Governor Andrew Cuomo has been saying that he will not approve a 2019-20 budget for the state unless the property tax cap is made permanent. He reiterated that message this past week in columns in Long Island’s Newsday, the Lower Hudson Valley’s Journal News, the Rochester Democrat and Chronicle, and the Buffalo News.
The New York State Council of School Superintendents takes the position that the tax cap needs to be amended, if it is to be made permanent.
First, the tax cap law should include two changes that have been unanimously approved by both the Senate and Assembly in the past:
- Allow districts to exclude the local share of capital costs for Board of Cooperative Educational Services (BOCES) capital costs, as they may now exclude the local share of school district capital costs.
- Allow school districts and municipalities to realize revenue outside the tax cap for additions to the tax base which generate payments in lieu of taxes (PILOts), as they may now realize such revenue for tax base additions which generate property taxes.
These would be commonsense adjustments to the tax cap, not major changes. They would provide similar treatment for similar considerations – two forms of capital costs and two types of tax base growth.
BOCES provide shared services to school districts, including special education, career and technical education, other specialized instruction, and administrative and other services. They enable districts to provide opportunities for students they might not otherwise be able to afford and to reduce overhead costs that their taxpayers might otherwise be asked to bear.
BOCES serve roughly 100,000 students every day and over 170 districts share business office operations through BOCES and over 300 participate in a BOCES-initiated health insurance consortium.
Without the exclusion we request, school districts can be required to devote a large share of their overall tax levy limit to BOCES capital costs, making it difficult and sometimes impossible to gain approval from member districts needed for BOCES capital projects to proceed.
When PILOTs are used to spur new construction for economic development, school districts and municipalities may face demands for additional services once those projects are completed. They should be permitted to realize revenue to help fund those new required services, as they can with projects which generate property tax revenue. The divergent treatment of the two forms of tax base growth now creates a disincentive for communities to use PILOT agreements as an economic development tool.
The Governor has vetoed these changes in the last two years. But he did sign legislation in 2015 to authorize the State Tax Department to develop regulations to address the issues. No regulations were ever advanced, however.
The common perception that it is “a 2 percent cap” will lead districts to hold down total tax increases, even if any allowable exclusions would support a larger increase.
This leads to our second recommendation: make the basic tax cap – the “allowable levy growth factor” – 2 percent, not the lesser of 2 percent or inflation, as it is now.
When the tax cap was being debated before its approval, it is doubtful anyone contemplated the possibility of a near zero percent tax cap. But that is what districts dealt with in 2016-17, when the allowable levy growth factor was 0.12 percent.
It is commonly referred to as a 2 percent cap, including by the Governor in his newspaper pieces this week. Here is an example from the Rochester column: “It’s time that the State Legislature made the 2 percent local property tax cap permanent once and for all.”
Major economic forecasts anticipate inflation will be above 2 percent for at least the next year, so there would be no immediate effect from this change.
This should be coupled with a more workable “carryover” provision, to give school districts an incentive to hold tax increases below 2 percent when they can and allow them to reserve that savings for use in a later, tougher year.
Finally, the current calculation can result in school districts having negative tax caps, typically when PILOT payments go up or capital costs go down. These are difficult for school districts to explain and confusing for voters to understand. The minimum cap after applying exclusions should be set at zero percent, the limit that applies when districts fail to gain voter approval for their proposed budget and tax levy.
These ideas are all part of the Council’s Financial Sustainability Agenda for New York’s Public Schools.
