February 17, 2011

Testimony: Mandate Relief and Real Property Tax Caps

Source: NYSUT Legislative Department


Testimony of Andrew Pallotta, Executive Vice President New York State United Teachers to the Senate Standing Committee on Local Government and the  Senate Standing Committee on Education Regarding Mandate Relief and Real Property Tax Caps

February 17, 2011

Good afternoon Chairman Flanagan, Chairman Martins and the members of the Senate Education and Local Government Committees.

I am Andrew Pallotta, Executive Vice President of New York State United Teachers.

NYSUT is a statewide union representing more than 600,000 members.  Our members are pre-k to 12th grade teachers, school related professionals, higher education faculty, and other professionals in education and health care.

Thank you for the opportunity to address you today.  As both taxpayers AND educators our members support property tax relief while preserving vital programs and services.  It is well known that high property taxes have the most negative impact on low and moderate income working families and on seniors with fixed incomes.  These populations must shoulder the burden of property taxes regardless of their ability to pay.

Whether your concern is making the provision of educational services more efficient, increasing education spending, addressing inequities in school funding, or improving programs, virtually all agree that working families and seniors on fixed incomes need tax relief.  NYSUT has supported this relief in the form of additional state and federal aid to schools, as well as through a property tax circuit breaker.

To best address the issues of real property tax relief, mandate relief for local governments and the concept of a tax cap, we must first understand the pressure school districts have been placed under by the Governor’s executive budget proposal.

Our schools are facing a perfect storm of a $1.5 billion dollar state budget cut, a drop off in federal revenue, proposed new cost shifts to school district, and the threat of an ill-conceived tax cap.  The Executive Budget proposal alone would devastate our schools by imposing massive cuts on public education — the worst in a generation.  Couple that will several hundred millions of dollars in cost shifts and add in artificial limits to local districts’ ability to raise revenue locally and you have a recipe for financial disaster.  If these policies and cuts are enacted as proposed, we will hollow out the quality of public education for years to come.

NYSUT members are doing everything they can to provide the services students need — finding cost-savings and economies of scale and dealing with the impact of layoffs and position losses.  NYSUT and our locals have made it clear we are willing to work locally and at the state level to preserve essential services, but we can’t cut our way to educational excellence.

Even though New Yorkers want and need tax relief, an ill-conceived and irresponsible tax cap will provide only the illusion of relief.  If you have difficulty paying your property taxes or believe your taxes are too high, a tax cap will not help you.  It is a gimmick and it would have a permanent, chilling effect on a community’s ability to fund its schools.  NYSUT supports a circuit breaker as the best mechanism to provide property tax relief to those who need it the most.

The Governor has advanced and the Senate has passed a Program Bill that includes a tax cap for school districts that is not the two percent that the Governor advocated for previously, but rather a zero percent tax cap.  The school budget vote is eliminated and replaced with the tax levy proposition and the provisions of law relating to contingency budgets are eliminated as well.

By establishing an automatic zero when propositions are voted down, New York state would be abdicating its responsibility for ensuring a sound education for every child and would sentence thousands of children in less affluent areas to unequal access and unequal opportunity. It would make it impossible for districts to plan, to make multi-year commitments or establish economies based on multi-year contracts.

Here in New York, as negotiations between the Governor and legislative leaders continue, it is essential to learn from history and reject problematic provisions. Additionally, any potential tax cap plan must be designed as a temporary measure so that we can revisit its impact and reevaluate its necessity in better economic times.

There are many examples of damaging tax caps in California, Illinois, Indiana and Massachusetts. A hard two percent tax cap would result in thousands of layoffs, devastating cuts to programs and the loss of vital public services. If the governor's tax cap proposal had been in place last year, it would have meant a $600 million revenue loss for districts statewide. A recent report by the New York State School Boards Association estimated that a damaging tax cap could result in the loss of more than 13,000 educator jobs in New York State this year alone. This is on top of the loss of 10,000 education jobs as a result of last year's budget cuts.

In the Governor’s Program Bill the only exclusion to the cap is the tax levy needed to support voter approved capital expenditures. An arbitrary cap that fails to take into consideration rising costs beyond the control of school districts is a blunt instrument that would damage education and efforts to create equity for all children. Evidence from other states has shown that poorer districts have a harder time mustering the votes to spend more than a cap, only widening the achievement gap for children of color and for children who live in poverty. The undemocratic proposal to require a 60 percent majority to override is especially problematic. The proposed tax cap would erode democracy — because 41 percent of the electorate could veto a proposition supported by the majority of voters.

Tax caps can be particularly harmful if adopted during a weak economy and without the state aid our schools have been promised. Billions of dollars in Foundation Aid remain unpaid to school districts and this is funding that was intended to support every child's constitutional right for a sound basic education. Evidence has shown us, when school aid is funded, property taxes are held down.

As a member of Governor Cuomo’s mandate relief team, I have had an opportunity to be part of the dialogue on mandate relief with many other stakeholder groups and I have come to the universal conclusion that  true mandate relief is in the eye of the beholder.

