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New York’s Tax
Cap Proposal: It’s really a zero percent cap for schools
HFM BOCES districts fall millions short under a tax levy cap
 New
York Governor Andrew Cuomo has said that the current bill to cap
local property taxes would “change the trajectory of the state
for good.” Recent agreements among legislative leaders on an
outline for a two percent tax cap seems to indicate that the
game is about to change. However, will things be better or worse
for New York schools and property taxpayers?
The proposed tax levy cap does not cap school district or
municipality spending, but limits the year-to-year increase in
the amount of money that these entities can be collected in
property taxes.
Under the current legislation, if voters do not approve the tax
levy increase proposed by a district, the district would be
required to adopt a contingency budget that “requires a tax levy
no greater than that for the prior school year.” Simply stated,
that means no change, zero percent increase.
New York’s Assembly defines a tax levy cap as limiting the tax
increase to two percent or a figure tied to change in the
national Consumer Price Index, whichever is less. New York State
Council of School Superintendents’ Robert Lowry says the
“so-called two percent or inflation figure would be used as a
trigger for determining what vote would be required to approve a
school tax levy increase.”
Lowry calculates the “trigger” for 2011-12, if a tax cap were
already in place, at 1.64 percent. If the district proposed an
increase below the trigger, more than 50 percent of voters would
be required to approve. If the proposed increase were above the
trigger, 60 percent or more would be required to approve.
“It is crucial to recognize that, with a tax cap, the question
voters are asked to consider would change,” Lowry said. “Instead
of voting on whether to approve a spending level, voters would
be asked to approve an increase in their tax levy, with the
ballot noting if the proposal exceeds the tax levy limit for the
year.”
HFM BOCES districts face steep cuts in programs and staff
HFM BOCES component school districts would feel keenly the
effects of a tax levy cap.
Among the 16 component districts analyzing 2011-12 budgets in
light of a hypothetical two percent cap, Mayfield schools would
face a gap of $1,955,781; Broadalbin-Perth a deficit of $1.8
million; even tiny Edinburg Common School District would
confront an $116,000 shortfall. Every district would contend
with the challenge of making steep cuts to get their spending
plans under the cap.
“Amsterdam would see a $3.8 million shortfall with a two percent
tax cap and flat state aid. This does not include the use of any
fund balance,” Amsterdam Superintendent Thomas Perillo said.
The Legislature passed, for the first time, a two-year education
aid formula that projects a four percent increase for 2012-13.
However, HFM BOCES District Superintendent Dr. Patrick Michel
cautions that the increase covers all categories of state
education aid—building aid, transportation aid, etc.— and points
out that the governor’s Gap Elimination Adjustment (GEA) is now
a permanent part of the aid calculation.
“We need to consider that most of that aid increase will be gone
after the aid formulas run, and the GEA will then take its
additional cut,” Dr. Michel said. “A flat or reduced aid
scenario for most schools is a real possibility.”
Gloversville Superintendent Robert DeLilli, whose district would
face a $2 million shortage, said the district’s choices “would
be to literally deplete reserves or cut deep into programs such
as athletics and extra curricular activities, all elementary art
and music, and reduction of kindergarten to half a day.”
Exemptions, but do they help?
The Assembly’s tax cap proposal does include some limited
exemptions for capital expenditures, large legal expenses,
growth in property values and increases in a district’s
contribution to employee pension plans. However, the proposed
bill does not clarify whether a district would be able to levy
taxes to fund these “exempt” costs. According to Lowry, the
bills can be interpreted to exempt the costs only for
determining whether a proposed tax levy increase exceeds the
threshold requiring a 60 percent vote for approval.
The burden on school districts to reach a 60 percent voter
approval for their budgets would allow a minority of voters to
control school funding decisions.
Local governments would be treated more favorably under the
proposed legislation. They would not be required to seek voter
approval for any tax levy increase. To approve a tax levy
increase greater than 2 percent or inflation (whichever is
less), they would require approval by 60 percent of their
governing body (e.g., town board or city council). If unable to
gain that percentage, they would still be permitted to raise
their tax levy by up to the lesser of 2 percent or the inflation
figure – they would not face the zero percent cap proposed for
schools.
While schools confront the specter of a tax levy cap and grapple
with rising costs and devastating state aid reductions, fair and
equitable distribution of state aid and mandate relief remain
the best hope for preserving school programs aside from a
complete redesign of New York’s educational system.
Enabling regional collective bargaining; creating regional
health insurance pools; providing pension reform; streamlining
the state’s special education requirements and reporting
mandates; and reforming the Triborough Amendment, which keeps
all aspects of expired union contracts in place—including
scheduled pay increases— during collective bargaining, would all
help provide relief from the effects of a tax levy cap. |
