Voters in New York’s suburban, rural and smaller city school districts approved 92 percent of proposed school budgets yesterday, according to the New York State School Boards Association.  This is above the historical average approval rate of 83 percent, and it is in stunning contrast to last month’s results in New Jersey, where more than half the proposed school budgets were rejected by voters.

Some initial observations on the New York outcome:

• By historical standards, school districts were especially restrained in their budget proposals this year.  The average budget increase was 1.4 percent, and the average tax levy hike was 3.2 percent (they were slightly higher on a per-pupil basis).  The median proposed tax levy increase for 657 districts was 2.9 percent.  The tax hikes were higher than inflation, which is projected at 2.2 percent for the coming year, but taxpayers (those who bothered to vote, at any rate) in most districts were apparently swayed by the arguments of school officials who claimed they were trying really, really hard to keep a lid on taxes.
• Governor Paterson’s proposed state aid cuts were baked into the school district budget proposals. In other words, taxpayers are content to live with the consequences of Paterson’s budget. Meanwhile, one of the issues holding up the state budget is the Assembly majority’s insistence on restoring half the school aid cut, which would cost $700 million.  Memo to Assembly Democrats: At this point, why bother?  (The answer: New York City, where there is no separate school budget requiring voter approval, is balking at making the same sort of staff and program cuts approved in other districts.)
• Schools were able to hold down taxes and spending in two ways: by cutting many of the new staff slots they’ve added over the past decade (despite shrinking enrollment), and by drawing on their enormous cushion of reserves. Paterson took flack from school districts late last year when he began suggesting that reserves were available to tide over delays in school aid payments and cuts in new aid; it appears he was right.

Some thoughts on Governor Paterson’s announcement today that he expects his forthcoming 2010-11 Executive Budget to result in a 2011-12 “surplus” of $1 billion that he will propose using for “property tax relief” in the form of a new “circuit-breaker” income tax credit:

1. The state’s 2011-12 General Fund budget gap was last projected at $14.3 billion.  This reflects, in part, the scheduled expiration of some $5.7 billion in temporary federal stimulus aid that will be used to help balance the state’s 2010-11 budget.  If the governor is saying that the four-year financial plan to be issued with his 2010-11 Executive Budget next week will make up for lost stimulus money, wipe out the entire projected gap and hold recurring spending a full $1 billion below recurring revenues in 2011-12, that’s really something to celebrate.  Applause should be held, though, until we know whether he intends to achieve structural balance solely through recurring savings and spending reductions, and not through another round of increases in state taxes and fees. (more…)

Buried in the so-called Tier V pension bill just passed by the state Legislature is an incredible set of special concessions to unionized school teachers in New York.  None of these changes were contained in Governor Paterson’s original “pension reform” proposal, which was a colossal missed opportunity to begin with.  The worst of the giveaways to teachers in the final bill–effectively locking in one of the fastest-growing, most difficult to control components of school district compensation costs–is not even mentioned in Paterson’s press release hailing the bill’s passage.

The teachers’ union had their way on three major items:

• While the minimum full-benefit retirement age after 30 years service was raised from 55 to 62 for all other civilian employees, it will set be at 57 for teachers.  In 2007-08, the median retirement age for New York State Teachers Retirement System (NYSTRS) members was 58.
• The Legislature promised to enact a three-month early retirement window for teachers who are 55 but have only 25 years of service.  Districts will greet this as a cost savings, but it also will shift a so-far uncalculated cost to an already stressed pension fund.
• Last but not least, the Tier V bill makes permanent a temporary law, annually renewed since 1994, barring school districts from “diminishing” health benefits for retired school district employees unless “a corresponding diminution of benefits or contributions” applies to active workers.  Since changes in benefits for current employees must be collectively bargained, the provision effectively gives unions a veto on the matter.  This provision of Tier V, described the Assembly’s press release on the bill as “mak[ing] permanent retiree health protections,” goes unmentioned in the Governor’s celebratory release.
  

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Governor Paterson has now all but formally abandoned the comprehensive school property tax cap he was pushing a year ago.  Instead, he has tucked a hopelessly byzantine variation of the cap into a proposed new property tax “circuit breaker” that would kick in when (or if) the state ever has some extra money sitting around again.

So, in place of a permanent, immediately binding limit on the annual growth in all school property taxes outside New York City—a limit that local school voters could nonetheless (a) be asked by their school boards to exceed, or (b) seek to reduce at their own initiative— Paterson is offering to redistribute currently non-existent state funds on an irregular basis at some unknowable time in the future.

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By lifting its cap on charter schools and allowing test score gains to be considered in teacher evaluations, New York State could ultimately grab a share of the federal government’s $4 billion in “Race to the Top” funding for educational improvement.   Unfortunately, Governor Paterson is doing nothing to make that possible, as Tom Carroll of the Foundation for Educational Reform and Accountability points out in today’s New York Post.

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New York led the nation in K-12 education spending per pupil in 2006-07, according to new data released today by the U.S. Census Bureau.  The Empire State’s school spending of $15,981 per pupil was 65 percent above the national average of $9,666.  New York’s total school spending of nearly $51 billion was exceeded only by California, which has more than twice as many students.

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Detroit’s school system may soon follow GM and Chrysler into bankruptcy — and it may be only the first of many such public-sector insolvencies around the country.  From today’s Wall Street Journal report:

Some experts say the Detroit case could be the first in a string of Chapter 9 bankruptcies among school districts and other public entities battered by the economic crisis, and it could help shape that area of the law. “Given the state of public finance,” says Samuel Gerdano, executive director of the American Bankruptcy Institute, “I think the wave is coming.”

While “massive deficits and widespread corruption” have played a part in Detroit’s collapse, pension costs have also been a factor.  The Detroit school system has more fiscal integrity than its New York State counterparts in at least one respect: it pre-funds the cost of health insurance coverage promised to retired teachers, rather than covering those costs on a pay-as-you-go-basis.   But as documented on page 41 of the system’s latest financial report, Detroit teachers aren’t required to contribute to their basic plan; moreover, teacher pension costs are about to skyrocket.  Just as in New York.

New York State’s school boards are patting themselves on the back for the relatively low levels of nominal spending growth in their proposed 2009-10 budgets, which will be submitted to local voters across the state next week.  But in real terms–adjusting for the annual inflation rate at the time of the budget vote–this year’s proposed per-pupil increases in spending and tax levies are considerably larger than last year’s.

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In a passage reflecting House Democratic spin on the supposed economic benefits of the stimulus package, today’s Washington Post reports that the bill includes aid “that many economists agree will enter the economic bloodstream quickly and trim further layoffs by state governments.”  But from the vantage point of New York State, where Gov. Paterson is not proposing significant layoffs, the increased federal funding will serve mainly to support increases in already generous pay and benefits for unionized public-sector employees.

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House Democrats in Washington, D.C., claim their massive federal stimulus package will require “unprecedented accountability” for how the added money is spent.  In reality, they’re pushing an unprecedented intrusion by the federal government into state and local decision-making on how to reallocate scarce resources in a severe fiscal crisis.

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