The property tax cap approved by the state Legislature, while it may have had the best intentions, will reshape the way schools operate – and those changes may not make everyone happy.
One dramatic change, not allowed by law now, could be ‘pay for services.’ As has been seen in other states, parents would pay additional charges for students to ride a bus; receive special education, speech and enrichment services; join a sports team; and play in the band.
Property tax cap: tax LEVY versus tax RATE
The property tax cap becomes effective in January 2012 for towns, villages and counties and in July 2012 for school districts (the 2012-13 budgets to be considered by the community on May 15, 2012).
The law says that tax levies may not increase by more than 2 percent or the increase in the Consumer Price Index, whichever is less, with some exceptions for legal settlements, excessive pension increases and tax base growth.
If a budget were proposed with a higher tax levy, 60 percent of the voters or local governing board must approve it. School districts, who are the only governments that face an annual vote from the community, would have two attempts to gain public support for their budgets before their tax levies would be frozen at the previous year’s level.
Observers fear that schools and local governments will be forced into dramatic cost cutting to meet the cap. In the case of schools, most have already been cutting costs for the past three years as state aid has been reduced.
A difficult problem with the cap involves semantics: tax LEVIES and tax RATES are not the same thing. Tax RATES determine a property’s tax bill. The tax RATE is multiplied by the person’s property assessment. Tax RATES are a combination of factors that include full-market values, equalization rates and the use of other revenue.
Tax LEVIES are the total amount of dollars collected by a government or school district and have little to do with the final tax bills.
For example, the 2010-11 Scotia-Glenville budget approved by the community in May 2010 proposed a tax levy increase of 3.8 percent. The resulting tax rate was increased in August 2010 by 0.75 percent – less than 1 percent.
The bottom line: while a school district or government may propose a tax LEVY increase of 2 percent or less, the resulting tax RATE and tax BILLS paid by property owners may be lower or higher.
Charging for services – not done yet at schools in NY
School districts and other governments use various sources of revenue, such as fund balance, reserves and state aid, to supplement budgets and lessen the reliance on raising annual tax levies. It is widely expected that governments will find alternative sources of revenues, as has happened in other states, to fill the annual gap.
For example, some schools in Massachusetts – where a 2.5 percent tax cap has been in existence since 1980 – charge parents separate fees for riding school buses, participating in sports and being involved with activities so that those growing costs do not impact the tax levy as heavily.
“Public schools have always operated under the idea that we provide as many services that students need to as many students as possible,” said Superintendent Susan Swartz, acknowledging that property taxes are high because of uncontrolled costs like health insurance. “With a tax cap, schools will now have to make educational decisions based on how many students use particular services or whether a service or course offering is ‘worth’ the cost.”
While New York public schools are not allowed by state law to charge fees for services right now, that could be among some of the promised ‘mandate relief’ measures being considered by the state.
Governor Andrew Cuomo has indicated that state aid may be increased in 2012-13 as schools grapple with the cap. Though the governor has also promised mandate relief, the tax cap legislation included two minor measures: superintendents at small schools (fewer than 1,000 students) can be shared and buses no longer need to have a seat for every child.
Here's a PDF of a flyer that describes the state's "property tax cap" law. [MORE]
