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New York State Property Tax Cap Now Official
Its official: New York State has a property
tax cap.
Adopted by the Legislature at the end of June,
the measure seeks to limit the annual increase in the tax levies of
local governments and school districts.
While the new law is being advertised as a 2
percent cap, districts actual increases are likely to vary from that
figure due to several provisions of the new law, including certain
costs that are exempt from the cap and the fact that voter approval
will still be required for budget passage.
So, what does a tax cap mean for our schools?
Fort Plain Central School District
Superintendent Douglas C. Burton said the tax cap will create a
significant new challenge for Boards of Education in developing
budgets, as they seek to stay within the cap. He predicted that the
cap would force many school districts to use what little reserves
they have left to salvage academic programs to the greatest extent
possible.
“Even with reserve funds, I anticipate that
our Board of Education will have to consider layoffs and further
program reductions this year to develop a budget that meets the
requirements of the cap and that can gain voter approval,” he said.
“This legislation will create monumental
change in public education for all rural high-needs districts in New
York State, not just Fort Plain.”
The tax cap legislation was approved at the
same time as 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. It’s
unclear which, if any of these items will offer meaningful cost
savings to Fort Plain.
The tax cap law did not address many of the
costs that drive up school spending, and ultimately taxes,
including:
Legislators did approve the creation of a
Mandate Relief Council to identify and repeal “unsound, unduly
burdensome laws and regulations.”
To cope with a loss of state aid and the
sagging economy in recent years, the district has cut virtually all
expense categories over the last several years including field trips
and spending for new equipment. In 2011-12, Fort Plain cut spending
by $400,000 from the previous year’s budget, in part by eliminating
17 positions, including eight teachers and one administrator.
Mr. Burton said that without legislative and
regulatory changes that help schools control these costs, the tax
cap alone will force even more difficult choices.
“While legislators may think that schools can
simply ‘cut the fat’ and become more efficient, the truth is that we
have been running on a budget that is quite lean for a long time,”
he said. “There is no more ‘fat’ to trim.
“Further cuts can only come at the expense of jobs and programs,
meaning fewer teachers, larger class sizes and fewer programs,
reduced sports offerings, fewer support staff such as custodians and
food service staff.”
Tax cap basics
The tax cap law sets forth a formula that
districts will use to calculate their allowable increase under the
cap.
Though much-publicized, the “lesser of 2
percent or the rate of inflation” is only one factor contributing to
a district’s cap, or "tax levy limit." In fact, there are eight
different steps to the calculation outlined in the legislation, plus
certain costs that are exempt from the limit. As such, many
districts may propose tax levy increases above the 2 percent
threshold and still be within their “cap.”
Exemptions include: growth in the state pension system
contributions that exceeds a certain level; tax base growth; and
some court judgments and successful tax assessment challenges.
These exemptions mean that school districts
could propose tax levy increases above two percent (or inflation),
and still be considered within the cap
So, what does it mean
to be considered “within the cap?”
Voters will still decide on school budgets in
New York. Whether or not a district is within the cap determines
what level of voter support they need for budget approval.
If a district is within its calculated cap,
then it only needs the support of a simple majority of voters for
budget approval.
A district can exceed its calculated cap with
the support of a supermajority (60 percent) of voters.
Similar to current law, school districts can
hold up to two budget votes under the tax cap law. If two budget
votes are defeated, districts would be prohibited from raising the
tax levy and higher than the one from the previous year.
If a local 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. This will allow them to adjust
their allowable cap for that year upward without needing a
supermajority for budget approval.
It’s important for taxpayers to also note that
the cap applies to the district’s tax levy, and not tax rates.
Individual property tax bills may go up by a different percentage
than the levy, as tax rates take into account the potential for
changes in assessments.
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