School funding debated; tax rise is a sure thing

Providing 'sound, basic education' will cost money.
KNIGHT RIDDER NEWSPAPERS
NEW YORK -- As state and city officials wrangle over where they will find $23.3 billion in mandated additional aid for the city's troubled schools, only one thing seems certain: Taxes will rise.
But by how much is anybody's guess at this stage. Lawmakers have not even worked out what percentage of the increased funding -- about $5.6 billion a year for four years -- will come from the state and how much, if any, from the city.
The spending was recommended last week by a court-appointed panel after an 11-year legal fight by the Campaign for Fiscal Equity, which wanted Albany to meet the state Constitution's requirement to provide all youngsters with a "sound, basic education."
Mayor Bloomberg is adamant that the state should shoulder the entire burden. He warned that if the city were required to pay it would force cuts that would "harm the very children this lawsuit was designed to help."
Gov. Pataki has called for 40 percent coming from New York City taxpayers. Others in Albany, including AssemblyEducationCommittee Chairman Steven Sanders (D-Manhattan), think the city should pay about 25 percent.
The court-appointed panel's recommendations now go to Manhattan Supreme Court Justice Leland DeGrasse. If he concurs, the state will have 90 days to find a solution. An appeal could lengthen that timetable considerably.
Inevitable increases?
Although most impartial experts see tax increases as inevitable, politicians are loath to utter the phrase.
"We're talking about less than 2 percent of the $102 billion the state budget includes from all sources," said Sanders. "If the governor's fiscal people put their minds to it, I am confident they can find hundreds of millions in savings."
Still, hundreds of millions are not billions.And,asCitizensBudget Commission chief Diana Fortuna put it: "An increase of $5.6 billion annually will inevitably require tax increases by the state, the city or both."
Fortuna's nonpartisan group has come up with a host of controversial funding sources, including expanding video-lottery gambling, reallocating education aid from wealthy suburban districts to city schools and creating a new state property tax.
The group also recommends revising the corporate tax structure and broadening the sales tax to include currently uncovered categories like home improvements and periodicals. And, as a last resort, hikes in the state income and sales taxes might be necessary.
If the CFE recommendations were funded solely by state income tax, a husband and wife with a combined income of $70,000 would pay $780 more, according to Citizens Budget Commission economist Marcia Van Wagner.
Meanwhile, legislators are under pressure not to cut programs, especially from the health care and government-employee unions that contribute heavily to their campaigns.
Albany watchers worry that lawmakers could find it politically more palatabletoextendtaxesthey promised would be temporary.
Tax extensions
The state already has extended a sales tax on clothing purchases under$110forayearbeyondits promised sunset last May. Other taxes could be extended, among them a quarter-point increase in the state sales tax, due to expire June 1, and an income tax surcharge on people who make $100,000 or more, which is set to end in 2006.
Similar increases in city sales and income taxes are due to expire at the same time.
Extending temporary taxes would raise $1.1 billion a year, according to one estimate. But, said Kathryn Wilde, president of the influential Partnership for New York City, "it would be devastating to the city," which already bears a disproportionate share of the state's tax burden.
Among the proposals floating in Albany is one to use anticipated future gambling revenues as security for a bond issue to fund the mandate.
Frank Mauro, executive director of the Fiscal Policy Institute, said it isn't even clear that expanding video-lottery gambling beyond racetracks is constitutional. And if it is, he noted, it would impose astronomical interest rates on future generations of New Yorkers.
The money scramble comes as both the city and state face huge budget gaps next year -- $2.9 billion for the city and $6.3 billion for the state. Additionally, the Metropolitan Transportation Authority's capital plan and its budget for roads and bridges are up for reauthorization next year, with a combined price tag of $55 billion.
And that's not the end of it.
The current decision applies only to New York City schools. But districts throughout the state -- including Albany, Cohoes and Glens Falls -- are organizing attempts to pursue their own school funding lawsuits.