Wayne County Sales Tax Sharing Questions and Answers

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1 Wayne County Sales Tax Sharing Questions and Answers November, Q: How much sales tax revenue is shared with school districts? A: $5.4 million per year is currently distributed to schools. 2. Q: What percentage of Wayne County sales tax is shared with schools? A: According to the original agreement, school districts received 33.3% of Wayne County sales tax revenue. However, in 1991 the Wayne County Board of Supervisors capped the maximum amount of sales tax to be shared with schools at $5.4 million where it remains today. Over the past 10 years, total sales tax collections have increased by $15 million, the County s share of sales tax has nearly doubled, and the Schools share has remained flat. In 2012, $5.4 million represented only 14% of Wayne County sales tax revenue. $45,000,000 Wayne County Sales Tax Distribution $40,000,000 $35,000,000 $30,000,000 $25,000,000 $20,000,000 County Share Town & Village Share School Share $15,000,000 $10,000,000 $5,000,000 $ Source: Office of the Wayne County Treasurer 1

2 2012 Wayne County Sales Tax Distribution 4th Quarter Previous Year, 1st, 2nd, 3rd Quarters Current (2012) Year Source: Office of the Wayne County Treasurer % of Total a Total County Collections $38,496, % b Calculated School District Share (a 3) $12,832, % c Actual Capped School District Distribution $5,400, % d Calculated County Share (a 2) $19,248, % Additional County Share - e Amount Above $5.4M School District Cap (b - c) $7,432, % f Actual Combined County Share (d + e) $26,680, % g Calculated Town & Village Share (a - b - d) $6,416, % h Actual Town Distribution $4,912, % i Actual Village Distribution $1,503, % Towns & Villages 16.7% Schools 14.0% County 69.3% 2

3 3. Q: Is it true that net property taxes paid by Wayne County taxpayers would decrease by $1.4 million if Wayne County stopped sharing sales tax with schools? A: No. Through the STAR program, NY State pays a portion of the school tax bill for each qualifying residential property. Until 2011 it was accurate to say that if schools lost sales tax revenue ($5.4 million), and town/county property taxes were reduced by $5.4 million, and schools raised property taxes by an equal amount, STAR payments from NY State could increase by about $1.4 million (meaning that $1.4 million less in net taxes would have to be collected locally). Also, because businesses are ineligible for STAR, business taxpayers would have been responsible to pay 100% of their school tax increases. This scenario was the basis for many prior debates about ending the practice of sharing sales tax with schools. Without changes to State law, this scenario is now impossible due to the State s new caps on STAR payments. Beginning with school tax bills, the savings resulting from the Basic or Enhanced STAR exemptions were limited to a 2% increase over the prior year. The new best-case scenario is that net property tax payments for Wayne County taxpayers might decrease by between $0 and $500,000. However, all of the following 3 assumptions would have to be met in order to reach that best case scenario: a. Schools would have to require no levy increases for any other purpose other than to make up for lost sales tax revenue. Levy increases for any other purpose would negate potential decreases in net taxes. b. 60% of school district voters would all have to approve tax levy increases averaging 6.1% and that exceed the property tax cap limit. c. Towns/County would all have to reduce their tax levies by a combined $5.4 million. Also, because STAR exemptions apply to residential properties only, net taxes on nonresidential properties could not decrease in this scenario. 3

4 4. Q: How is the schools share of sales tax revenue distributed among individual school districts? A: Sales tax is divided amongst the school districts according to the relative total average daily attendance of the pupils residing in Wayne County and within such school district (without regard to the location of the school attended) for the last preceding school year. Sources: New York State Tax Law Section 1262; Wayne County Board of Supervisors Resolution #25 (68), February 20, 1968 In , sales tax was distributed to schools as follows: Average Daily Attendance of School District Students Residing in Wayne County Sales Tax Distribution Clyde-Savannah $322, Gananda 1, $404, Lyons $345, Marion $320, Newark 2, $800, N. Rose-Wolcott 1, $465, Palmyra-Macedon 1, $684, Penfield $174, Phelps-Clifton Springs $4, Port Byron 8.47 $3, Red Creek $154, Sodus 1, $409, Victor $11, Wayne 2, $862, Webster $35, Williamson 1, $401, Total 14, $5,400, Q: Why is some sales tax distributed to schools outside of Wayne County? A: The only schools that receive Wayne County sales tax are those that include property within Wayne County. School district boundaries often do not correspond with Town and County boundaries. Penfield, Phelps-Clifton Springs, Port Byron, Victor, and Webster school districts are headquartered outside of Wayne County; however, the boundaries of those school districts all extend into Wayne County. 4

