July 23, 2008

Monroe County loses on appeal; must pay back $29 million to school districts amount withheld under 'FAIR' plan over five year period

Monroe County taxpayers will pay more than $3 million in interest and legal fees as a result of a settlement with local schools that were shorted sales tax revenue to be paid over the next five years. A 'FAIR' plan proposed by Monroe County Executive Maggie Brooks was to intercept sales tax revenue normally sent to county school districts to cover a projected $50 million budget gap.  The plan diverted sales tax revenue, historically pledged to school districts, to help pay the county's Medicaid expenses. Sales tax revenues were cut by 50 percent for all 17 suburban school districts within the county, and seven others whose borders cross the county line. The schools sued, an appellate court ruled in their favor, and, in July 2008, Ms. Brooks announced she would not appeal. Instead, the administration sought a settlement not to continue litigation and returning the withheld $29 million funds over a five-year period. 

Monroe county lost the lawsuit brought by 24 suburban school districts over distribution of sales tax revenue. The districts' lawsuit was filed in response to County Executive Ms. Brooks' plan which would have been tied to the county's decision to allow the state to intercept sales tax revenue to fund the local share of Medicaid.  Because the county would receive less sales tax revenue under the plan, it was going to distribute less revenue to school districts, a major part of the plan. Monroe County was the only county to allow the state to intercept some of its sales tax revenue to pay for the local share of Medicaid costs.  The sales tax revenue to schools was to be cut by 50% comprising 2% of district budgets. 

The Hilton Board of Education joined the protest against County sales tax intercept plan in October 2007. 

"For the Hilton School District, our best estimate is that this represents a loss of about $540,000 this year," Hilton Superintendent of Schools David Dimbleby said. " Our joint resolution with county school districts will ask the Courts to enforce the current laws regarding the use and distribution of sales tax revenue.  We believe the County does not have the authority to change state laws governing the distribution of sales-tax dollars and that this abrupt action has a direct and significant impact on all school district budgets this year.  Our Board of Education is expected to discuss this issue at its Oct. 9 meeting and take some action."  

Hilton School District was to receive about $2.2 million in sales tax revenue during the 2007-08 school year. The County's decision will effectively cut that amount by 50% beginning in January 2008.  In September the County Legislature approved a plan that reduced by $29 million the amount of sales-tax revenue given to schools. The county shared $57.9 million with school districts in 2006. The sharing of sales tax with school districts was begun in 1985.    The County's plan was designed to address the County's structural budget gap of about $50 million a year over the next two years. Under the plan, suburban school districts would lose at least $24 million a year in sales tax revenue. The proposed plan included these provisions: Monroe County opts in to the 'Medicaid swap,' using some of its sales tax revenues annually to cover the county's Medicaid costs; the city, towns and villages will be reimbursed by the county for any loss of sales tax revenue that is diverted; sales tax funding for suburban school districts will be reduced by 50 percent; the county will charge-back the $14.3 million cost associated with Monroe Community College to local taxpayers based on the student residency in your town; the fee for auto registration will increase by $10; and the county property tax rate will be reduced to $8.99 per $1,000 assessed value from $9.10.    

Board of Education