sions, assistant superintendent for business, updated the board on the financial status of the district. The projected 2012-13 budget shows that there is $594,968 in anticipated cuts because of the 2 percent tax levy cap.

He began with putting the current economy in perspective with a few stats:

• 13.3 million people unemployed
• 5.7 million have been unemployed for more than 26 weeks

“Things are turning around a little bit. The stock market went up 337 points today,” he said. “It’s not where we were a year ago, but we’re not out of the woods just yet.”

He then looked at the past years’ milestones before diving into the tax levy and budget projections.

This is the first in a 2-part article series about the school’s projected budget. Check Patch later today for the second article, which will look more in depth at the packet Sions prepared for the meeting as well as the board's discussions on the repercussions and possible future cuts. That packet is attached to this article.

A Summary

Sions explained that the district’s revenue is restricted because the tax levy is stopped at 2 percent.

“You’re not allowed to increase the revenue that you might need to do more programs or whatever you may need,” said Sions. “We can’t do anything on the revenue side because we’ve been capped so the only choice we have is to cut.”

Then and Now

“We had successful negotiations with the teachers union that helped the budget crisis considerably,” said Sions. “Pfizer has been settled. We managed to get a 45 percent reduction … in their taxes. It could have been a lot worse. We’re just now trying to move that through the next five years. Had we gone to court and lost, it would have been a devastating judgment.”

“That’s behind us, that’s good news,” he added. “But then we have some more bad news. The guys up in Albany are the Grinches this year because they passed a 2 percent tax cap.”

Tax Levy

“The law says that, basically, a school district cannot increase its tax levy more than 2 percent from the previous year’s levy,” said Sions. “There’s a caveat to that … if the CPI (Consumer Price Index) is lower than 2 percent, then it’s the CPI. It’s naturally whichever is lower. This year, the November CPI is 3.5 percent so we go to the 2 percent and we don’t get to have the 3.5 percent.”

Public Misconceptions

Sions stressed that a 2 percent tax levy increase does not equal a 2 percent tax rate increase limit. “So, just because the levy goes up 2 percent, that does not translate into your tax rate going up 2 percent. You’ve got a lot of other variables (like) equalization rate, the Pfizer settlement, homestead, non-homestead. People mistakenly believe that whatever the tax levy increase is, that’s what their tax rate is going to increase by so people were totally surprised last year when they saw the levy and the budget go down, but their taxes went up in both towns.”

“One part of town got a 14.5 percent increase in taxes while the other part of town got a 4.5 tax increase,” said Board President Anne Byrne. “And that’s with a below zero tax levy. People are thinking they’re going to have a cap of two percent and it’s a misnomer. It’s not the case.”

“Yes we have to dispel that notion,” said Sions. We have to make sure that the community understands that.”

The Before—Budgeting in the Past

“In the good ol’ days, … you developed a budget that reflected the mission of the school district. A budget was nothing more than a reflection of your educational program. Once the budget was completed, then a tax levy was calculated.  The levy basically provides most of the revenue necessary to support the expenditures that are appropriated by the taxpayers in the annual budget vote. Most of our budget appropriations are funded by that levy.”

Sions added that there’s also state aid, but that has been declining.

The After—Projections

“Beginning in the 2012-13 school year, … under the new tax law, the tax levy, not the budget is determined first by a formula that uses the previous year’s levy as a baseline,” said Sions.

The education program is driven by the budget and the budget is driven by the tax levy.

“So this basically in turn forces difficult choices. Our projections freeze state aid at its present level and hope that it doesn’t get cut because we’ve got a $3.5 billion deficit in the state. Although with this new tax increase, I think that’s been cut in half.”

“We get state aid, which has been declining recently. We don’t know what’s going to happen there. There’s talk that we might get a 4 percent increase. I’ll believe it when I see it,” said Sions.

Super Majority

“It’s like the school district has been put on an allowance determined by politicians in Albany,” said Sions. “There is a loophole. A school district is allowed to put up a levy—because you’re going to vote on a levy this time, not the budget—that has a greater increase than 2 percent, but you need a super majority, which is 60 percent of the vote.”

But there’s a catch.

“The catch to that is, if you put it up for the 60 percent and you lose, you have to go back to the previous year’s levy and the effects of that could be devastating: 0 percent increase," said Sions.

“There may be a point where we’ll be forced to go out (to the community) and say, we need your 60 percent. If we don’t do this, we’re going to lose a lot,” added Sions. “There are districts right now that are going out and trying for the 60 percent because they just can’t do it without just emptying the place out.”

“There are school districts in the state of New York that are going to go bankrupt this year because of this and they already depleted their reserves,” said Byrne.

“But we’re stuck with this for four years and this is the first year,” said Ron Hansen, board vice president.

“Massachusetts has been doing this for a few years now and how they do it is every five years, they go out for the super majority,” said Byrne.

Money from the Reserves

 “I would recommend to the board that we go for the two percent levy. The only way you could get that $594,968 down is to bring in money from the reserves,” said Mark McNeill, superintendent.

“Fortunately we have a lot of reserves and that’s going to help out a lot, unlike some school districts, which have depleted their reserves,” said Sions.

“So in retrospect, we really hurt ourselves because we shouldn’t have applied the reserves to 11-12,” said Ron Hansen, board vice president. “If a district knew that the tax cap was coming, they could have said, we’re not going to dig into the reserves so that next year it’s not so bad.”

“Yes, but what we also knew was also coming was the Pfizer impact,” said McNeill. “For that reason, we sought to put whatever reserves we could in to sufficiently bring the tax levy below zero so whatever the tax rate became, it was totally attributable to the shift in the assessment and Pfizer and not influenced by our budget. The thing about reserves … the levy could be addicted to it and when reserves dry up, all of a sudden there’s a huge spike in the tax levy. It’s a delicate balance.”

“Every year, you try to come down,” said Board Member Sarah Chauncey. “You have this new number you have to meet. So what we take from the reserves will keep going up.  You’re continually depressing your base budget and I don’t understand how you don’t have to keep cutting programs to meet the goal of the tax levy.”

“I don’t know how either, you just keep getting squeezed tighter and tighter,” said Sions. “They’re asking us to come up with a tax levy of 2 percent when the CPI is up 3 percent and we’ve got 15 percent increase in pension cost and the increase in health care cost. It’s not in the real world.”

 “If you try to follow this (2 percent) you’re going to continually cut your program,” said Chauncey. “It’s going to take less time to deplete the reserves than we think.”

“We have an added advantage in that we do have the maximum fund balance allowed,” said Sions. “If you got in a real jam and your reserves got depleted, you could appropriate fund balance. Hopefully you wouldn’t have to do that but you do have that cushion. It’s pretty much you have to wait it out until the four years are over and hope that this goes away.”

“Debt reserve is gone as of this year,” said Sions.

This is the first in a 2-part article series about the school’s projected budget. Check Patch later today for the second article, which will look more in depth at the packet Sions prepared for the meeting as well as the board's discussions on the repercussions and possible future cuts. That packet is attached to this article.