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A tax primer
May 13, 2010 - John Stack
For many local school districts this year, extreme workforce reduction measures have been taken. In the worst case locally,
In my work, I have done many town hall information meetings. One of the things come up is when a school or town budget is shown in the newspaper, it often includes, or only includes, what change there will be in the tax rate. This is often a very poor indicator of what is happening with the municipal budget. Tax rates can change drastically with no change in spending, and conversely, tax rates can stay flat when there are large changes in spending. The town of
This is what is happening over in
My point is that most local school districts are making some very hard decisions this year. They have no choice but to make very unpopular cuts, such as teachers, aides and sports. But, for most districts, the schools really have no choice. When Tupper has to lay off 25% of their staff, I say they really have gone beyond cutting the fat and taxpayer angst, if it is directed towards the school, it is misdirected. More time should have been spent in prior years on keeping a much closer eye on costs and what is truly needed so that the cuts this year wouldn’t be so draconian. Of course, a much better method of appropriating state school tax dollars would also be a good place to start to get things changed. Another way would be to rid the system of paying for things in the future.
A big problem with the budget is paying for pensions. The school district(and other municipal governments) have to pay a certain percent of payroll towards the State Pension Fund. Back in the 90’s the level was about the same year to year. Then, in the late 90’s, the stock market exploded. The State decided the stock market was making much more money than was needed to keep the fund solvent. So, they stopped collecting pension money for a few years. This would have been a good time to cut back on taxes as revenues could stay the same, but the expenses decreased. I don’t remember anyone doing that. In fact, new initiatives could be taken because taxes wouldn’t increase. Of course, the chickens came home to roost. The stock market took a dive, and is still lower than its peak over 10 years ago. The state needed that money to keep the pension fund solvent. But, localities cried that they couldn’t afford to start paying back those dollars right away. So, the comptroller decided to delay and delay the municipalities payments, seemingly expecting the stock market to take off again and it would all be moot. That didn’t happen. Now, rather than take their medicine when they should, schools and towns and such are having to pay more into these funds at precisely the worst possible time. In an article today, Mt Vernon schools has abudget which lays off over 100 staff, yet their pension obligation for 2010-2011 is increasing more than 30% over last year. This is what happens when you continue to push problems off into the future and hope some silver bullet will save you.
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