Tax Cap

Moody’s: With Low Levy Cap, School Districts Rely More On State Aid

The flat growth in this year’s cap on school property taxes is driving districts to rely on overrides and on increasing state aid, an analysis released by Moody’s on Monday found.

Nearly all school districts saw their proposed budgets approved by voters.

But eight school districts requesting overrides of the state’s cap on property taxes failed to pass their spending plans. Meanwhile, the number of school districts seeking to override the cap has doubled this year to 36 from last year’s vote.

This has coincided with ever-increasing school aid from Albany.

“If allowable levy growth remains restricted, school districts will have to increasingly depend on overrides, state aid growth, and expenditure cuts to balance their budgets, a credit negative,” Moody’s found.

The tax cap, in place since 2012, is set at limiting levy increases to either 2 percent or the rate of inflation, whichever is lower. With inflation virtually flat, the cap for school districts was on average 0.12 percent.

It requires 60 percent of voters to support a budget that overrides the cap in order for it to effect.

There have been efforts to make the cap easier to override or end the linkage to inflation, but those have largely failed.

With the cap levy progressively lower each year since it’s been in effect, state aid has grown, making districts more reliant on funding from Albany.

“Growth in state aid revenue has outpaced levy growth, which generally benefits districts that are more reliant on state revenues and challenges districts more dependent on property taxes,” Moody’s found.

“Although school districts more reliant on state aid derive a greater benefit from the current environment of low levy growth and increased state revenues, property taxes have traditionally been a more stable source of revenue than state aid. Continued dependence on state aid growth to enhance revenues and balance budgets exposes districts to state-level budget strain.”

School Districts Seeking Tax Cap Overrides Doubles

As school districts face zero inflation and virtually no room under the state’s cap on property taxes, the number of school districts seeking overrides of the limit has doubled, according to the New York State School Boards Association.

“The 2 percent tax cap is not really a 2 percent tax cap,” said NYSSBA Executive Director Timothy G. Kremer. “The quirks and vagaries of the cap formula mean it can fluctuate widely from year to year and district to district. It’s time for truth in advertising: Make the tax cap growth factor a true 2 percent.”

Most school districts in New York this month are putting their budget proposals before voters for approval. A spending plan that overrides the limit on tax levy increases — set at 0.12 percent this year given flat inflation — requires a 60 percent majority to be approved.

There are 36 school districts that have proposed budgets overriding the cap, double the 18 districts that do so last year.

Meanwhile, there are 95 school districts that have negative tax levy limits, which requires them to not hike property taxes from a year ago without the supermajority approval.

Statewide, the average levy hike is 0.7 percent, lower than the 1.5 percent from last year. Spending, however, is up by 2.1 percent, compared to the 1.8 percent on average in 2015.

Gov. Andrew Cuomo has touted the tax cap as an important tool for voters and taxpayers to control some of the highest property taxes in the nation.

But school districts and local governments have sought increased flexibility under the cap, such as eliminating the linkage to the rate of inflation.

NYSUT Releases Conference Board Letter To Lawmakers On Tax Cap

The New York State United Teachers union has released a letter from the Education Conference Board written to state lawmakers urging them to boost education spending by $2.2 billion as the state’s cap on property tax increase is due to be virtually flat this year.

“If the state cannot match local tax relief with solid support for schools, it will be at the expense of opportunities and programs for students,” the letter states. “The Educational Conference Board strongly recommends the following actions to blunt the detrimental impact of this year’s low cap and provide schools with the state funding needed to continue to provide critical services for students next year.”

At the same time, the union raises concerns with the negative growth rate under the cap which has been calculated for some school districts. In all, the union says 82 school districts are facing a negative cap this year.

“The financial pressure of a negative cap can cause the loss of student programs,” the conference board states. “It complicates the public’s ability to engage in the school budget process and creates instability for schools. We recommend setting a floor of zero percent for tax caps to provide a degree of stability rather than the disruption a negative cap causes for students and communities.”

The crimping under the cap makes school aid all the more important for districts, NYSUT argues. Both the Assembly and Senate want to increase foundation aid beyond the $266 million proposed by Gov. Andrew Cuomo. All together, the Assembly wants a $2.1 billion hike in spending, the Senate backs $1.6 billion increase. Cuomo’s education funding proposal stands at a $961 million increase.

Despite the concerns from NYSUT and other school district officials when it comes to the tax cap, the provision is unlikely to change in New York. Lawmakers have argued the tax cap is popular and supporters, including Cuomo, say it’s working as it was intended: Keeping the nation’s highest property taxes under control.

ECB March2016Letter TaxCapFilings Release by Nick Reisman

Counties Release Budget Priorities

The New York State Association Of Counties released its to-do list of budget priorities for the coming fiscal year, with the local government officials backing a variety of measures aimed at easing the burden on municipal-level officials and taxpayers.

