The public sector is generally exempt from paying any taxes or fees. This works if an economy is in balance, but if the public sector’s tax exemptions aren’t offset by a growing population and growth in the retail and manufacturing sectors, both of which do pay taxes, the tax base doesn’t keep pace with the cost of public services. Our area suffers because high taxes do not attract new business or encourage population growth — both of which are needed to meet the ever-increasing cost of the services provided by the public sector.
According to a recent article in our local newspaper, about 9 percent of New York’s schools face the possibility of becoming insolvent — broke. Schools in the Mohawk Valley are in the process of merging. Our local schools are partially funded by property taxes and we have a shrinking property tax base. State aid also helps fund the cost of operating our schools. Those state dollars come from taxes and fees. The state’s budget, like ours, is facing a deficit. That means sate aid dollars are shrinking. Indeed, Gov. Andrew Cuomo recently stated that he would not provide new aid to upstate cities facing financial crisis.
On top of that, the state puts strings on the dollars it gives our community. Those strings are called “mandates” and school administrators refer to them as “unfunded mandates.” They are called unfunded for three reasons. First, there may not be an increase in state aid to cover the cost of implementing them. Second, there may not be an annual increase in state aid to cover the ongoing cost of implementing them. Third, the state aid may be cut but the unfunded mandate remains.
The problem with mandates has grown in the last four years because the public schools have seen stagnant or reduced funding as costs have skyrocketed. For example, we are mandated by the state, to pay into the Employees’ Retirement System (ERS) and the Teachers’ Retirement System (TRS). As the returns on the investments that are used to fund these programs have fallen off, local costs have risen over the last four years without a corresponding increase in state aid. Schools, facing about a $600,000 deficit in 2013, are forced to cut positions and programs to balance budgets.