At last week’s Lowell City Council Meeting, City Manager Murphy stated that because we have that excess Tax Levy it counts against us and comes into play where funding for Schools (Chapt 70) is concerned and that state money is reduced because of that.
Dick Howe Jr wrote in his City Council Summary
In response to Councilor Milinazzo question, Manager concedes that the city’s “excess levy capacity” (meaning we have the ability to raise taxes more) cuts down the amount of state aid the city will receive. Same with rising home values which mean the ability to raise more money through taxes. Councilor Samaras asks about school funding, particularly expenditures on charter school and how it relates to the rest of the school system. Conor Baldwin, Chief Financial Officer, says that Greater Lowell Tech’s assessment to the city is increasing by $1 million this year. Also says the state will be reducing (or at least not increasing) aid to schools, both making this budget very challenging
While it is a decent summary, it’s NOT exactly correct. Councilor Milinazzo was actually talking about Chapt 70 funding. (LTC Council Meeting 3/17 at the 7:30 mark) but for the record, Excess Tax Levy does NOT count against any City in either formula.
There is NOTHING in either the General Local Aid Formula or the Chapt. 70 (School Aid) formula, that states if you have excess tax levy capacity you are punished or money is withheld from your city because you aren’t at the upper most tax cap.
I’ve attached a Power Point Presentation from the Mass Dept. of Elementary and Secondary Education, that does a pretty good job explaining the Chapt. 70 formula and what that means they are looking for for funding.
Part of it states:
Chapter 70 aid is determined in three basic steps (Bold Mine)
It defines and calculates a foundation budget, an adequate funding level for each district, given the specific grades, programs, and demographic characteristics of its students.
It then determines an equitable local contribution, how much of that “foundation budget” should be paid for by each city and town’s property tax, based upon the relative wealth of the community.
The remainder is funded by Chapter 70 state aid. Local Contribution + State Aid = a district’s Net School Spending (NSS) requirement. This is the minimum amount that a district must spend to comply with state law.
So while the increase home value and the amount charged in property tax is part of the formula, EXCESS TAX LEVY is NOT! You don’t get penalized for having excess levy.
The Attached Power Point also explains a little more information about the formula including:
Local Contribution Establishing local ability to pay
The foundation budget is a shared municipal-state responsibility.
Each community has a different target local share, or ability to pay, based on its property values and residents’ incomes.
Prior to this policy, required local contributions had become less linked to ability to pay. A process was established in 2007 to move each community from its 2006 baseline to its new target.
Individual communities’ target local shares are based on local property values and income, and foundation budget.
To determine local effort, first apply this year’s property percentage (0.3808%) to the town’s 2014 total equalized property valuation
Then apply this year’s income percentage (1.4930%) to the town’s 2012 total residential income
Local Property Effort
+ Local Income Effort
= Combined Effort Yield (CEY)
Target Local Share = CEY/Foundation budget
Capped at 82.5% of foundation
In FY16, 143 of 351 communities are capped.
GN: What can be confusing is that there is a reference to the tax levy but it doesn’t state that it is punitive to have excess levy.
Increase last year’s required local contribution by the municipality’s Municipal Revenue Growth Factor (MRGF)
Calculated annually by the Department of Revenue
Quantifies the most recent annual percentage change in each community’s local revenues, such as the annual increase in the Proposition 2½ levy limit, that should be available for schools
If the preliminary contribution is above the target, reduce by the effort reduction percent (45% in FY16).
If the preliminary contribution is below by less than 2.5%, the preliminary contribution becomes the new requirement.
If the preliminary contribution is below by more than 7.5%, an additional 2% is added to the preliminary contribution. For those below by between 2.5 and 7.5%, 1% is added.
The Preliminary Budget mentioned by CFO Conor Baldwin (that can also be found on the State’s Chapt. 70 website )shows that Lowell will actually be receiving an additional $306,000 in State Aid/ Something Mr. Baldwin states in a memo as part of the Council Packet.
He is correct when he states the $300,000 increase is the lowest increase in a long time. That is due to the City paying more by meeting the Net School Spending in 2015 and thus setting the base foundation for the City higher, combined with the added value of property in the city and the additional income generated from that (I pointed out Sunday that the average tax bill went up 6.3%) so the State see’s that as the increase in ability to pay more.
Again NOTHING mentioned that states excess Levy is something you get penalized for or that it is held against you as ability to pay.
Here is a summary sheet from the Chap. 70 website but you need to be Joe Smith or a financial guru to understand it.