Schools

School Officials React to New Funding Restrictions

The new property tax cap will place new limits and challenges on district revenues.

After funding challenges led Bermards Superintendent Valerie Goger to say the district will need to change the way they deliver education last spring, new, significant limitations on school tax revenue have created additional obstacles.

The principal change comes from a newly passed state law that limits how much each school district can raise in local property taxes per year. Commonly referred to as the 2 percent tax cap, the law will have significant effects on the funding for Bernards Township schools in upcoming years.

Breaking Down the 2 Percent Tax Cap

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The New Jersey state legislature passed Gov. Christie signed into law a mandate that school boards cannot increase the school property tax levy by more than 2 percent of the previous years amount. In past years, the district could increase the levy up to 4 percent or more with certain exceptions. The new two percent cap also contains exceptions, including an automatic waiver for rising health care costs over the cap, as well as pension payments, debt service payments and capital expenditures.

In budget hearing meetings this past year, the school board displayed tax levy increases dating back to the 1998-99 school year, and the lowest annual increase was 3.93 percent, passed this year for the upcoming 2010-11 budget. Over the same period, from 1998-2010, the average tax levy increase for school taxes was 8.38 percent, well above the new 2 percent level (see table below).

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The school district has the ability to seek a referendum to raise funds over the cap, although Schools Business Administrator Nick Markarian said no specific options have been discussed at this point in the year. School budget preparations typically begin in the fall or winter of the school year.

Tax Levy Increases Since 1998

School Year                     General Tax Levy                     Percentage Increase

   1998-99                             $30,128,190                                       16.5%
   1999-00                             $32,459,687                                         7.7%
   2000-01                             $37,263,741                                       14.8%
   2001-02                             $43,045,190                                       15.5%
   2002-03                             $46,138,805                                        7.2%
   2003-04                             $50,491,299                                        9.4%
   2004-05                             $54,379,909                                        7.7%
   2005-06                             $58,065,146                                        6.8%
   2006-07                             $61,313,765                                         5.6%
   2007-08                             $63,779,923                                        4.0%
   2008-09                             $66,837,438                                       4.8%
   2009-10                              $70,156,926                                        5.0%
   2010-11                               $72,914,093                                        3.9%

Markarian said that the new cap would present challenges to the district. He said he was not aware of a time when the district raised taxes by an amount under 2 percent, instead raising taxes in the 4-5 percent range each year for the past several years.

"It's going to be a problem," Markarian said. "(The two percent cap) is so new to all of us that we really don't know how it will affect the district … (But) very few districts have the surplus needed to deal with those kinds of changes."

The surplus the district did have was taken this year after the Gov. Christie signed an executive order to withhold state aid payments to districts in the amount of the surplus funds school districts had in their budget. Bernards lost over $1.6 million from February through June in the 2010 school year.

Board Members React

"From my perspective, I was still reeling from the $1.7 million taken away, the $3.8 million taken away (from state aid cuts for the 2010-11 school year) and the (after the school budget was defeated at the polls)," said Board President Susan Carlsson. "I had gotten myself to the point where I could live with that, but then we got this."

"We just keep getting penalized for doing the right thing," Carlsson said. "It think it's patently unfair that we get lumped in with districts who may not be doing what they're supposed to be doing." Carlsson said that the school district's careful financial planning, it's ability to build a surplus fund, and it's lean budget all make it uniquely hurt by sweeping funding cuts.

The board president was also upset by the decision to limit the district's ability to gather its own revenue. "We are just completely being pushed out of our role here," Carlsson said. "They're cutting us off at the knees. I don't see that we're going to have to any relief. "

Carlsson suggested that the board draft a letter to send to local legislators, the governor and the state education commissioner stating the board's position on the cap and other mandates that they feel negatively affect the district.

"There are legislators who said to us they would support us, but they are falling in line and not sticking up for districts who are doing a good job. I don't think we can sit here and not say something," Carlsson said.

Other Board of Education members shared a slightly different view than the board president. Board member Michael Byrne said, "I think you have to acknowledge the state is in a very bad position. If we don't fix the problem, if it goes bankrupt all the businesses are going to leave. It's our very way of life that is in question." Byrne did agree that the way the cap was implemented uniquely hurt districts like Bernards, and he said he would have liked to see a more even and fair approach.

Board members Ken Wilke and Bill Koch said that they would like to focus their efforts on things that they might be able to change, such as some of the state's unfunded mandates that use up district money. "I don't see us being successful in fighting the 2 percent cap," said Wilke. "I would rather we lobby for changes (in other areas)."

Board member Elaine Kusel said, "I think it's an offensive that they are telling us how to handle our budgets. It's not like Trenton has done a good job with their money." Kusel said she believes education is one of the few areas in which the state has done well, and that targeting it for cuts is a mistake.

Next Steps

At the end of the 2010 budget process, Goger said that the district is predicting to have to cut another $1.3 million from the budget if the state moved to the then proposed 2.5 percent hard cap. To prepare for the cuts, the district began conducting a review of education models from K-12 in order to come up with potential savings.

Goger said following the Monday, July 26 Board of Education meeting that the district had prepared a standardized set of questions that they have been using while visiting other well-run districts. Middle school reviews have almost been completed and high school visits will start shortly, according to the superintendent. "We'll have recommendations and a written report in October or November this year," Goger said. The findings will be presented to the Board of Education in a regularly scheduled meeting.


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