New York State Property Tax Cap Now Official
What does this mean for taxpayers?
The New York State Legislature made it official this June in passing Governor Cuomo's push to put in place a property tax cap on school districts and municipalities. The cap will take effect this coming budget season and affect school district planning for the 2012-13 school year.
The measure, adopted by the Legislature at the end of June, seeks to limit the annual increase in the tax levies of local governments and school districts. The legislation also included a package of items that legislators said was intended to offer districts some “mandate relief,” referring to state laws and regulations that drive up costs — and ultimately taxes.
As Duanesburg school leaders continue to analyze the new tax cap legislation, Superintendent Christine Crowley and Business Administrator Brenda Kane are gearing up for what will surely be another difficult budget year for the district.
“These are difficult economic times for our community members so it’s crucial that we continue to strive to balance the 21st century educational needs of our students with our taxpayers’ ability to support our schools,” Crowley says.
Property tax cap law summary:
• While the new law is being advertised as a 2 percent cap on annual property
tax levy increases, several provisions state that the actual increases will vary
from that figure. This is primarily due to a series of costs that are exempt
from the cap, including some pension contributions and spending for
voter-approved capital projects.
• Voters will still decide on school budgets in New York. Voting on the 2012-13 school year budget will be held on May 15, 2012.
• The 2 percent number, (or inflation, if it is less) actually refers to the figure that determines what level of voter support is needed for a school budget to pass. If the tax levy increase is above the cap —after accounting for exemptions — the support of a supermajority (60 percent) of voters would be required for budget passage. If it is within the cap, a simple majority is needed for budget approval.
• If the proposed tax levy exceeds the tax levy limit, the voting ballot must include the following statement: “Adoption of this budget requires a tax levy limit increase of _____ which exceeds the statutory tax levy increase limit of _____ for this school fiscal year and therefore exceeds the state tax cap and must be approved by 60 percent of the qualified voters present and voting.
• The tax cap is defined as 2 percent or the rate of inflation, whichever is less. For the current year, this generates a 1.6 percent increase (the current rate of inflation) in the levy. Pension cost increases above 2 percent of payroll dictates that 1.3 percent can be added to the levy beyond the inflationary increase of 1.6 percent. This results in a total allowable 2.9 percent increase in the levy above the prior year.
• An additional amount is allowable for growth of the district’s tax base. This figure is between 1 and 2 percent, depending on the region of the state. As such, the allowable levy increase (without requiring an override vote of 60 percent of those voting) is between 3.9 and 4.9 percent for next year. Subsequent years will vary, depending on changes to pension costs and local growth rates.
• If a school district budget is under the cap, the difference between the requested amount and the cap amount can be carried over to the next year. Beyond this base figure, court judgments and tax certiorari cases that create at least a 5 percent increase in expenses and any costs of capital projects approved by voters can be added dollar for dollar into the levy without triggering the need for an override vote.
• Each school district will be required to submit their proposed budget to the state comptroller, education commissioner and the tax commissioner by March 1st of each year. This raises the question of how will school districts know the proposed levy amount when the state doesn’t authorize an amount of school aid until at least April 1.? This new requirement means school districts will be forced to rely on the Executive Budget proposal, giving even more leverage in the state budget process to the governor.
• There is no five year expiration date
for the cap. It will last as long as rent control in New York City is in place,
or until repealed by the legislature.
Mandate relief measures
The tax cap legislation was approved with a package of changes intended to help
school districts and local governments control costs. These included the
creation of a Mandate Relief Council to curb some of the laws and regulations
that lead to escalating expenses for school districts and local government. The
mandate relief items approved recently that apply to schools include:
MANDATE RELIEF COUNCIL
This 11-member council will determine if a statute or regulation is unsound,
unduly burdensome, or costly; establish procedures for repealing unfunded
mandates in both statute and regulation; provide a procedure for direct appeals
from school districts and other local governments on mandates; and require the
state Comptroller to issue a detailed report on the cost and effect of unfunded
mandates.
STUDENT TRANSPORTATION
The new law allows districts to base bus routes on patterns of ridership instead
of having a seat for every potential rider.
COOPERATIVE PURCHASING
The new law allows school districts greater flexibility in cooperative
purchasing with other districts, and state and federal contracts. While this may
lead to better deals on some goods and services, Duanesburg already does as much
competitive/joint purchasing as possible, including through state contracts,
Schenectady County, and with other school districts via BOCES.
PENSION BORROWING
This gives districts the ability to finance up to 125 percent of their pension
contribution increases incurred during the next three years. This would allow
districts to smooth out sharp increases in pension costs from year to year
without jeopardizing educational programs.
SHARING SUPERINTENDENTS
The new law also allows up to three districts with less than 1,000 students to
share a superintendent. Duanesburg current student population is 882.
ENERGY PURCHASING
The new law also authorizes the Office of General Services (OGS) to provide
centralized electricity purchases for schools. Duanesburg purchases electricity
through OCM BOCES along with many other schools & municipalities across NY
State.
PRE-K CENSUS
Districts only need to determine the Pre-K census every two years, rather than
every year. This does not apply to Duanesburg because Pre-K programs are not
offered.
Arguments For and Against Tax Caps
The property tax is a major source of funding for public safety, schools, roads,
libraries, and other services in most American communities. In recent decades,
concern over rising property tax bills has led a number of states to impose some
form of limit on the amount of property tax revenue that counties,
municipalities, or school districts can collect. Several other states are
considering property tax caps as well.
Those who support the tax cap law argue
that tight property tax caps will force localities to provide services more
cost-effectively, or to eliminate services that are not needed. Those opposed to
the law claim that caps are more likely to force localities to cut necessary
services. As an example they point to California, where education, health care,
transportation, and other public services all have declined dramatically since
the state adopted a tight property tax cap (Proposition 13) in 1978.
California’s school system, formerly one of the best in the country, became one
of the worst.
Similarly, some Massachusetts towns have had to lay off school and municipal
employees (including fire and police), freeze wages, and close town libraries
and senior centers in order to comply with Proposition _2 ½, that state’s severe
property tax cap.\
Looking ahead
Duanesburg is already bracing for another difficult budget planning process for
the 2012-13 school year. In addition to the state's new tax cap, the Federal
Education Jobs Funds aid, which is a federal grant that totals over $$338,000,
will expire in 2011-12 and state funding for education could again be reduced in
the next New York State budget.
“As we close the door on this successful school year we are opening another and we will do everything we can to make this school year and future years just as successful,” says Crowley.
“During this recession, and despite losing thousands of dollars in state aid over the past few years, we have worked very hard to keep our tax rate as low as possible," says Kane. (Tax History Chart ) "In upcoming budgets, will continue to be thoughtful about how we use every dollar.”