New budget season, new tax levy cap
October 24, 2011
As the Duanesburg School District gears up for the development of its 2012-13 school budget, district leaders and the Board of Education want to be sure taxpayers are aware of a dramatic change in the budget development process—the state’s new tax levy cap legislation.
The new tax levy cap legislation, which has been in the news for a few months, has unfortunately been misconstrued and misrepresented as a “2 percent tax cap.” This misleading label has led many taxpayers to believe that their individual school tax bill cannot increase by more than 2% next year. However, the new legislation refers to the tax levy (the total dollars that a school district collects from property owners within the district in order to balance its budget), not the tax rate (which is used to calculate what each property owner will pay in school taxes) and does not, in fact, restrict any proposed tax levy increase to 2 percent. Instead, the law determines what level of support is needed for a school budget to pass. If the tax levy increase is above the "tax levy limit"—after accounting for exemptions—the support of a supermajority (60 percent) of voters would be required for budget passage. If the levy is within the limit, a simple majority (50 percent) is needed for budget approval.
Essentially, the "tax levy limit" sets a threshold that requires districts to obtain a higher level of community support for a proposed tax levy that is above the “tax levy limit.” However, the new legislation does not place a limit on any taxes a school district would levy to pay for expenses related to specific “exempt” items, including some court orders, some pension costs and local capital expenditures. The costs of these exempt items are added to the “tax levy limit” to come up with the “allowable tax levy” limit.
It is important to note that:
(1) Tax levy limits will vary by school district;
(2) The new law does not limit an individual’s tax bill.
For a thorough explanation of the new tax levy cap law, download Understanding New York's Property Tax Levy Cap as it relates to public schools--a 6-page overview of the NYS tax levy cap.
Determining each district’s tax
levy limit
By law, each school district’s tax levy is determined by a complex, eight-step
formula that was developed by the state.
[VIEW THE FORMULA] The formula takes into consideration a
number of variables, including growth in the local tax base (if any),
exemptions, the previous year’s tax levy, as well as the current and coming
years’ PILOTs (Payment In Lieu Of Taxes). The rate of inflation or 2 percent
(whichever is lower) is also part of the equation—that’s where the misleading “2
percent tax cap” comes into play. Consideration is also made for any allowable
“carryover” funds from previous years, as districts are allowed to “bank” some
unused portions of their tax levy limits to use in future years (details on this
are still emerging from the state).
Individual school districts will each have a unique tax levy limit, which must be submitted to the state by March 1 each year. Once the tax levy limit is determined, the district will then add coming school year’s exemptions to the tax levy limit, creating a “maximum allowable levy.” As a result, a district may actually propose a budget with a tax levy that is higher than its tax levy limit and still be within its “cap” under the law.
“At this point, using the figures we have now, our tax levy limit appears to be closer to 3 percent,” says Duanesburg Business Administrator Brenda Kane. For more information, download the presentation Kane shared at the October 19 Board of Education meeting.
Frequently Asked Questions
Question: How does the
new law take into account the fact that some expenses are currently beyond a
school district’s control?
Answer: By allowing for
exemptions. After a school district calculates its “tax levy limit,” it then
adds exemptions into that amount, allowing a district to propose a tax levy
greater than the amount set by the “limit” without triggering the need for
approval by 60 percent of voters. These exemptions include:
• Voter-approved local capital
expenditures;
• Increases in the state-mandated employer contribution rates for teacher and
employee pensions that exceed two percentage points;
• Court orders/judgments resulting in any amount that exceeds 5 percent of a
district’s current levy. However, tax certioraris are not exempt.
Question:
What will the new property tax levy law mean for MY tax bill?
Answer: That remains to
be seen. First, the new law applies to the tax levy, not to tax rates or to
individual tax bills. Second, it does not impose a universal 2 percent cap on
taxes, or any other specific amount. The law does require a greater number of
voters to approve a proposed budget that exceeds a school district’s individual
“tax levy limit,” as calculated by a complex state formula. And third, there are
several factors (assessments, STAR, equalization rates, etc.) that dictate how
your school tax bill is calculated after the district sets the final tax levy;
these factors are beyond the district’s control.
Question:
Do residents still vote on school district budgets?
Answer: Yes. Residents
will still be voting on the district’s proposed spending plan on the third
Tuesday in May. This year, the date is May 15. The polls will be open from 1
p.m. to 9 p.m. at the elementary school. Under the new law, the level of
voter approval needed to pass a budget will now depend on the amount of tax levy
required under the school budget proposal.
If the district meets or stays below the “tax levy limit” threshold (before exemptions), it only needs a simple majority (more than 50 percent) of "yes" votes for budget passage/approval.
If the district goes beyond the “tax levy limit” threshold (before exemptions), it must secure support from 60 percent or more (a supermajority) of voters for budget passage.
Question: How will I know if
Duanesburg is proposing a tax levy above its “tax levy limit,” requiring 60
percent voter approval?
Answer: By law, any school district that proposes a
budget that requires a tax levy (before exemptions) above its “tax levy limit”
must include a statement on the ballot indicating this to voters. Information
will also be available on the district website.