Pension Costs Could Affect School Tax Levy

Written by Rich Forestano, rforestano@antonnews.com Friday, 07 December 2012 00:00

Mineola officials, regardless of the option,

do not want to pierce the state imposed tax cap

Teacher retirement in the Mineola School District could affect next year’s tax levy, which has a state-imposed 2 percent limit that was put into law in 2011. Finance Superintendent Jack Waters revealed that the district could have $800,000 exempt from the cap due to the estimated retirement costs that would go into effect in the 2013-14 school year.

Waters said the Teacher Retirement System (TRS) increases for next year is about $1.5 million. Mineola under state law could put out a 3.05 percent increase for the next year, with half of the estimated TRS cost spikes not included, leveling out piercing the cap, a move the district does not want to make.

Pension cost estimations, according to Waters, could be anywhere from 15.5 to 16.5 percent or $5.9 million. Employee cost rates for this year is 11.84 percent, with an estimated increase of 4.16 percent next year. The 2012-13 TRS payroll totals $37 million.

The first 2 percent of the employee cost rate is included in the levy cap calculation, according to Waters. Any increase over the 2 percent is exempt from the levy cap, which means if the district chooses, it can exceed the cap.

“It still has to be paid,” Waters said. “For example, where the first 2 percent has to be included in the levy cap, $740,000 is part of the calculation we have to prove to the state that this is where our pension costs are. The additional 2.16 percent ($800,000) is outside the cap and would be reflected as an exempt amount in terms of proving to the taxpayer that we have complied with the 2 percent [cap].”

Last year’s tax levy totaled $76,242,180. Waters said regardless of the exemption, the district would still work to not float a 3.05 tax levy increase.

“We would go out with a tax levy of 3.05 for the 2013-14 year but we would comply with the state saying the 1.05 [percent] is exempt. [The 3.05 percent] is something, all things being equal I don’t think we’re going to work towards.”

District Superintendent Michael Nagler pointed out that TRS alone is more than the 2 percent cap, “which is not good. What will be allowed under the law of the cap, we would be allowed to go out with 3 percent. That would be within the cap parameter. So it’s kind of a misnomer that you get this exemption; it’s a bad word because you’d think you’d be exempt from paying it, you’re not. It just doesn’t figure in to the 2 percent [state cap].”

Nagler noted that the TRS budget line is significant in how the district crafts a budget for next year. In May, the district floated and passed a $83,992,180 budget, a decrease of $229,458 or a 0.27 percent drop in spending from 2011-12.

“The levy calculation this year has some added twists in it,” said Nagler. “ Putting a budget…our norm has been around 2.5 [percent] over the last four or five years. It’s going to be a challenge to get to that number this year, but we haven’t really started crafting the budget yet. We’re just looking at big numbers. When we start to apply how we craft the budget, we’ll have news on this as we go along. This number is pretty astronomical and there’s no indication that this is leveling off.”

Board President William Hornberger said according to State Comptroller Thomas DiNapoli, that Mineola should anticipate future increases in employee cost rates.

“Everything is dependent upon the global capital markets and what’s driving their rate of return,” Hornberger stated. “Last year’s rate of return for the fiscal year ending June 30 was 2.8 percent. Apparently, that wasn’t good enough.”