What happens if we increase taxes by 5% every year for 10 years?

To meet school payroll and other expenses without layoffs or a cap on raises, we will arguably need something in the neighborhood of a 5% tax increase each year.

Unfortunately, very few people are experiencing 5% annual increases in household income.

Over time, that’s a problem.

Take a family earning $150,000 in 2012 paying $15,000 in school taxes. Assume property taxes increase by 5% each year, while household income increases by the national average of 2%.

Here’s what happens in 10 years time:

Year	Household  Increases 2%/year	Total % Change	School Taxes Increase 5%/year	Total % Change	% of Income to School  Taxes
Year 1	$150,000		$15,000		10%
Year 10	$182,849	22%	$24,433	63%	13%

In Year 1, this family spends 10% of income on school taxes. Over the next decade taxes rise by a total of 63% while income rises by only 22%, so now this family is spending 13% of household income on school taxes (and their children are taking out loans to pay for college).

When people talk about school spending and taxes being “unsustainable,” this is what they mean. The only way to fund Irvington schools at the level we are funding them is to gentrify: the “big rich” will have to move in, and the “little rich” will have to move out. It seems to me that this process has been taking place for some time now.

The “big poor,” a term coined by my friend D., need to move to Connecticut.

Or Riverdale. #SENDOUT

• compound calculator
• percent change
• division calculator

AND SEE:
• What people who do not have children in the schools pay
…to educate the children of people who do
• How we got here
• 4 is not 2
• Budget vote
• Core Knowledge: curriculum & property values

Back of the envelope – budget shortfall & teacher layoffs next year

Here’s a quick back-of-the-envelope calculation to estimate the shortfall we face in 2013-2014.

Assuming no change to “Other” expenses (which is probably unrealistic), I come up with a $610,000 shortfall. Personnel is 80% of the budget, so If the union does not agree to cap raises at 2%, that would mean roughly 6 teachers laid off in order to fund 4% raises.

(6 teachers because under LIFO the teachers earning the lowest salaries are laid off first. You have to lay off more of them to make up the shortfall.)

Obviously, these are very rough calculations, but they’re not a bad place to start.

FTE = full-time equivalent Essentially, 1 FTE = 1 teacher.

2012-2013 BUDGET
Personnel	$40,800,000
All other	$10,200,000
TOTAL	$51,000,000
2013-2014 BUDGET
4% increase Personnel	$42,432,000
All other (0% no increase)	$10,200,000
TOTAL	$52,632,000
PERCENT INCREASE	3%
budget w/2% increase	$52,020,000
SHORTFALL	$612,000
# FTEs POTENTIALLY LOST	~ 6

AND SEE:
4 is not 2