The cap, the freeze and the tax credit

by Timothy G. Kremer

On Board Online • January 26, 2015

Timothy G. Kremer
NYSSBA Executive Director

Did you hear the one about the tax cap, the tax freeze and the tax credit?

I wish there were a funny punch line, but unfortunately, this is no laughing matter, especially if you're leading a school district in an area of the state with lower property wealth.

That's because Gov. Cuomo is tying yet another initiative to the property tax cap.

In case you missed it, the governor chose property tax relief as the first proposal to unveil as part of his 2015 "Opportunity Agenda."

His latest proposal is a state tax credit for people whose property taxes exceed six percent of their total household income, similar in concept to a "circuit-breaker."

This latest initiative marks the governor's third property tax capping proposal in less than four years. Besides the tax cap itself introduced in 2011. Cuomo doubled-down last year with a "property tax freeze" that requires school districts to stay within their tax cap (and adopt state-approved government efficiency plans) in order for taxpayers to receive state rebates for any increase in their school property taxes.

I'm not necessarily opposed to the governor's latest proposal. Many advocates, including NYSSBA, have supported a circuit breaker-type of approach to property tax relief. The governor's proposal targets tax relief to households that need it the most, those who bear a disproportionate tax burden relative to their income. It's hard to argue against that goal.

But as we've seen time and time again in Albany, there's always a catch. In order for eligible taxpayers to get their rebate, their taxing authority (read: school district) must pass a budget with a tax levy at or under its tax cap.

My problems with the proposal are three-fold. First, except for Tier VI pension reform, very little is being done in Albany to address the many mandates that drive up local property taxes. In fact, the governor seems oblivious to the concept of legitimate cost increases.

Second, as proposed, the governor's plan would cost the state upwards of $1.66 billion per year when fully phased-in, paid out of the state's projected surplus. If the state has billions of additional revenue to spend, it should first fully fund its commitment under the Campaign for Fiscal Equity legal decisions (we are $4.7 billion behind in Foundation Aid) and eliminate the GEA ($1 billion short). Increasing state aid is the most effective, efficient and direct way to provide property tax relief.

Third, school boards already have a de facto "tax cap" in place every time their spending plans go up for a public vote. School boards and their leadership teams across the state have worked hard to balance taxpayer support with student need. Even before enactment of the tax cap in 2011, school district increased spending just 0.8 percent in 2011-12, 1.1 percent in 2010-11, and 2.3 percent in 2009-10. Those are very responsible numbers.

School decision-makers know the economic climate in their communities and put forth budgets that reflect that climate, along with the needs and wants of their communities. In fact, school boards have attempted fewer and fewer tax cap overrides that require a 60 percent supermajority for passage. In 2012, there were 51 attempts, followed by 31 in 2013 and 29 last year.

As the governor begins his second term, it's increasingly clear that he does not trust school boards and local governments to make the right decisions for taxpayers. Cuomo simply lumps all school boards together with all educators as part of "the last public monopoly." How ironic that such a characterization would come from a governor who operates so autocratically.

Former Gov. Eliot Spitzer referred to the property tax cap as a "blunt instrument." For some communities, it's a butter knife stuck, permanently, in the back. For others, it's more like a sledgehammer.

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