NASSAU COUNTY CIVIC ASSOCIATION, INC. "The government is us, we are the government, you and I." Teddy Roosevelt

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January 30, 2006

How to address School Taxes

The answer is accountability

While many issues are important, the high burden of taxation is one of the most important issues facing Long Islanders. It is not complicated but rather simple; people can no longer afford to live on Long Island. While each taxing jurisdiction attempts to minimize the result of their tax increase, the cumulative tax burden in New York is the highest in the nation as reported by the Citizen’s Budget Commission’s last year. As indicated on each resident’s tax bills, the largest component is school taxes.

The discussion about taxes is not complete unless we address the basis for our current assessment system. Nassau County settled a lawsuit brought by the American Civil Liberties Union and the Clinton Justice Dept (Civil Rights Division) which alleged that Nassau County discriminated against blacks based on the property assessment system. As the assessment system was inconsistent and unfair to ALL Nassau residents and the cost to defend the suit was prohibitive, the county settled. The agreement called for the re-assessment of all property in Nassau County.

The initial re-assessment was completed approximately 3 years ago. The court settlement allowed for commercial property to be phased in but not residential property. As such, yearly residential re-assessments continue. State law allows for an assessment increase of a maximum of 6% per year or a total of 20% in five years. The county has violated that provision. There is currently a case pending before an appeals court seeking to compel the county to adhere to the law and re-assess the properties in accordance with the law. This is why assessments have increased dramatically. As your total tax bill is based on your assessment, increased assessments mean an immediate increase in taxes. With yearly increases in school and town taxes along with a county property tax increase two years ago, it adds up to a large tax burden.

What really complicates the re-assessment process is the fact that it is done every year. This leads to instability and a quickly escalating tax burden. Even if your taxes are grieved (tax certiorari), your assessment is not immune from increasing the following year due to re-assessment. The only people making money are the attorneys who file the appeals and charge a fee in the amount of 50% of the total tax reduction. Unfortunately, this past April, the Nassau County Legislature voted 10-9 along party lines to continue the yearly re-assessments of residential properties.

In 2004, Nassau taxpayers received double digit tax hikes. The reason; most school districts did not provide an estimate of the actual tax rates and instead made tax levy projections. Thus voters who supported passage of their local budget were misinformed as to the size of the actual tax increase. During the time of the budget votes, school districts cited two reasons for not providing an estimate of the tax rates; the complexity of estimating rates based on annual fluctuations of property value assessments and the lack of information relating to state aid due to the late state budget. 

According to a Newsday article in November, 2004, “Of 54 Nassau school districts posting tax bills in recent weeks, 48 had residential tax rates rising faster than overall tax levies.” This represents the amount of revenue raised from local property taxes which is separate from state and federal aid. Accordingly, the majority of school districts had a surplus. The article went on the say that Garden City and Roosevelt were able to accurately predict their tax rates. As these districts are similar to the other 52 districts, why did the majority of districts fail to disclose their tax rates? 

Local school boards are responsible to produce a yearly budget that is fiscally sound and reasonable. The basic funding sources for a school budget are state aid, federal aid and revenue from property taxes. Even though federal aid has increased, state aid has decreased. This is the reason cited by school districts for the increased reliance on property taxes which place the burden more directly on the backs of property owners. While this dynamic would necessitate more lobbying of our state legislators by the school board, it would also require fiscal restraint and the implementation of financial efficiencies to keep any tax increase to an absolute minimum.

The majority of school budgets list the salaries for school administrators; however the amount listed is their current salary. The only way to determine what the new salary increase will be is to wait for next year’s budget which will show the increase. Furthermore, the salaries for the other district employees are allotted to other budgetary lines. While the stated basis for this practice is to allow districts flexibility in negotiating with the employee unions, it does not allow for transparency. Last year, all 54 Nassau school districts were asked to post their line item budget on their district websites yet only small number have done so. If the Town of Hempstead and Nassau County can post their budgets on the web, why can’t school districts?

Like other entities, school districts have fixed and variable costs. Some costs such as the expense of mandated programs are fixed, however other costs such as employee salaries and benefits can be negotiated. Even annual increases for fixed costs can be minimized.

A favorite argument for high teacher salaries is the ability of a district to attract good teachers and stay competitive in the market place. When New York City (which pays less then most suburban districts) announced that it was looking for 5000 teachers, it received 30,000 applications. As to benefits, most school employees contribute on average between 10-15% to their annual health care benefits. While a large majority of residents would like to pay our teachers a high salary, we simply cannot afford it. 

Districts should negotiate contracts that reflect fiscal reality. Some suggestions; require employees to contribute more for their medical benefits, reduce the starting salary for new employees, reduce the number of salary steps, eliminate longevity pay and eliminate five figure annual salary increases and perks for  administrators

The cost of energy has increased due to the cost of natural gas and oil. Districts can convert their lighting to low energy bulbs and light switches that turn off the lights when no one is in a room. The use of solar energy and related equipment should be considered.

The “No Child Left Behind Act “which requires state testing for all children in grades three to eight in English and Math is a mandate. The issue in dispute is whether it is unfunded, under funded or fully funded. The requirement was enacted to provide a snap shot of how a school is performing. I would argue that while there are some costs for testing, federal funding for education has risen 43% over the last few years according to a Heritage Foundation Study. A look at the federal education budget over the last 10 years validates this point.

