Budget Presentation: State Aid and Tax Levy Limit

At the Feb. 14 board of education meeting, Assistant Superintendent for Business Dr. Andrew Van Alstyne gave another in a series of budget presentations to the board. These “budget vignettes” detail different aspects of the Guilderland Central School District budget. The Feb. 14 presentation focused on state aid and the tax levy limit.

Dr. Van Alstyne gave the board an overview of what Gov. Hochul’s recently released budget proposal means for GCSD as well as its impact statewide in regards to state education funding. It is important to note that the executive budget is a proposal, therefore the amounts contained in the budget are not final state aid numbers. During his presentation, Dr. Van Alstyne discussed two considerations that will shape the GCSD budget for the 2023-24 school year, the state foundation aid process and the district’s tax levy limit.

2023-24 state aid funding in the executive budget proposal

Dr. Van Alstyne highlighted three aspects of the executive budget proposal that could have a significant impact on the 2023-24 GCSD budget, the governor’s commitment to fulfilling Foundation Aid phase-in, an allocation within the Foundation Aid funding earmarked for a designated purpose and the expansion of universal pre-kindergarten funding.

Foundation Aid

What is Foundation Aid?

Foundation Aid is a key funding source for every school district in New York State (NYS), as it provides educational opportunities for students. Foundation Aid was created with a mandate that the state should offer adequate yearly funding to ensure every child would be provided with a “sound basic education”. The state calculates Foundation Aid using a research-based formula that identifies the cost of successfully educating students, providing additional funding for high-needs students, while adjusting for local fiscal capacity. In the past, the effort to fully fund Foundation Aid was hindered by several economic and political factors; however, recently New York state has reaffirmed its commitment to address the amount of outstanding Foundation Aid that is due to schools. The 2023-24 school year is the final year in a phased-in process to fully fund Foundation Aid to schools, hence the significant increase in the proposed executive budget.

Proposed statewide Foundation Aid for 2023-24 school year

Statewide total school aid is expected to increase by $3.1 billion in the proposed budget, with one of the most notable increases to Foundation Aid, at $2.7 billion. GCSD is anticipated to receive an increase of approximately $5 million in Foundation Aid funding. Under the governor’s proposal, the 2023-24 school year will be historic, in that it is the first year every NYS school district will receive its full Foundation Aid funding. One reason for the significant increase is that the Foundation Aid formula takes into consideration inflation, which was quite high last year. Transportation costs statewide have been greatly affected by inflation; the executive budget proposes a significant increase to statewide transportation aid in the amount of $176.7 million.

At the current phase in the budget development process, state aid amounts are estimated and not guaranteed; these amounts are subject to change based on actual data once the budget is passed by the NYS legislature.

Specific allocation of Foundation Aid funding: high impact tutoring

Traditionally, Foundation Aid has been unrestricted money local school districts could allocate at their own discretion to best achieve their missions, visions and goals. This year; however, the executive budget proposes that a specified amount of school districts’ Foundation Aid funding be used for a required purpose: new efforts for high impact tutoring. Under the budget proposal, the amount GCSD is to spend for new efforts for high impact tutoring is $520,181.

Expansion of universal pre-kindergarten

The executive budget proposes a $160.6 million increase in universal pre-kindergarten (UPK) funding statewide. The state funds UPK according to a per “slot” basis, meaning each school district is allocated a number of slots and each slot is assigned a value by the state. The district is then funded that amount. If a district cannot accommodate their allotted slots, it will not receive the total funding.

Due to a lack of space to accommodate the UPK program in GCSD elementary buildings, the district works with available community partners. These partners also have limited capacity. In the 2022-23 school year, the district and its partners were able to provide for 110 slots that were awarded to Guilderland families through a lottery system. Because of the anticipated increase in UPK funding for the 2023-24 school year, GCSD administrators are working to develop a potential solution, perhaps by partnering with other school districts.

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 constraints 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:

  1. Start with prior year’s tax levy: $78,218,651
  2. 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%
  3. Add the prior year’s Payment in Lieu of Taxes (PILOTS): $81,896
  4. Subtract the capital expenditures net of state aid, which is debt incurred over time from projects such as bus purchases or capital improvements: $1,633,220
  5. Start formula again with the adjusted prior tax year levy: $76,925,449
  6. 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%
  7. The product is the gross adjusted tax levy subtotal: $78,463,958
  8. Subtract next year’s PILOTS: $41,767
  9. Arrive at the tax levy limit: $78,422,191
  10. Add the capital expenditures net of state aid: $2,153,898
  11. Arrive at the maximum allowable tax levy amount: $80,576,089
    The maximum allowable increase is $2,357,438 or 3.01%

It is important to note that these calculations are preliminary and some pieces of data may change.

Tax cap and inflation

Dr. Van Alstyne presented a chart comparing the tax cap with inflation. Historically, these two elements of the budget are fairly similar. During the 2021-22 school year, this trend changed when inflation spiked to 8% while the tax cap was at 3.01%. This jump in the rate of inflation is significant because, just as families’ budgets have been affected by inflation and rising costs, so has the district’s. Personnel salaries and benefits are the biggest expense for the district, which are determined in contracts and can be affected by inflation. In addition, ongoing capital projects and transportation costs have been susceptible to rising costs caused by inflation.

Superintendent’s draft budget proposal will be shared March 7, 2023

Superintendent of Schools Dr. Marie Wiles will present the first draft of the budget for 2023-2024 at the Mar. 7, 2023 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 4, 2023 meeting.

Important upcoming dates

March 7, 2023: Superintendent’s Budget Presentation
March 14, 2023: Budget Workshop Q & A
Week of March 20: Virtual Focus Groups to Discuss Budget
March 28, 2023: Budget Work Session
April 4, 2023: Board Action to Adopt the Proposed Budget
May 2, 2023: Budget Hearing
May 16, 2023: Budget Vote and Election

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