New York State School Boards Association

Tax shifts a major concern in veterans exemptions

Adoption varies greatly by region

by Paul Heiser

On Board Online • November 28, 2016

By Paul Heiser
Senior Research Analyst

Nearly two-thirds of school districts that have not adopted a property tax exemption for veterans say the reason is they do not want to redistribute the tax burden to other property owners in their districts, according to a survey by NYSSBA.

The survey found that 64 percent of school districts did not adopt the exemption because they did not want to shift the tax burden onto non-veterans. Of the districts that adopted the alternative veterans exemption, nearly 30 percent reported a tax shift from veterans to non-veterans in their district ranging from $100,000 to more than $1 million in 2015-16. About one-third of districts had not calculated the impact, while 13 percent said the exemption did not take effect until 2016-17.

NYSSBA has called for the state, rather than local taxpayers, to fund the tax exemption for veterans - as well as new school property tax exemption enacted by the state. The Association supports legislation, such as S.1699-A (Carlucci) / A.966-A (Abinanti), that would provide that.

"Many school boards want to be able to recognize veterans for their service and dedication," said NYSSBA Executive Director Timothy G. Kremer. "At the same time, it is important for tax policies to be fair for all residents of the state. A state-funded veterans property tax exemption program would achieve the goal of providing such a benefit to veterans without shifting the resulting tax burden to other residential and commercial taxpayers within the district."

Districts grappling with adopting the alternative veterans exemption

In 2013, New York enacted the alternative veterans exemption, which allows school districts - at their own discretion - to give veterans an exemption on a portion of their properties for school district tax purposes. This exemption, when applied, effectively reduces the amount of property taxes otherwise paid by residential property owners who served during periods of conflict from the Spanish-American War through the first Persian Gulf conflict.

Prior to that time, the alternative veterans tax exemption was applicable only to county, city, town and village taxes.

In the nearly three years since the law was enacted, 254 school districts - about 41 percent of all districts in the state - have adopted the exemption, according to NYSSBA's survey of school districts conducted from March 2016 through May 2016. At the same time, 362 decided not to adopt the exemption. (After the survey was conducted, state lawmakers adopted an additional exemption that applies to all military veterans who served during the Cold War.)

Because there is no state financial support, school districts that adopt the exemption have two choices: cut programs and services available to their students in order to accommodate the reduced revenue, or raise taxes on the remaining taxpayers. In addition, when the tax burden is shifted, it is both residential and commercial taxpayers that end up paying more. This can be challenging for school districts, especially in areas of the state already experiencing dwindling commercial investment.

Pronounced regional variations

The vast majority of school districts that have adopted the alternative veterans exemption are in the lower part of the state. About two-thirds (65 percent) of districts that have adopted the exemption are in counties south of the Capital Region.

For example, 85 percent of districts on Long Island responding to NYSSBA's survey reported having adopted the alternative veterans exemption. This includes 93 percent in Nassau County and 79 percent in Suffolk County. Communities just north of New York City also had large proportions of school districts adopt the exemption (see map above).

The proportion of school districts adopting the veterans exemption decreased the farther north one travels, in some cases considerably. For example, only 7 percent of districts in the central part of the state (Area 4) have adopted the exemption.

There are likely multiple factors used by school districts in determining whether to adopt the exemption. One likely factor is that property and income wealth is higher in downstate suburbs, meaning the tax shift from veterans onto any individual non-veteran may be smaller compared with upstate, mostly rural, communities. In addition, NYSSBA's survey found that more than one-third of districts (38 percent) said there was little demand for the exemption among members of the community.

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