Out of all taxing jurisdictions, school districts give voters the ability to have a direct say in any tax increase. Even with this power, the turnout this past May as reported by Newsday was approximately 18%. While that was an improvement over last year, more residents need to get involved and vote.

For two consecutive years, almost one third of all school budgets were defeated. The average rate of increase was 2-3 times the rate of inflation with tax increases of 6-9%. Even when residents voted no, a majority of districts re-submitted the same budget and warned parents that a 2^nd no vote would impact their children.

Many parents are under the false impression that a no vote actually reduces the budget. While it may reduce the proposed increase, a contingency budget is enacted. This allows for an increase based on the Consumer Price Index which was 2.7% or a budget cap of 3.24%. As some districts have actually authorized amounts above the specified budget cap, this year the New York State Education Department began monitoring districts for compliance with the law.   

The last component of this debate is fiscal accountability. Due to a lack of mandated fiscal oversight and independent review, many scandals have emerged.  The Roslyn scandal has proven that increased funding does not necessarily improve the quality of education. Between seven and eight million dollars in spending were deemed questionable. These funds could have been used to limit the growth of local taxation. With state lawmakers struggling to address the recent legal victory of the Campaign for Fiscal Equity, it is imperative that school funding be fair and adequate throughout the state. It is also imperative that the level of taxation adequately reflect what is absolutely necessary. Therefore it is essential that the legislature enact fiscal reforms that put in place strong financial controls and procedures that ensure accountability by local school districts.

While Lawmakers recently passed several proposals, much more needs to be done. The Nassau County Civic Association, Inc has proposed several initiatives to ensure fiscal accountability. The reform package is as follows:

We believe that General Municipal Law and or Educational law should be amended to require that each and every school district post its full line item budget on the internet and a hard copy to their local public library. This will ensure that local residents are fully informed as to how their tax dollars are being utilized. This openness will encourage greater accountability by the district and will facilitate public participation as this information is readily accessible. Since many districts already have their own websites and have their budgets and other financial information in an electronic format (Lotus, Excel), the cost would be insignificant.

Most school boards use Generally Accepted Accounting Principles. While these standards are sufficient for other entities, they do not provide the same level of accountability as imposed on companies that trade on the stock market by the passage of the Sarbanes-Oxley Act of 2002. This act requires that the CEO or CFO swear under the penalty of perjury that their financial statements are true and accurate. As school boards are considered local governmental entities, the implementation of Government Accounting Standards Board Principles (GASB) will ensure stronger fiscal accountability. Nassau County has implemented this form of accounting which has helped restore fiscal order to county government. 

This new accounting change can be promulgated by the New York State Comptroller; however he has not moved to make this change. We would recommend passage of an amendment to General Municipal Law, section 36. In addition, a requirement should be implemented to mandate two certifications; each and every school board member and treasurer must certify under oath that the school financial statements are true and accurate to best of their knowledge and that each has complied with their various fiduciary duties as a board member or officer. The second should contain a perjury clause along with the following; “I, John Doe did not breach my duty of care, duty of loyalty to the residents of Anywhere School District and have complied with all required financial reporting provisions.” 

Educational Law and or General Municipal Law should be amended to impose a clear duty on each and every school board member or officer to report fiscal misconduct of any other board member, officer or school employee relative to school financial matters. This shall include the thief, misappropriation of school funds, property and or proprietary information. Violations shall constitute a class A misdemeanor.

All school districts must promulgate and maintain a code of ethics with an annual certification that school board members or officers are in compliance with the code. This code must require that any conflict of interest must be publicly disclosed. Compliance should be governed by a state conflicts board. This should include but not be limited to vendor relationships, contracts for services or goods, financial interests, school employees, etc.

All school districts should be required to provide full disclosure of all entities that have a relationship with a school district. This shall include but not be limited to providing services, receiving services from the school district and or the use of school property for any purpose by an entity.

Educational Law should be amended to permit a private right of enforcement by any school district resident pertaining to a breach of duty or knowingly filing a false certification by a school board member or officer relative to their fiduciary duties. This would be similar to the federal False Claims Act. This would allow a citizen to litigate an action of behalf of the taxpayers to recoup the value of any benefit that was wrongfully received by the respondent and or seek restitution of any lost monies owed to the school district. This private right of enforcement would include the imposition of reasonable attorney fees and court costs to be borne solely by the respondent. 

The final initiative is a mandated audit every two years by the New York State Comptroller’s office. Unfortunately this would require additional state funding and would be expensive. Consideration should be given to requiring all districts to have an internal auditor (which is currently optional) who must report his or her findings to the State Comptroller. If further investigation is warranted, this will trigger a separate audit by the comptroller.

“Every government degenerates when trusted to the rulers of the people alone. The people themselves, therefore, are its only safe depositories.”

Thomas Jefferson.

The issue of accountability is an important aspect of honest government. Government can only be honest by being open and transparent. Accountability is also an action word. It requires the participation of voters, school districts and our elected leaders.

This article originally appeared in the Tri-Alliance Blog in December.