5 6. Q: Is there a restriction on how school districts may use sales tax revenue? A: Yes. Schools sales tax revenue may only be used to reduce school taxes for Wayne County taxpayers. Sales tax revenue is treated as an adjustment to the school tax levy and results in a direct reduction in the school tax rate only for properties in Wayne County. For example, Palmyra-Macedon CSD true value school tax rates are lower for properties within Wayne County (Macedon, Palmyra, and Walworth) than the Pal-Mac tax rates on properties outside of Wayne County (Farmington and Manchester). The same is true for schools predominately outside of Wayne County; for example, Penfield school tax rates are lower on properties within Wayne County (Macedon and Walworth) than the Penfield school tax rates on properties in Monroe County (Penfield, Perinton, Pittsford, and Brighton). Sources: New York State Tax Law Section 1262; Wayne County Board of Supervisors Resolution #25 (68), February 20,

6 7. Q: How many New York counties currently share sales tax with school districts? A: As of 2010, five New York counties shared sales tax with their school districts: Erie, Monroe, Onondaga, Wayne, and Westchester. Wayne County has been very progressive supporting the county school districts since the 1967 agreement to use a portion of sales tax collections to lower school taxes for Wayne County taxpayers. An end to this agreement would cause a SHIFT in taxes directly to PROPERTY TAXES in a county that already has one of the highest property tax rates in the Nation. Source: Local Government Sales Taxes: 2010 Update Office of the New York State Comptroller; Division of Local Government and School Accountability - 6

7 8. Q: What are the main causes of school districts recent fiscal stress? A: The two main revenue sources for school districts are New York State School Aid and school property taxes. New York State limits growth of both major revenues. Over the past 4 years, even as State government s overall spending has increased by more than $11 billion, NY State School aid has decreased by $860 million. $ $90.00 $80.00 $70.00 $60.00 $50.00 $40.00 $30.00 $20.00 $10.00 $0.00 NY State Total Spending (billions) $78.93 $ Adopted Budget NY State Operating Funds + $11.2 Billion % $25.00 $20.00 $15.00 $10.00 $5.00 $0.00 NY State School Aid (billions) $21.69 $ Adopted Budget School Aid - $860 Million -3.9% 7

8 During this same period, New York State also limited the amount that school districts may raise through property taxes with the Property Tax Cap. Proposed school levy increases that exceed the levy limit the lesser of 2 percent or inflation, plus or minus certain costs now require 60% voter approval. If voters do not approve a district budget, the district is limited to a 0% tax increase. In 2013, only 27 school districts sought overrides of the levy limit (out of nearly 700 total districts in NY State). Of those, tax cap overrides were approved by the voters in only 7 school districts. 9. Q: What has been the impact of cuts to State Aid to schools and the new Property Tax Cap? A: In the face of limited revenues, school districts have made reductions in program and workforce to balance their budgets. Over the past 5 years, the eleven school districts centered in Wayne County have eliminated 430 positions from their workforce. Positions Eliminated from Workforce School District vs Clyde-Savannah 52 Gananda 25 Lyons 30 Marion 82 Newark 29 N. Rose-Wolcott 42 Palmyra-Macedon 37 Red Creek 20 Sodus 39 Wayne 45 Williamson 29 Total 430 Source: Wayne County School Districts 8

9 10. Q: What would be the impact on school districts if they were to make additional cuts sufficient to make up for loss of sales tax revenue? A: The impact would vary by district, but could include reductions in programs, increases in class sizes, and elimination of services. In total, the reductions would require the equivalent of the elimination of more than 100 additional workforce positions across Wayne County. 11. Q: What would be the impact on school districts if they were to simply raise school taxes by an amount equal to loss of all sales tax revenue? A: The impact would vary by school district, but required levy increases on Wayne County properties only (see also question #6) would range from 4.2% % and average 6.1%. However, because New York State now caps STAR reimbursement payments (see also question #3), actual tax bill increases on Wayne County properties would range from 4.7% % and average 7.3%. However, the likelihood of tax increases this large being approved by 60% of school district voters is small. In 2013, only 27 school districts sought overrides of the levy limit (out of nearly 700 total districts in NY State). Of those, tax cap overrides were approved by the voters in only 7 school districts. % Increase in Wayne County School Tax Bills $ Increase in Wayne County School Tax Bill ($100K home) Clyde-Savannah 8.1% $143 Gananda 4.9% $117 Lyons 10.2% $155 Marion 6.4% $115 Newark 8.6% $156 North Rose-Wolcott 5.7% $87 Palmyra-Macedon 4.7% $93 Red Creek 16.0% $160 Sodus 5.6% $112 Wayne 4.9% $79 Williamson 4.7% $94 Average 7.3% $119 Source: Wayne County School Districts 9

10 12. Q: Is it true that, if schools no longer received sales tax revenue, the shortfall would be temporary and that New York State would pick up the difference in State Aid? A: No. New York State School Aid is not tied to sales tax revenue and the State would not pick up the difference if schools lose sales tax revenue. Over the past 4 years, New York State has cut Aid to schools by $860 million. Prepared November 15, 2013 For questions or corrections, please contact Ralph T. Brongo II, Assistant Superintendent for Business Palmyra-Macedon CSD 151 Hyde Parkway Palmyra, NY (315)