The counties back a takeover of county indigent defense costs, as well as an increase in community college funding. The counties also want the state to lower the E-911 surcharge.

Perhaps most importantly, the counties are pushing for using bank settlement funds for upstate road and water infrastructure projects and have the state invest in clean water infrastructure.

County leaders are feeling the squeeze this year, as are other local government and school district officials, given the allowable growth in the state’s cap on property taxes is less than 1 percentage point.

“County officials from across the state have been communicating concerns to their state legislators,” NYSAC President Bill Cherry, the treasurer of Schoharie County, said in a statement. “A projected property tax cap growth at basically zero in 2017, combined with stagnant sales tax revenues, counties will not be able keep up with the rising costs of state mandated programs provided at the local level. We need State Lawmakers to assist their local taxpayers and provide mandate relief, and dedicate bank settlement funds to local roads and water projects.”

Modest changes were made to the state’s property tax cap law last year, but not as much as some local government leaders had sought.

NYSAC noted in a release that nine different mandated spending requirements from the state took up 99 percent of county property taxes that were levied statewide.

DiNapoli: School Districts Overriding Tax Cap Grows

The number of school districts planning to submit budgets that override the state’s cap on property tax increases has grown to 36, according to Comptroller Tom DiNapoli’s office on Thursday in a report.

That number is still relatively low compared to the 601 school districts that have reported their proposed budgets to the state as March 2. But percentage-wise, the number has increased from 3.5 percent of schools to 6 percent.

The limit for increasing the tax levy this year is capped at 0.12 percent, the lowest level since the cap has been in place when it was first applied in 2012.

“School districts are feeling the impact of a historically low tax levy limit,” said DiNapoli. “Although district administrators and school boards have been reluctant to exceed the tax cap, this year’s limit seems to have left some districts with limited options. As school budget planning continues over the next few weeks, we may see additional districts deciding to seek voter approval for an override.”

The cap is linked to the rate of inflation or 2 percent, whichever is lower at the time. Some local government officials and school districts this year, along with labor unions, are urging lawmakers and Gov. Andrew Cuomo to remove the rate of inflation component of the cap and simply limit levy increases to 2 percent. Such a proposal is unlikely to be backed by Cuomo, who has counted the tax cap as one of the signature economic achievements of his first term.

DiNapoli’s office found that so far, at least 76 of the 601 school districts reporting are facing a negative levy limit. Those districts will need to cut taxes by $18.6 million or in order to stay within the allowable limit.

Two-thirds of voters can override the cap, along with a supermajority of elected officials who consider budgets.

NYSUT: Tax Cap ‘Crippling’ School Districts

commoncoreThe zero percent growth in the state’s tax cap this year is “severely crippling” school districts and their ability to raise revenue, the New York State United Teachers union said on Wednesday in its prepared testimony to state lawmakers.

The labor umbrella group is calling for a $2.6 billion increase in state aid for schools as well as modifications to how the tax cap impacts districts.

The funding request i more than twice the $963 million proposed by Gov. Andrew Cuomo in his $154 billion budget proposal made earlier this month.

“We are making progress on many fronts but there is still work to do,” said NYSUT President Karen Magee. “This is the year the state should significantly increase the Foundation Formula, eliminate the Gap Elimination Adjustment and make good on its commitment that, no matter where students live or go to school, they have the opportunity for the sound, basic education the New York Constitution requires.”

Calls for altering the cap are back again this year as school districts face the prospect of setting budgets that allow for less than a 1 percent increase in the levy, or the amount collected in taxes. A supermajority of voters can choose to approve budgets that override the cap.

NYSUT, along with education officials that represent school districts, want a “true” 2 percent cap on taxes that eliminates linking the rate of inflation to the measure that’s been in place since its approval in 2011.

It’s unlikely Cuomo would go along with alterations to the cap, even as state lawmakers last year approved modest changes to the measure that allow for some growth in certain instances.

No-Growth Tax Cap For School Districts

School districts in the 2016-17 budget year will have a record-low cap on property tax increases, a report from the New York State Association of School Business Officials found.

The report released on Wednesday found the allowable growth rate in the tax levy, or the amount collected in taxes, will be 0.12 percent, the lowest the cap has been since it has taken effect in 2012.

The low cap is due to record-low inflation and is reviving a push from education advocates the Legislature considering altering the measure so that the limit is at 2 percent, not tied to the consumer price index.

“We urge the Legislature and concerned citizens to contact the Governor’s Office or the Commissioner of Tax and Finance and request they fulfill their obligation to implement these changes to the tax cap that the Legislature passed. These changes will each benefit about 75 percent of school districts throughout the state, which is particularly important in a zero percent tax cap year,” stated Michael J. Borges, NYSASBO Executive Director.

Comptroller Tom DiNapoli, too, raised concerns with the tax cap being under 1 percent in the new budget season.

