School districts like Broadalbin-Perth obtain revenue from three primary sources: State aid, local property taxes and undesignated fund balances (“rainy day” funds). The district’s two largest sources of revenue, state aid and local property taxes, could take a severe hit in 2010-11 to the tune of up to $1,742,085 – or an 6.2 percent reduction in total revenue from 2009-10.
Gov. David Paterson’s executive state budget proposal includes a $1.1 billion reduction in state aid to public schools – a 5 percent, across-the-board cut. School funding formulas determined that, for Broadalbin-Perth, the reduction in state aid would be $1,486,085 – a cut of 11.32 percent from 2009-10. The state budget is now in the hands of the Legislature, which could choose to increase education funding. However, considering that the state’s $8 billion deficit seems to grow daily, those closely watching the situation believe that significant changes to this part of the Governor’s state budget proposal are unlikely.
What is the significance of HRBRRD to Broadalbin-Perth’s revenue?
The other piece of Broadalbin-Perth’s revenue puzzle that remains uncertain is property tax revenue from the district’s largest taxpayer, the Hudson River-Black River Regulating District (HRBRRD), which is grappling with a revenue problem of its own. The HRBRRD was established in the early 20th century to regulate the flows of the Hudson and Black rivers to prevent flooding in a region that extends from Watertown in the West to Albany in the South.
In November 2008, a U.S. Court of Appeals decision limited the HRBRRD’s authority to assess certain hydroelectric plants for costs associated with the regulating district’s school and property taxes – which had been done for more than 80 years. The court’s decision resulted in a nearly $4 million revenue shortfall for HRBRRD’s $5.4 million operating budget, leaving the regulating district unable to pay its annual $2.4 million in school and property taxes.
The regulating district owes Broadalbin-Perth $256,000 in school taxes for 2009-10. B-P and other area school districts sought restitution from Fulton County and were denied. Now, there is legislation before the New York State Senate and Assembly that would allow the HRBRRD to transfer funds between its accounts in order to pay its local taxes; as of March 5, the bill was in the Legislature’s Environmental Conservation Committee.
If the Legislature passes the bill, the regulating district would be able to pay its taxes to Broadalbin-Perth and other local school districts – at least for this year. However, the HRBRRD is still seeking a long-term solution to its revenue problem. If it cannot find a solution, all school districts that rely on the regulating district for revenue, including Broadalbin-Perth, will have to make significant budget changes for the 2010-11 school year and beyond.
How will Broadalbin-Perth make up for this lost revenue?
Whenever a school district is faced with lost revenue, it has two choices: Cut spending or increase revenue by raising the local tax levy. District leaders have said that they will not increase the local tax levy by more than 8 percent in 2010-11, which would increase revenue by no more than $821,143. The other $920,942 in lost revenue will result in spending cuts.
The next edition of Budget Countdown will focus on Broadalbin-Perth’s 2010-11 spending goals and specific areas where it is looking to achieve cost savings.