New York State Commission on Property Tax Relief Makes It's Much Anticipated Report

By MARIA BRANDECKER

Legislative Gazette Staff Writer

Mon, Jun 9, 2008

After an initial delay, the New York State Commission on Property Tax Relief released its highly anticipated report June 2, with recommendations it said should save taxpayers money and address the causes of high property taxes by reforming policies for new and existing mandates.

The report included three main suggestions: adopt a property tax cap, institute a “circuit breaker” and reform state mandates on local governments and schools through legislation.

The commission was created by former Gov. Eliot Spitzer who appointed Nassau County Executive Thomas Suozzi as chair. The commission was given the task of examining unfunded state mandates, the causes of high property taxes, the impact of increased state aid and existing property tax relief programs, and the effectiveness of property tax caps in other states and potentially in New York.

In addition, the commission was given the task of finding an effective way to impose a limit on school property tax growth without impacting the ability of a school district to provide a quality education.

Since February, the six commission members heard testimony from taxpayers, school board members, school superintendents, elected officials, business leaders, representatives of teachers’ unions and policy experts on how to lower property taxes.

Suozzi said there are only three ways to address rising education costs: decrease expenditures, increase state aid to school districts or continue to increase property taxes.

According to the commission’s report, New York spends more per student on primary and secondary education then any other state. The report shows that in the 2008-2009 school year, the state will spend an estimated $18,768 per student, outside of New York City, Buffalo, Rochester, Syracuse and Yonkers.

In addition, the annual growth rate of school expenses increased from 4 percent to 6 percent and is estimated to be as high as 7 percent in the 2007-2008 fiscal year.

The primary sources of school funding are local property taxes and state funding. According to the report, New York’s percentage share of school funding is below average. In 2005-2006, 53 percent of school funding, excluding New York City, came from local revenue, 43 percent came from state funding and 4 percent came from federal aid. The commission found that the state’s share of school funding over time from records reaching back to the 1940s consistently tracked lower than the national average.

However, the report also concluded that the state’s contribution in dollars to school funding is relatively high. Since the state is spending more money per student, the burden is falling onto local and state taxpayers. The report also indicated that the state’s funding until 2007 had not kept up with increasing expenses.

In order to address these issues, the commission suggested the Legislature implement a school property tax levy cap. A cap would limit the amount by which the total property tax levy can increase from year to year. The commission recommended setting the cap at 4 percent or 120 percent of the consumer price index, whichever is lower.

If the maximum tax levy increase permitted under the cap is not used in a year, the unused portion could be “banked” and used another year to increase the levy up to 1 ½ percent above the 4 percent cap.

The commission suggests that school districts would no longer have to submit their budgets to the voters in years when the tax levy growth does not exceed the cap. If growth does exceed the capped amount, it would be subject to voter approval. As a result, the current school budget voting process would be replaced by a cap override vote.

The votes required to override the cap would be based on state aid growth by district. If the annual growth for a district is at least 5 percent in the current year the vote needed to override the levy cap would be 60 percent. If the annual growth is less than 5 percent, a 55 percent vote would be needed to override the cap.

Under the commission’s recommendation, taxpayers could vote to “underride” the increase and keep the levy growth to a level beneath the cap.

Suozzi said after a cap is adopted, the commission recommends a “STAR circuit breaker.” A “circuit breaker” would provide relief to individuals by limiting the percentage of household income that could be spent on property taxes annually.

The Basic STAR, Enhanced STAR and Middle Class STAR are programs that provide homeowners property tax exemptions supplemented by state funding. The commission found several fundamental problems with the various STAR programs but suggested the benefits most taxpayers receive from the programs should remain and at least $2 billion of the existing STAR program should be transitioned to income based relief, which the circuit breaker would provide.

The commission said there should be a careful review of all existing individual property tax exemptions to see whether they still make sense and are fair. The report stated if any changes are to occur they should not sacrifice the benefits of the middle class taxpayers because they need it the most.

Based on the commission’s recommendations, the circuit breaker would be limited to the primary residence of individuals, eligibility would be phased out for those with higher income and property values and benefits would be income based. Any excess amount paid by a household would be partially reimbursed by the state. However, the reimbursements could be only a portion of what was overpaid to ensure people living on expensive properties are paying their share.

Sen. Elizabeth Little, R,C,I-Queensbury, and Assemblywoman Sandy Galef, D-Ossining, have already introduced legislation (S.1053a/A.1575a) that is similar to the circuit breaker recommendation.

Also suggested by the commission is altering new and existing mandates and a call for no new legislative mandates and no new regulatory mandates from the state Education Department without a complete accounting for the fiscal impact on local governments, which must include full documentation, local government input and proposed revenue sources to fund new mandates.

In addition, the commission recommends an annual report be conducted by the state comptroller’s office explaining the cumulative cost to localities complying with all new regulatory and legislative mandates. According to the commission, this would help increase accountability.

The commission also recommends amending the Triborough provision of the Taylor Law to prevent teachers who are working under expired contracts from receiving salary and benefit increases until new contracts are negotiated.

The Taylor Law regulates union negotiations between public employee unions and public employers in the state. The law contains the Triborough amendment which makes it an improper practice for a public employer to “refuse to continue all the terms of an expired agreement until a new agreement is negotiated.”

The commission suggests that a single unit at the state Education Department be responsible for all existing school district reporting. The unit would be responsible for streamlining and consolidating all reporting. The report states because of overlapping state and federal requirements, school districts must prepare numerous and sometimes redundant reports.

Before the commission releases its final report in December, it suggests that a tax relief task force on mandates undertake a review of existing school district mandates. This process would involve collaboration among representatives of school districts, state Education Department and lawmakers.

The commission recommends temporarily suspending school building aid for new projects in districts identified for potential reorganization. This would prevent new building projects from being launched during a period consolidation is being contemplated and would end when the decision on consolidation has been made. The districts would be identified either by a Boards of Cooperative Educational Services school district restructuring committee or by the commissioner of education.

The commission also suggests repealing the Wicks Law or dramatically increasing its monetary threshold. Schools and municipalities have long complained Wicks Law requires multiple contractors for capital projects which increases their costs substantially. Legislation was introduced this session to increase the threshold for Wicks Law.

The commission also suggests consolidating non-instructional and purchasing services through BOCES. This would encourage the use of BOCES for back office school district operations such as payroll and purchasing. Using BOCES back-office services could be a cost effective way for school districts to perform operational, management and other non-educational functions.

In addition, each BOCES region should create a committee to evaluate potential restructuring opportunities including consolidation of districts.

The commission recommends consolidating property assessment and property collection at the county level. This would eliminate tax shifts resulting from changing equalization rates within the county, improvement in assessment accuracy resulting from more regionalized data analyses and market monitoring and specialization of staff for specific types of properties.

The commission recommends that school districts be required to report on union negotiation outcomes to the governor’s office of employee relations. These outcomes would be summarized by the governor’s office in an annual report to the governor and Legislature.

In addition, the commission recommends that school districts be required to report on collective bargaining outcomes in their annual school budget presentations to the voters in a manner that clearly and transparently informs the public of those outcomes and attendant costs.

This article along with others like it on the subject of New York State Government can be found at http://www.legislativegazette.com.