Key Budget Terms

Key budget terms commonly used by school districts in New York State are defined below. They appear in alphabetical order by category: budget, revenues, and taxes.


Budget

3-part budget: School districts must, by law, divide their budgets into three components – administrative, capital and program – and each year they must show how much each portion has increased in relation to the whole budget. The three components are defined as follows:
  • Program includes expenses associated with instructional programs, teacher salaries and benefits, health services, transportation operating costs, special education, instructional supplies and equipment, and athletics.

  • Capital consists of maintenance costs for buildings and grounds, custodial services, utilities, capital expenses, bus purchases, and debt service.

  • Administrative expenses include costs associated with office and administrative areas, financial/legal services, human resources, business office, communications, board of education expenses, BOCES administration, district clerk, and school supervision.
Consumer Price Index: Consumer Price Index (CPI): An index of prices used to measure the change in the cost of basic goods and services in comparison with a fixed base period. Also called cost-of-living index. However, the CPI does not take into account many of the items that cause school district budgets to rise, such as the increasing cost of health insurance, liability insurance and retirement contributions. 

Contingent budget: if the budget doesn’t pass, the Board of Education can elect to adopt a contingent budget or ask the community to vote again in June. If the budget is defeated twice a district must adopt a contingent budget. A contingent budget must meet certain criteria according to the state, with no increase in the tax levy over the prior year's levy.

Debt service: is the amount paid for the financing of capital projects and other borrowing. An example of Spencerport's debt service includes the payments on the borrowing for the voter-approved capital projects. Typically, this cost is offset by increased revenues in the form of building aid from the state.

Fiscal year: is the accounting period on which a budget is based. The New York State fiscal year runs from April 1 through March 31. The fiscal year for school districts in the state run from July 1 through June 30.

Support services: The personnel, activities, and programs that enhance instruction and provide for the general operation of the school district. This includes attendance, guidance, and health programs; library personnel and services; special education services provided by speech and language pathologists, physical therapists and occupation therapists; professional development programs, transportation, administration, buildings and ground operations, and security.
 
 Revenues
 
BOCES aid:  BOCES (Board of Cooperative Educational Services) offers cooperative services to schools by combining resources for two or more districts. BOCES aid is a form of state aid for services including student performance and testing, cooperative bidding, healthcare, workers comp and utility consortiums, vocational education, curriculum development, and computer services. The state reimburses school districts for a portion of their approved BOCES expenditures. Districts pay for services in a given year and are reimbursed the following year. The amount of reimbursement is based on the district’s state aid ratio and may vary from 30 to 90 percent.

Foundation aid: refers to the consolidation of 30 aid categories to streamline and simplify the calculation of New York State aid. 

Local sources: provides a share in the county's sales tax receipts.

Reserved/Unreserved fund balance:  Reserved fund balance is the portion of fund balance set aside for specific purposes such as the Reserve for Encumbrances, Reserve for Repairs, or Tax Certiorari Reserve, etc.

Each reserve fund has certain establishment and use requirements. Unreserved fund balance is the residual amount of fund balance after all reserves have been taken into account.

Unreserved fund balance consists of appropriated (designated) fund balance and unappropriated (undesignated) fund balance. Appropriated fund balance is the portion of unreserved fund balance that has been used to reduce taxes in the subsequent fiscal year. 
 
 Taxes
 
Equalization rate: represents the average level of assessment in each community. For example, an equalization rate of 71 means that, on average, the property in a community is being assessed at 71% of its market value. The words "on average" are stressed to emphasize that that an equalization rate of 71 does not mean that each and every property is assessed at 71% of full value. Some may be assessed lower, while others may be assessed higher.

Equalization rates are established by the New York State Board of Equalization and Assessment. School districts that comprise more than one city, town or village must use the equalization rate to determine the tax rates for each municipality. The purpose is to bring equity to how the taxes are distributed in any one school district, so that ideally a home with a full market value of $100,000 in one community will pay the same taxes as a home with a market value of $100,000 in the next community, regardless of how those two homes are assessed.

Reassessment: is a systematic analysis of all locally assessed properties (both commercial and residential) to reflect current market prices and further assure that each property owner pays only their fair share of the tax burden.

With a reassessment comes a redistribution of taxes. This process does not result in a windfall of new revenue for the school district, town, or county, nor does the reassessment change the total amount of taxes that the school district must collect; it merely redistributes who pays them.

In theory, rising assessments will result in a decrease in the tax rate (everything else being equal), as there is now a larger tax base from which the school may generate the same amount of tax dollars. If a property owner’s assessment doubles, their tax bill will not double – in fact, it may remain about the same, increase slightly, or even decrease depending on the final tax rate.

STAR: New York State School Tax Relief program that provides an exemption from school property taxes for owner-occupied, primary residences. This state-financed exemption is authorized by Section 425 of the Real Property Tax Law. You must apply for the STAR exemption. Senior citizens with combined incomes that do not exceed $62,200 may qualify for an enhanced exemption.

Tax Certiorari: The legal process by which a property owner can challenge the real estate tax assessment on a given property in attempt to reduce the property’s assessment and real estate taxes.

Tax levy: Total sum to be raised by the school district after subtracting out all other revenues including state aid, federal aid, and local sources. The tax levy is used to determine the tax rate for property owners in each of the cities, towns or villages that makes up a school district. First, the school district develops and adopts a budget. Revenue from all sources other than property tax (state aid, sales tax revenue, user fees, etc.) is determined. These revenues are subtracted from the original budget and the remainder becomes the tax levy.

Tax Levy Limit: The threshold dictated by an 8-step state formula that determines the highest tax levy BEFORE exemptions that a school district can propose and still need a simple majority to pass.
Maximum Allowable Levy Limit: The Tax Levy Limit plus allowable exemptions results in the maximum allowable tax levy, which is the highest tax levy a district can propose and still only need a simple majority to pass.
   





Tax rate: The amount of tax paid for each $1,000 of assessed value of property. In districts that cover just one municipality, the tax rate is figured simply by dividing the total assessed property value by 1,000 and then dividing that again into the tax levy (the amount of money to be raised locally). In districts that encompass more than one municipality, the formula for figuring the tax rate is more complicated. It involves assigning a share of the total tax levy to each municipality and applying equalization rates to take into account different assessment practices. Equalization rates are established annually by the NYS Office of Real Property Taxes (ORPS) to make assessments and tax rates comparable throughout the state (often called full or true value).