At the Feb. 13, board of education meeting, Assistant Superintendent for Business Dr. Andrew Van Alstyne continued his series of budget presentations, this time on state aid and the tax levy limit. While hisWhile his previous presentation covered Foundation Aid, Dr. Van Alstyne briefly reviewed the two changes Governor Kathy Hochul proposed to the funding in her 2024-25 Executive Budget and how it will affect Guilderland’s tax levy limit.
Recap on Foundation Aid
Before diving into a discussion on the tax levy limit, Dr. Van Alstyne provided a short synopsis on Foundation Aid and the estimated amount the Guilderland Central School District will receive for the 2024-25 school year.
WHAT IS FOUNDATION AID?
Foundation Aid is the largest source of state aid and uses an evidence-based formula to ensure every child in New York state has access to “a sound, basic education.” It takes into account the cost of educating a student successfully, adds additional funding for high-needs students, and considers how much a district can provide locally due to its fiscal capacity. The 2023-24 school year is the first year every school district in NYS received its full Foundation Aid after the governor’s commitment to fully fund the measure back in 2021. Prior to the governor’s commitment, GCSD consistently failed to receive its full Foundation Aid amount, resulting in a loss of approximately $4 to $5 million each year over the last decade.
While it’s historic for every school district to receive their full Foundation Aid, the amount they’re allotted in the future could be significantly impacted by changes to the Foundation Aid formula proposed by the governor in her 2024-25 Executive Budget.
GOVERNOR’S PROPOSED CHANGES TO FOUNDATION AID
In her 2024-25 Executive Budget, Governor Hochul proposed two changes to the Foundation Aid formula: ending the practice of “save harmless” and modifying how inflation is applied to the Foundation Aid formula.
“Save harmless” is a longstanding policy NYS has used to hold school districts harmless – or save harmless – from loss, ensuring they don’t receive less aid in a school year compared to the previous one. Governor Hochul has proposed ending this practice, which will largely affect districts in rural and small communities. Declining enrollment has been the main contributing factor since most of these districts were fully funded prior to the Foundation Aid phase-in. While this change would not affect GCSD, it’s important to note because eliminating save harmless would put small and rural school districts in serious financial straits, significantly affecting future statewide education funding.
The second proposed change to the Foundation Aid formula is how inflation is accounted for. Currently, inflation is adjusted each year to determine a school’s district’s Foundation Aid. Under the governor’s proposal, inflation would be calculated by using a 10-year average and dropping the highest and lowest figures.
Dr. Van Alstyne utilized numbers from the governor’s executive budget proposal to show that Guilderland would face a $326,000 funding gap if the governor’s proposed change is adopted, which would also considerably affect the district’s aid in the future.
Tax Levy Limit (Property tax cap)
The property tax levy is the total amount of property taxes a school district collects. It is important to understand how the property tax cap works and the restrictions on how much money a district can propose in a school budget.
Property Tax Cap Formula
Every year, school districts are required to calculate a “maximum allowable tax levy” under the property tax cap law. This is calculated according to a formula provided by NYS:
- The district must follow an eight-step formula determined by NYS; school districts have no control over the formula.
- The formula limits the increase in the vast majority of expenses to 2% or less based on the preceding calendar year consumer price index (CPI).
- The result of the formula determines the amount that property taxes can increase, setting a threshold for voter approval.
- If the tax increase proposed by the district is less than the threshold amount, the budget must pass with 50% or more of the voters voting “yes”.
- If the tax increase proposed by the district is greater than the threshold amount, the budget must pass with a supermajority or 60% or more of the voters voting “yes”.
- If the budget is ultimately defeated, no increase in the tax levy is permitted.
A step-by-step look at the tax levy limit calculation for GCSD:
- Start with prior year’s tax levy: $80,302,434
- Multiply by the tax base growth factor. This number is provided by New York state; it is comprised from an escalation of property values and new construction values: 1.003%
- Add the prior year’s Payment in Lieu of Taxes (PILOTS): $83,534
- Subtract the capital expenditures net of state aid, which is debt incurred over time from projects such as bus purchases or capital improvements: $2,153,898
- Start formula again with the adjusted prior tax year levy: $78,497,068
- Multiply by the allowable levy growth factor, which is the lesser of the consumer price index (CPI) or 2%. This year the CPI is approximately 8.0% but NYS law only allows an increase of 2%: 1.02%
- The product is the gross adjusted tax levy subtotal: $80,067,010
- Subtract next year’s PILOTS: $0
- Exclude ERS or TRS (Employee Retirement System, Teacher Retirement System) expenses. This is the first time in 10 years school districts are allowed to exclude these expenses since the rate has grown more than 2 percentage points: $11,887
- Arrive at the tax levy limit: $80,078,897
- Add the capital expenditures net of state aid: $2,398,671
- Arrive at the maximum allowable tax levy amount: $82,477,568
- The maximum allowable increase is $2,175,134 or 2.71%
It is important to note that these calculations are preliminary and some pieces of data may change.
Tax Cap and Inflation
Following the calculation of the district’s estimated tax levy limit, Dr. Van Alstyne compared the tax cap with inflation. Historically, these aspects of the budget have coincided with each other; however this trend changed during the 2021-22 school year when inflation peaked at 8% while the tax cap was at 3.01%. Although inflation has since decreased, it remains high for 2024-25 at 4.12% with the tax cap at 2.71%. Under the governor’s proposal, GCSD would be “doubly hit with inflation” according to Dr. Van Alstyne because of the annual adjustment to inflation, compared to the current Foundation Aid formula that uses the prior year’s figure.
Superintendent’s draft budget proposal will be shared March 5, 2024
Superintendent of Schools Dr. Marie Wiles will present the first draft of the budget for 2024-2025 at the Mar. 5, 2024 Board of Education meeting. This draft budget is subject to revision but will provide the Board of Education with a document to work from before adopting a final budget at the April 16, 2024 meeting.
Important upcoming dates
- March 5, 2024: Superintendent’s Budget Presentation
- March 12, 2024: Budget Workshop Q&A
- March 26, 2024: Board of Education Budget Work Session
- April 16, 2024: Board Action to Adopt the Proposed Budget
- May 7, 2024: Budget Hearing
- May 21, 2024: Budget Vote and Election