Districts
chafe at new spending limits
Monday, August 09, 2004 • By KATHERINE BLOK
• The Express-Times
A new state law will restrict spending and saving by
public school districts in an effort to reduce local
property taxes, but local school officials and education
groups in Trenton say the law will increase taxes in the
long run.
The legislation mandates that districts reduce their
maximum budget surplus from 6 percent to 3 percent or
$75,000, whichever is greater, for the 2004-05 year, then to
2 percent for 2005-06. Spending increases are restricted to
3 percent or the Consumer Price Index, whichever is
greater.
"Some districts had up to 6 percent (surplus) before.
It's immediate tax relief," said Ron Rice, a spokesman for
the state Department of Education. "It requires districts to
come up with a more realistic budget. A lot of times,
districts overestimate their surplus. This allows for
smarter budgeting We feel confident that by 2006-07, there
will be less pressure on taxes."
Rice said the new regulations will give voters a more
accurate picture of a school district's expenditures and
make districts more accountable to the voters.
Though the 2004-05 tax rate was approved by voters in
April under the old regulations, districts were required to
apply the new regulations retroactively this summer.
The amount of surplus cash the Belvidere School District
had to eliminate could have paid for two teaching positions,
said Superintendent Jean Atkin Gool. The district, plagued
by financial problems, eliminated five teaching jobs this
spring. A grant from the state Board of Education allowed
the reinstatement of one of those positions, a physical
education and health teacher.
"This law is one of those things, how do you say
something bad about a law that gives money back to the
taxpayers," Gool said. "But the problem with this law is we
keep reducing our (spending) and giving money back, at some
point those taxes are going to go up because we're not going
to have money to function. It's short-term relief, but be
careful what you wish for. The long-term consequences are
that taxes will go up because our expenses are not going
down."
Gool estimated that, given current trends, Belvidere
will have to eliminate more teaching positions in about two
years. She said reducing the district's surplus account is
not a good financial policy.
"That's the money we have in case the boiler goes, in
case the roof goes. It's reducing your savings account," she
said.
Greenwich Township Superintendent Kevin Brennan said the
new law is going to make it much more difficult for local
school boards to manage their budgets and that will only
worsen in the future.
The district had to return $310,086 of its surplus to
the taxpayers. Homeowners were going to see no increase in
their school taxes. Now, they'll see a 5- to 6-cent
decrease, officials said.
Brennan said at some point, the K-8 district will likely
have to let go of programs or positions to keep within the
state's new spending limits. He said he doesn't see how that
is fiscally responsible.
"To say we're concerned about it is an understatement,"
Brennan said.
The New Jersey School Boards Association, the New Jersey
Education Association and the New Jersey League of
Municipalities all opposed the new law. The NJEA is widely
considered one of the most powerful lobbying groups in the
state and the League of Municipalities has strong ties to
Gov. James E. McGreevey, the former mayor of
Woodbridge.
The NJSBA calls the new law the most change in school
finance since 1997.
NJSBA spokesman Frank Belluscio said a group of small
districts in Sussex County that buy insurance as a group is
required to hold a certain amount of money in reserve for
that insurance. Because of the surplus reduction, those
districts are going to end up spending more on their
insurance policy and will likely have to raise taxes.
Belluscio also said districts that want to save to fund
building projects with cash won't be able to do that.
Instead, they will have to borrow the money, which will cost
taxpayers more.
"I don't think that's what the legislature wanted,"
Belluscio said.
The surplus reduction will have a long-range impact and
brings each district's savings account to a "perilously low"
level, Belluscio said.
One factor the NJEA is concerned about is districts'
abilities to fund contractually required salary increases
for teachers. NJEA spokesman Steve Wollmer said the union
has not yet addressed the impact the spending restrictions
will have on contract negotiations.
"A 2.5 percent salary increase isn't going to get it
done for teachers in New Jersey. That's barely treading
water," Wollmer said.
Spending increases are also affected by things school
districts have to purchase, such as energy, food, supplies
and insurance. A 2.5 percent spending increase will likely
not cover increases in the costs of those items, Wollmer
said.
"The problem here is (the new law is) driven by the
legitimate desire for property tax relief, but we just think
it's the wrong way to go about that," Wollmer said. "The
state ranks near the bottom in terms of state support for
public schools. That's why property taxes are so high. So
instead of providing a larger percentage of the support,
it's saying cut your budgets. That's not what we mean by the
state assuming its share of the burden."
Like the NJSBA and NJEA, the League of Municipalities
opposed a companion bill that places the same spending and
saving restrictions on municipalities. League legislative
analyst Joe Moran said the new regulations are "far too
stringent" and will make budgeting more difficult for
towns.
"It's a very politically attractive thing. I think the
citizens are concerned about property taxes and the
Legislature and the administration could represent this as a
means to control property tax increases," Moran said. "It's
really an attempt to marginally address the problem and get
a lot of good publicity."
The Department of Education's Rice stood by the new
regulations.
"It is our position that it's good policy for the state,
for districts, for taxpayers," he said. "Give it a chance,
wait until the budget process next year. We are confident it
will allow for many savings and districts will be
fine."
Reporter Linda Lisanti contributed to this report.
Reporter Katherine Blok can be reached at 908-475-8044 or by
e-mail at kblok@express-times.com.
Copyright 2004
The Express-Times. Used with permission.
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