While some would suggest that gutting basic labor rights found in the state’s Taylor law or destroying the state’s public pension system, the strongest public pension system in the nation I may add, are viable ways to achieve mandate relief for local governments and school districts, we would vehemently disagree. Seeking to abolish basic labor protections or destroy the public pension system should not even enter the debate when we are discussing true mandate relief that will provide real savings which can be passed on to real property tax payers. 

If the goal of this hearing is to address mandates that will relieve the pressure on real property taxpayers, the first unfunded mandate that should be addressed is the detrimental impact the state’s charter schools is having on the overall funding for education. Payments made charter schools are ballooning out of control for cities with a disproportionate number of charter schools, like Albany and Buffalo, because of statutory language capping school district payments to charter schools which was left out of legislation signed into law this year that amended the 2010 -2011 enacted state budget.

To illustrate this point, let’s take a look at charter school payments and property taxes in Albany. This year payments to charter schools increased by $5 million; this increase in far exceeded the increase in taxes but voters were unable to vote on charter school payments and were hit twice by the lack of cap on these payments. 

The charter school process is unaccountable to the local community that pays the taxes to support these schools.  This truly is taxation without representation resulting in significant funding losses for the school district while property taxes continue to rise.

Charter schools are also creating huge inefficiencies that cost property taxpayers money.  Overhead costs, administrative cost, and management fees that go to for-profit companies are coming straight out of property taxpayers’ pockets. 

In Buffalo there are such inefficiencies that city school district officials estimate they could educate the same number of pupils that currently attend charter schools for $35 million LESS than it is costing to run charter schools annually. 

What’s more, studies have shown that approximately 30 percent of the costs transferred to charter schools are fixed costs that can never be recovered by the sending public school district.  In part, this is because one twenty-fifth of a teacher cannot be laid off each time a child leaves to attend a charter school.  Our public schools must always stand ready to take back any and all students should a charter school close at the last minute.  This has happened around the state.  The sending public school must therefore maintain a certain level of extra capacity should these students return.

Educational research indicates that the transfer of 10% of a school district’s student body through either vouchers or charters will create debilitating circumstances for a school district.  We have already reached this point in Albany and Buffalo.

We cannot continue to force school districts and property taxpayers to absorb the fiscal impact of charter schools in their community for only a handful of children at the expense of most of the state’s students.

In regards to cost savings, NYSUT recognizes the importance of spending education dollars wisely by reducing non-instructional and administrative costs through greater economies of scale, efficiencies and investment in energy conservation and green buildings. BOCES should be given direction and authority to pursue regionalization of procurement, payroll and other back-office and administrative services.

NYSUT is just as concerned about increases in health insurance costs as the employers. We have supported the development of a coordinated bulk drug purchase for all state agencies and local governments. The state should also explore self-insuring prescription drug procurement while protecting mandated benefit levels and eliminate the "risk charge" that siphons rebates to insurance middlemen.

NYSUT applauds President Obama and Congressional leaders for championing investments in modern green school buildings. NYSUT believes that the state should require all new school construction to adopt the New York Collaborative for High Performance in Schools (CHPS) standard developed jointly by SED and NYSERDA. Contrary to what you might believe, green schools do not cost more to build than conventional schools. In fact, green schools cost significantly less money to operate and use less water and energy, freeing up resources to focus on improving student education. A typical green school saves $100,000 per year in direct costs. If all new school construction and school renovations went green starting today, billions of dollars would be saved over the next decade.

In 1997 the Ohio School Facilities Commission launched an ambitious program to rebuild all 3,500 public schools as "green" schools rather than as conventional ones. The Commission found that building green schools would save the state an estimated $1.4 billion in energy bills alone.

The state should undertake other conservation measures which include implementing net-metering for school facilities where onsite devices such as solar panels could produce enough energy to give back to the grid and offset energy bills. NYPA and NYSERDA should provide training for school district energy managers and building personnel and provide seamless one stop technical assistance from audits to installation and financing.

To provide school districts with options to help address spiking pension costs, legislation should be adopted to allow for an optional smoothing of pensions payments for the Teachers Retirement System. Allowing school districts the option to address this brief spike in costs through the amortization of pension payments will save education jobs and alleviate program cuts, while maintaining the integrity of the Teachers’ Retirement System. If widely utilized, smoothing current pension costs could produce a two year savings of nearly several hundred million dollars for school districts statewide.

Additionally, the state should implement a 55/25 early retirement incentive similar to the incentive offered in 2010. Last year’s incentive saved a large number of jobs, by allowing long time public servants at the top of the salary scale an opportunity to retire without incurring a retirement penalty.  These incentives come at very little costs to the retirement system or employers and provide school districts with a tool to reduce or avoid layoffs and keep important educational programs in place.

In conclusion, we urge you find ways to address the issues of real property tax relief and mandate relief in ways that will not harm New York’s public education system. Disinvesting in our student's education and walking away from our commitment to our most needy and vulnerable populations will only deepen the economic and social pain for families across the state.

Investments in education are critical to meeting the workforce demands of a global information and high tech economy and growing the state’s economy. There is no better return for taxpayer dollars than maintaining our commitment to an excellent education for all schoolchildren. We stand ready to work with you to find alternatives to these cuts.

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