Teachers Union Sues NYS Over Tax Cap

[Chris_Wendt]

I have maintained from the beginning that the so-called "Two-percent Tax Cap" was unconstitutional. Now the Teachers Union, NYSUT has filed suit to have it declared so. Of course, this "Two-percent Tax Cap" is not a tax cap, and it is not two percent; it is a sham, a political gimmick intended to pacify angry voters (until we got our last tax bills).

Certainly, my perspective and the perspective of NYSUT are 270-degrees apart from one another, but we both agree this law is not constitutional for some of the same reasons, and perhaps some differing reasons.

Read NYSUT's press release here: hperlink to NYSUT Website. They also provide a link to the complaint they filed with the court.

This is not about feelings or sentiments. It is about the NYS Constitution and the U.S. Constitution. It is not about taxes, it is about our children's education. I don't like to have to say this, but NYSUT is doing the right thing, here.

But since the "Two-percent Tax Cap" has not really worked, and because it cannot solve any of the real problems causing high taxation, it would be good to scrap this law as soon as possible, and then get down to fixing the problems, including but not limited to:

• The Triborough Doctrine (Triboro Amendment to the Taylor Law)
• the TRS & ERS "Pension Bomb"
• "Do-over" budget votes
• overall funding and prioritization of State Aid to Education
• Wicks law
• Administrative consolidation opportunities

Take heart, those of you who think the Tax Cap is working. There is no way to tell how long this suit will take, or how it will be decided. I was involved with a constitutional suit against the state (REFIT), which took years, and we (low-wealth, high tax school districts) lost our case. Why did we lose? Because we could not take the position that we (Wantagh, for example, with 5 US Blue Ribbon Schools of Excellence) were unable to provide the constitutionally mandated sound, basic education to our students.

The very next group that sued the state, the Campaign for Fiscal Equity (CFE) won BIG -- $7 Billion, because NY City could take the position that they were unable to provide a sound, basic education to all of their public school students because of low state funding. And they had the (lack of) results to prove it.

Happy reading!

Chris Wendt

[lilly]

The suit is a PR fiasco for the teachers union at this point in time.

[Chris_Wendt]

Lilly posited:
“The suit is a PR fiasco for the teachers union....”

So it would appear. We must then consider why would NYSUT inflict negativity upon themselves?

Thinking more about their suit, which I support 100%, even more odd than the public opinion disaster is the fact that, if NYSUT wins their suit, then the Legislature would be forced to deal with the real problems threatening the financial solvency of New York’s public schools:

• Triborough
• OPEB (unfunded Post-Employment Benefits obligations
• The “Pension Bomb”

In having to actually deal with these major financial stressors, the Legislature would have to actively consider legislative solutions that would be contrary to NYSUT’s best interests. Why would NYSUT want to open Pandora’s Box at this time?

The answer is simple. Up until this very minute, public school districts in NY State cannot file for bankruptcy solely because they have the unfettered ability to levy taxes to meet their obligations. However, if you have been following the news or this blog site, you would have heard of school superintendents' professional associations, locally and statewide, speaking and writing about fiscal as well as educational ”insolvency". There is a real and present danger, in the minds of some noted professional educational leaders, of fiscal and programmatic collapse in school districts around the state. (Wantagh’s educational leadership has not expressed these fears for our district, and I do not believe the we are in any imminent danger, compared to other districts, see next post in thread for examples).

What does “fiscal insolvency” mean, and why would that be of sufficient concern for NYSUT to take on negative publicity and risk stirring up a legislative hornets nest?

Insolvency would occur when a district’s liquid financial assets are insufficient to meet their current obligations. Most notably, this happened in Kalkaska Michigan in 1993, and they had to shut down their schools in March, when the money ran out. This precipitated a major restructuring of education funding in Michigan. If this were to happen next year, say in the Half Hollow Hills School District, with the current NY tax cap in place, I believe HHH could go to court and file for bankruptcy, citing correctly that they no longer have the lawful ability to raise the taxes required to meet their obligations, and in all probability could be awarded bankruptcy protection from their creditors, including NYSUT.

The specter of school district bankruptcy protection would be most ominous to NYSUT, as it would almost certainly entail abrogation of NYSUT contracts with school districts, meaning any district which found itself in a financial squeeze between insolvency and the tax cap, such that bankruptcy became the only way out of their predicament.

Now, if you are NYSUT, which should you fear more? A wave of school district bankruptcies and canceled union contracts, or the more distantly future prospect of legislators possibly amending legacy laws that would reduce some of NYSUT’s legal benefits and perks?

Just saying…

Chris Wendt

Edited to remove Seaford. Please see the following post for self-identified districts citing their concerns about insolvency.
-CW

[Chris_Wendt]

In the interest of accuracy, the following LI school superintendents have self-identified as having concerns over the possibility of insolvency for their district:

• Copiague
• Middle Country
  
• West Babylon

Together, these districts have 20,193 students.

See also NY School Districts Face Insolvency (hyperlink)

Chris Wendt

[Chris_Wendt]

Now, as this subject is coming into better focus, here are two other tentacles for consideration. You can see how the combined effects of unfunded mandates, Core Curriculum, APPR, and the "Tax Cap" have gotten some very well respected professional educational leaders publicly voicing concerns about the looming prospects of fiscal and educational insolvency. While some readers may dismiss this as they're "crying wolf", it would not hurt to consider the potential for damage to be caused by these two tentacles of this dilemma:

1. In my opinion, as the pressures mount on individual districts, educational insolvency would most likely precede fiscal insolvency. In other words, as long as a financially stressed district had any money, they would prioritize their spending, pinch their nickles, and as we have seen in the recent and more distant past, start cutting and then cut more, and finally they will have cut too much for anyone to bother voting to pass the next budget. In this phase of pre-financial collapse, union salaries and benefits could not be cut, and neither could regular school (day) busing. Early and big hits could be expected to sports and extracurricular activities, but eventually faculty cuts would have to be made, and class sizes would increase as a result. Without a voter-approved budget in place, under the "tax cap", they would not be able to raise taxes by even $1.

2. After reaching a state of educational insolvency, having become unable to deliver required coursework and services, a financially strapped district could eventually become fiscally insolvent. Some LI districts are forecasting such an outcome in one or two years. The only real life example I know of this resulted in an insolvent school district having to close down for the rest of the school year in March of 1993 when they finally ran out of money.

Insolvency does not equate to or require "bankruptcy"; it only requires a district to run out of money. While nobody would ever wish that to happen to any school district, there is little or nothing most of us could do about it; but there is one thing we would be forced to do because of it...chip-in and make their pension fund payments for them!

Yes, the NYSTRS happens to be a multi-employer defined-benefit pension plan, and as such all employers (school districts and BOCES in the state) are jointly and severally liable for all of the contributions owed to the fund. Therefore, if three districts simply ran out of money and defaulted on $15 Million of pension contributions, then that $15 million default would simply be spread among the remaining districts that were still solvent, for them (us) to pay.

I admit this is an over simplification or even an exaggeration. The only way a school district could default on TRS contributions would be if they had to close their doors months early, stop holding classes, and furlough all of their teachers. As did happen in Kalkaska Michigan in 1993. In other words, this kind of eventuality is not without precedent.

I believe that the teachers union, NYSUT, their membership and their pension fund all really need for this "tax cap" to be declared unconstitutional and vacated by the Court of Appeals.

Sincerely,

Chris Wendt