Tuesday, June 12, 2012

QUESTION: So What Will This Merged District Cost?

The merged district will offer new sports, new music and language programs and more course options for students. How much will all of this cost ?

While there is no doubt that a primary concern of many people (not the least of which is our students themselves!) is the educational value that a merged district can offer, there is another concern, particularly to those paying taxes – What will the cost of this new merged district be like in comparison to what we presently have ?

In order to talk about the costs, let’s look at the basic component parts of any budget – expenditures and revenues.

EXPENDITURES - The expenditures are basically the costs of doing the business of educating our young people. Estimating the expenditures for the 2013-2014 school year, the three districts as they presently exist have a combined set of expenditures of around $63.3 million. That is the combined cost of all three districts operating separately.

In comparison, the merged district expenditures are projected to total about $63.9 million for the same school year. This is about $600,000 more than the districts separately. This is less than 1% more than is currently spent in each of the three districts.

But what about the revenue side of the equation ?

REVENUES - In terms of revenues, without getting into the morass of funding streams, basically the three districts operating as separate entities get roughly $41.3 million from the State of New York in “regular” state aid. This actually includes federal as well as state aid, and some miscellaneous aid but for the sake of discussion it will be referred to as “regular” state aid.

This amount of “regular” aid wouldn’t change in a merged district. So the usual state aid coming into the merged district would remain at about $41.3 million. But there is additional aid that will also be available to the merged district that wouldn’t be to the districts if they remain separate. This is state incentive aid. In total, the new district would have about $59 million made available to it in “incentive” aid over a 14 year period ! The study suggests that the money be allocated over that period of time at a clip of about $6.2 million each year. This money does decline in the 6th year of the 14 year cycle, being reduced annually by about $620,000 each year. See this post about how the Study team proposes we manage this incentive aid.

BOTTOM LINE - So back to the question – how much does this cost us financially ? Well, the expenditures between the two possible arrangements (merged versus separate districts) are essentially the same - $63 million. The potential revenues are substantially different.
Expenditures, Revenues, and State Incentive Aid
Regardless of whether the districts merge, “regular” state aid will be the same - $41.3 million. It is ONLY if we merge that we get a financial boost – specifically $59 million in “incentive” aid spread across 14 years. So in terms of revenue, a merged district has (at least initially) a $6 million per year advantage over the present arrangement.

BUT WAIT, THERE’S MORE - So what happens when that aid runs out in 14 years ? Well, there are three answers to that.

The first is that the Study suggests placing some $10 million over the life of the incentive aid into the reserve fund of the new district. This will help stretch out the fiscal advantage of the merger even further.

Second, the Study suggest applying $10 million to paying off some of the district’s debt in order to free additional monies for the future as well. The less you pay in debt services, the more you have for other things. Again, this extends the impact of the incentive aid further into the future beyond the 14 year payout period.

Lastly, what happens is that the district is no worse off than the three are right now ! If in 14 years the incentive aid flat out ends, and we have done nothing else, we will still have a school system with expenditures almost identical to what we they would have been if no merge took place, and a stream of “regular” state aid that would also be the same. What we WILL have gotten is $59 million in the meantime that has helped us established a superior educational system to what we have presently, in light of the cuts to staffing and programs that we have had to endure.

In the end, the expenditures to teach our kids will be the same regardless of whether we merge; the regular state aid we receive will also be the same whether we combine the districts or not.

The real fiscal question is “Do we want to leave $59 million on the table ?”

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