We’re Losing the Property Tax Battle to WHOM?

Posted by & filed under CGR Staff, Rochester Business Journal.

Kent GardnerCGR recently recruited a staff member from out of town. After he and his wife had found a house they liked (comparable to the home they were selling), they were confronted with what is a familiar problem—the property tax bill. The house they were about to buy was going to cost them nearly 50% more in property taxes each year. Familiar story, right? Darn those folks in North Carolina and Florida and Utah for their low property taxes! How can we compete?

But my colleague was moving from Orchard Park, a Buffalo suburb, not from Raleigh or Tampa or Salt Lake City! That’s right—Erie County property taxes are lower than Monroe County’s.

That New York state property taxes are high is well known. The Tax Foundation published a list of the highest-taxed counties in America for 2006. New York counties captured all but three of the top 17 places with Wayne, Niagara, Monroe and Erie capturing the top four places (GO, NYS!!).

We’ve not focused a lot of attention on tax differences between NYS counties, however. Ranking full value tax rates among the 44 towns of Erie and Monroe counties (the cities must be the subject of a later column), Monroe captures all but two of the top 18 places. Erie sweeps the lowest 25.

It doesn’t take a lot of research to identify the culprit: Monroe County schools spend more than their counterparts in Erie County. Taxes paid to Erie and Monroe towns are nearly equal.
Leaving out Buffalo and Rochester city schools for the purposes of this analysis, Erie County public school districts spent an average of about $11,400 per student while Monroe districts spent about $12,300 in 2004-05, according to figures from the State Education Department.

Monroe spent more in a variety of areas. First, suburban districts in Monroe spent more money on central administration than their counterparts in Erie, even though the Monroe districts have 15% fewer students. On a per-student basis, Monroe districts spent 27% more per student on central administration. This hardly comes as a shock, as the Rochester Business Journal’s 2007 report of the 50 top paid government employees in Monroe County included 47 school district administrators.

But the disparity in administrative expense can’t account for the entire difference. Administration accounted for only 2% of total spending. The big money is, as it should be, in instruction, which accounts for 60% of total school spending. On a per-student basis, Monroe districts spent about 6% more on instruction and 21% more on fringe benefits than Erie districts.

The difference is more dramatic when regular instruction and instruction for students with disabilities are compared. Monroe districts spent $400 more per student on regular instruction—a difference of about 6%. But they spent nearly $5,000 more per student on instruction for students with disabilities—a difference of about 34%. This amounted to nearly $11 million in 2005.

Along with spending, another factor pushing up school tax bills in Monroe County is a lower contribution from the state, relative to Erie. Monroe suburban schools got about 43% of their budgets covered by the state, compared to 48% for Erie suburban schools in 2005.

All this brings us to the question of whether the higher spending in Monroe has yielded results. Although educational effectiveness is difficult to measure, the data we have suggest that suburban school systems in Monroe can’t claim better outcomes. In 2005, Monroe students performed similarly to Erie’s on the fourth-grade battery of state tests, yet Erie districts had somewhat higher passing rates on the middle school state tests and Regents exams.

The state commission on a property tax cap led by Nassau County Executive Tom Suozzi has recommended a cap on school property taxes. It has yet to become law and we can be confident that the battle to be fought in Albany’s legislative chambers will be bloody. Given what we know of spending and outcomes in Monroe County, Governor Paterson might expect support from Monroe voters.

Erie County, Monroe County Tax Difference Chart

Kent Gardner, Ph.D. President & Chief Economist
Published in the Rochester (NY) Business Journal June 13, 2008

Co-author on this month’s Policy Wonk is Melanie Zilora, CGR intern.