“The nearly zero growth in the tax cap will limit budget options for school and municipal officials as they plan for next year,” said DiNapoli. “Although some local governments can rely on available reserve funds to bridge the gap, others may need to take a hard look at operations to find ways to cut costs to stay under the cap.”

School districts may still override budgets that call for tax increase above the cap, but that requires a 60 percent majority to do so.

Gov. Andrew Cuomo’s budget this year increases education aid by about $990 million, with $2.1 billion being spent over the next two years and also ends the education cuts known as the gap elimination adjustment. State lawmakers have called for a $2.9 billion increase in school aid.

Comptroller: Flat Growth For The Tax Cap

Villages and library districts next year will be limited to raising tax levies by a mere 0.12 percent while counties and towns will be limited to 0.73 percent, according to Comptroller Tom DiNapoli’s office.

The cap on property tax increases limits growth in levies to 2 percent or the rate of inflation, whichever is lower.

Inflation in the years since the cap has been in place, approved in 2011, has been largely flat.

And the limit local governments can raise taxes has steadily declined in recent years to nearly zero allowable growth in 2016.

Local governments can submit budgets that override the cap with 60 percent of its voting members approving of the spending plan.

School districts, too, are expecting flat growth in the tax cap after a year in which they were limited to a 1.62 percent cap. On the school district level, 60 percent of voters must approve a budget that overrides the cap. Budgets for school districts are typically approved in May.

Local government advocates and education officials in New York have urged state lawmakers to make changes to the cap to allow for more levy growth and discard the provision that limits increases to the rate of inflation.

State lawmakers and Gov. Andrew Cuomo did agree to modest changes to the cap that allows for some growth such as in payment-lieu-of-taxes, but not the broad-based changes some local governments were seeking. taxcap

Lawmakers Assess A Zero-Growth Tax Cap

State lawmakers return to Albany next month with a looming concern for local government and school officials back home: A zero-percent growth in the state’s cap on property taxes.

“That’s good for us taxpayers, but local governments are struggling,” said Democratic Assemblyman John McDonald of Cohoes. “Local governments are going to have to start making some serious decisions about withdrawing services to the taxpayer.”

Both McDonald and Westchester County Assemblywoman Sandra Galef were the lone lawmakers at a brief and sparsely attended Assembly hearing on property taxes on Wednesday, which last less than an hour.

The tax cap itself was altered, albeit slightly, during the previous legislative session’s broader negotiations on rent control in the New York City area. Ultimately, lawmakers agreed to modest changes that allowed for growth in areas like payments in lieu of taxes.

But school districts have in recent weeks raised concerns about a tax cap that will allow for increases of less than 1 percent heading into the next budget season. The tax cap allows for a 2 percent cap on property taxes or limits growth to the rate of inflation, whichever is lower. Inflation has typically been under 2 percent since the cap was approved in June 2011.

What this could mean: Lawmakers in an election year will almost certainly be spurred to push for more money in the state budget that would flow to schools and their local municipalities.

“They’re going to be looking to the state for that revenue,” McDonald said of local governments and schools. “Let’s face it: Pension costs are still increasing, the personel costs are increasing. Utility costs are still going up. It’s going to be very challenging for the community to see under the tax cap.”

Galef, meanwhile, pointed to the potential impact on local infrastructure projects suffering from the narrow levy growth. Gov. Andrew Cuomo, who has made local property taxes a key economic issue for his administration – has generally been opposed to broad-based tax cap changes. But that hasn’t stopped lawmakers from proposing changes.

“If you wait too long, specifically with the roads, you may end up spending more money at the end of the day,” Galef said. “So, we really have to look at the capital. I’m a real strong believer in the tax cap, but you don’t want to happen for so long that people aren’t looking at certain things for infrastructure. That might be on the table next year.”

Poll: 38 Percent Of School Board Members Would Consider Cap Override

commoncoreA poll of school board members around the state found 38 percent would consider seeking overrides of the state’s cap on property tax increases, the New York State School Boards Association found.

The result comes as school districts next year will have to submit budgets with a cap that is virtually at zero, due to the low rate of inflation.

The survey found 68 percent of school districts polled plan to have their budget submitted with a tax cap at or near a zero percent increase.

“With no growth allowed in their tax levies, we expect more school boards to attempt a tax cap override in order to meet their rising expenses,” said Timothy G. Kremer, NYSSBA’s executive director. “We’ll know more in 2016 when school boards begin the budgeting process in earnest and share various budgeting scenarios with their communities.”

Sixty percent of voters must approve a budget that allows for a cap override.

The cap has been in place since 2012, with an average of about 30 districts a year seeking to override the cap, or 4.4 percent of all districts.

In the last year, the number of school districts seeking cap overrides was below that average — 18 in total, or 2.7 percent of all districts.

A coalition of education groups — including the school boards association, the Council of School Superintendents and the state’s teachers union — are calling for changes to the cap that would eliminate tying the cap to the rate of inflation, making the limit a 2 percent cap on levy increases.