A plan to bring what he termed “real tax relief for New Yorkers,” was proposed recently by Gov. David Paterson as part of his new budget and is under review by the legislature. If enacted, the plan will give property owners tax credits that will be paid for by projected savings at the State level over the next fiscal year. The amount of that tax credit will depend, however, on the fiscal restraint of each school district in the State, said Matt Anderson, a spokesman for Paterson.

“What this plan will do, if enacted, is not only control spending at the State level and return any surplus those savings generate directly to the taxpayers, but also encourage school districts to do the same,” he said. “We looked at the STAR program and recognized that it did not provide the kind of real property savings it was designed to bring because of escalating costs at the local level.”

Theplan would work as follows: Thetax credit for property owners will be reduced proportionally when their school district does not maintain a tax levy for the year that is at or below 1.2 times the rate of inflation, or four percent over the previous year, whichever is less. In the event that the local school district tax levy increase is more than that, then the amount of the tax credit will be reduced proportionally. For example, if a property tax bill in 2012 increased by five percent, and the inflation rate is four percent, then the credit will be multiplied by a factor equaling 104/105 or the credit would be one percent less than that given to property owners living in a school district that met the cap. If the tax bill rises only by three percent, then the credit will be increased by a factor equaling 104/103, or one percent more.

This, undoubtedly places more pressure on school districts to keep the rate of annual increases under control, even at a time when State aid has been reduced and mandates increased.

“There’s no question that the proposal gives school districts the incentive to control spending, but if the State doesn’t control spending as well, then there will be no money for tax credits,” said New York Sen. Chuck Fuschillo (R-Merrick).

“I would be in support of a circuit breaker law, depending on how it is set up to work,” said N.Y.S. Assemblyman Robert Sweeney (D-Lindenhurst). “Anything that helps to save money and reduce taxes is important but I don’t know if we are going to get control of this [the State’s fiscal] problem unless we do something dramatic.”

Meanwhile, school officials pointed out that they are wrestling with a number of issues that make reducing costs difficultat best.

“Certainly, the picture is not rosy,” said Amityville School Superintendent John Williams in discussing this year’s budget discussions. “We are preparing for the worst but doing our best.

Williams said that the most difficult part of the budgeting process is not coming up with a spending plan that taxpayers can afford and one that provides for education, but coming up with one that can be managed during the year when other factors, such as the State’s decision this year to delay committed funding to school districts.

“If we have to reduce staff and increase class sizes, we can bite the bullet and do what has to be done,” he said. “But then when something happens such as the State’s decision to withhold subsidy payments in the middle of the year, that can wreak havoc on any financial plan. "

“In our case, you will find that we will definitely be under the cap this year,” said Alan Adcock, superintendent of business for the Massapequa School District. “But it may be more difficult for other school districts that have no reserve funds.”

Some school districts used reserve funds in the face of eroding state aid over the past several years, and as a result of some added costs associated with the State’s decision this year to lag some state aid payments.

In Lindenhurst, where the State withheld $2.75 million in aid, the district had enough money in reserve to bridge the gap until the payments came in, however, Superintendent of Schools Richard Nathan said that kind of fiscal management can lead to difficulties for school districts down the line, especially those who do not have enough in reserve. “It could impact on future budgeting, reduce emergency reserves or reduce bond ratings,” he said.

“The districts were promised two years of federal stimulus funding,” said Charles Leunig, superintendent, Copiague Schools. “But the Governor has used some of that money to plug a portion of the State’s budget this year, and that is likely to diminish the amount we have available for next year.”

School districts may face other problems as the Governor also proposes to shift the two-month summer special education costs that districts incur each year. For about as long as anyone can remember, the State picked up 80 percent of those costs. Discussions underway in Albany include a change that would have the State give a district the same level of funding for that program as it does for its regular state aid package, which is much lower. That would result in districts having to pick up an additional, 30, 40 or 50 percent of those summer special education costs. In the case of Massapequa, for example, that would mean the district taxpayers would be shouldering another $502,000 a year.

While many local lawmakers support the cap on spending, they point out that even as Gov. Paterson talks about it, the lawmakers in Albany bring in whopping increases every year. There is currently an $8.2 billion deficit at the state level this year—a deficit that promises to grow if the pace of spending is not abated.

“We [Albany Republicans] have passed legislation for a spending cap two times, but the Democrats always defeated it,” said Fuschillo.“ Instead, they approved one of the largest spending increases— $13 billion—last year. Now the Governor is talking about a spending cap? I am in favor of it, but it has to start in Albany.”

“TheAssembly approved a cap on State spending in 1995 and the Senate failed to approve it,” countered Sweeney, who points out that the State’s overall budget has increased only slightly, and that the additional spending Fuschillo and the Republicans talk about was covered by $25 billion in federal stimulus money.

According to the New York State’s 2010 budget report, annual growth of the State-financed portion of the budget – that is, spending financed directly by State residents through State taxes, fees, and other revenues – was almost flat. General Fund disbursements totalled $54.9 billion, an increase of $301 million (0.6 percent) from 2008-09 results. Projected General Fund spending has been reduced by $8.7 billion compared to the current services forecast.

But lawmakers, including Sweeney, note that the State has operated with more than $25 billion of stimulus money that will not be available next year. The question is – What is the State going to do?

“If the economic picture does not improve and turn around, then we are going have serious financial difficulties next year and really tough cuts will have to be considered.”

“There’s no doubt that we are in tough times,” said Assemblyman Joseph Saladino (R-Massapequa). “But there are real savings to be realized (at the state level) by making the right cuts and the Governor refuses to identify them. Those include focusing on Medicaid fraud and abuse, which could produce as much as $150 million in state funds if a full-court press is made to end this abuse,” he said.

“What the State and Long Islanders in particular need is a real commitment to change,” said Assemblyman Andrew Raia (R-9th District). “Unless that takes place we will continue to see the same circumstances play themselves over and over again like Groundhog Day.