65% Of 2014 Tax Increase Due To School District. Coming Years A Concern For RPSD.

With an increase of $800,475.00 in the 2014 tax levy – the largest annual increase since 2007 – the Roselle Park School District (RPSD) accounts for 65% of the increase to be paid by property taxes. The school district also accounts for the largest portion of this year’s tax levy, with around 52¢ of every dollar going to schools. Although the portion has been stable throughout the years – school districts in New Jersey usually account for more than 50% of property taxes – the increase between years in relation to the total property tax is what is noticeable for the district.

Additionally, due to the shrinking availability of what is termed ‘banked cap’, the coming school years present a possible dilemma with costs being more than current projected finances can handle without needing a public vote.

Currently, school districts in the state can increase the amount to be raised in taxes by 2% of the previous year’s amount without having that amount go before voters. This is because two years ago, the State of New Jersey allowed school districts to move their elections to the same day as the general election in November of every year and – as an incentive – provided that any district that does so will be able to remove having their entire budget approved or denied by voters. Previously, Board Of Education (BOE) elections were held in April and every budget, in its entirety, was voted on before being approved. Since RPSD moved its elections, voters can now only vote for any amount over 2% – and only that amount over the cap. As an example, if a budget increases the tax levy by 2.5%, voters can only vote on whether they approve or reject the ½ percent, not the entire 2.5%. This causes a real administrative issue because if some programs begin in September when the tax levy increases over 2%, and the overage amount is defeated in a November election, there might be programs or staff that might be cut in January due to the district having to re-evaluate a budget with certain programs and associated costs already in place.

A caveat exists, called a ‘banked cap’, that allows a school district to increase the amount to be raised by taxes over 2% without having it go before the voters. A school district can increase the tax levy over 2% by using ‘banked cap’, which is any amount of increase that the district did not raise taxes by up to 2% for any previous three years. In other words, if, in 2011, the school district raised the tax levy by 0%, they are allowed to raise taxes any other year, up to three years later, by 2% and that is in addition to the 2% cap put in placed annually. If a district only raised the tax levy portion by 1%, they are allowed to place the remaining one percent into any subsequent year’s budget up to three years later. It should be stressed that the money not raised in previous years will need to be raised in whatever year it is used. Theoretically, this banked cap can raise taxes by up to over 8% in one year if a district maintains a $0 increase for three years without having to put that amount up for a vote, even though the full 8% will need to be increased through the taxes residents pay in the year it is used.

The total Banked Cap available was $974,683 at the start of the 2014-15 school year. Out of that amount, $754,721 was used in the 2014-15 school year budget. In 2013, the school portion of the total tax levy was $18,370,800.00 which meant that only $367,416.00 (2%) could be increased by taxes without needing to be voted on by the public. This left $433,059.00 that needed to be covered – by what is termed revenues – to make up the $800,475.00 tax levy increase for the school district. The three-quarter of a million dollars in banked cap covered that shortfall as well as paid for other projects and budget requirements.

This will leave only $219,962.00 available in banked cap for the 2015-16 school year budget. With the 2014-15 tax levy being $19,171,275.00, the amount that can be increased will be $383,425.50. Combining that amount with the outstanding banked cap will only allow an increase of $603,387.50 that can be raised without needing a public vote. This amount is just under $200,000 short of this year’s total tax levy increase. And since the last time the district did not increase the tax levy by the full two 2%, there is no banked cap that can be used in the foreseeable future, which means that the probability is high that the school budget will be going before voters in the coming years.

Adding to the current financial concerns is the fact that contract negotiations with the teachers’ union will begin next year and any increase in salaries/benefits will add to future school district budgets as well as the possibility of redistricting the elementary schools requiring input from residents.

To address the mounting financial concerns, the BOE has taken a proactive measure of hiring a grant writing firm (article link) to help offset expenses for district necessities related to the education of the borough’s children.

The BOE Finance Committee is expected to meet in December to review the 2015-16 school year.