Frequently Asked Questions
about
New York's Property Tax Levy Cap
Does the new cap mean school tax levies can't increase by more than 2
percent?
No, the law does not prohibit tax levy increases greater than 2 percent.
The law has been
misconstrued and misrepresented in media sound bites as a “2 percent tax
cap.” Instead of imposing a true cap, the law establishes a threshold —
or tax levy limit — that determines what level of support is needed for
a school budget to pass. Each district is required to calculate its own
tax levy limit by following a complicated, eight-step formula
established by the state.
If the proposed tax levy increase is above the tax levy limit — after
accounting for exemptions — the support of a supermajority (60 percent)
of voters would be required for budget passage. If the levy is within
the limit, a simple majority is needed for budget approval.
What is a "tax levy limit?”
For school
districts, the “tax levy limit” is the highest allowable tax levy
(before exemptions) that a school district can propose as part of its
annual budget for which only a simple majority of voters (more than 50
percent) is required for budget passage. Any proposed tax levy amount
above that limit requires budget approval by a supermajority (60 percent
or more) of voters.
Essentially, the “tax levy limit” sets a threshold that requires
districts to obtain a higher level of community support for a proposed
tax levy above the “tax levy limit.”
However, the new legislation does not place a limit on any taxes a
school district would levy to pay for expenses related to specific
“exempt” items, including some court orders, some pension costs and
local capital expenditures. The costs of these exempt items are added to
the “tax levy limit” to come up with the “allowable tax levy” limit.
It is important to note that:
(1) Tax levy limits will vary by school district;
(2) The new law does not limit an individual’s tax bill.
How is the district’s tax levy limit determined?
By law, each school
district’s tax levy is determined by a complex, eight-step formula that
was developed by the state. The formula takes into consideration a
number of variables, including growth in the local tax base (if any),
exemptions, the previous year’s tax levy, as well as the current and
coming years’ PILOTs (Payment In Lieu Of Taxes). The rate of inflation
or 2 percent (whichever is lower) is also part of the equation.
Consideration is also made for any allowable “carryover” funds from
previous years, as districts are allowed to “bank” some unused portions
of their tax levy limits to use in future years (details on this are
still emerging from the state).
Individual school districts will each have a unique tax levy limit,
which must be submitted to the state by March 1 each year. Once the tax
levy limit is determined, the district will then add coming school
year’s exemptions to the tax levy limit, creating a “maximum allowable
levy.” As a result, a district may actually propose a budget with a tax
levy that is higher than its lax levy limit and still be within its
“cap” under the law.
How does the new law take into account the fact that some expenses are currently beyond a school district’s control?
By allowing for
exemptions. After a school district calculates its “tax levy limit,” it
then adds exemptions into that amount, allowing a district to propose a
tax levy greater than the amount set by the “limit” without triggering
the need for approval by 60 percent of voters. These exemptions include:
•Voter-approved local capital expenditures;
•Increases in the state-mandated employer contribution rates for teacher
and employee pensions that exceed two percentage points;
•Court orders/judgments resulting in any amount that exceeds 5 percent
of a district’s current levy. However, tax certioraris are not exempt.
As a result of these exemptions, a district's final tax levy after
exemptions are added could be greater than this published tax levy limit
and still be considered within that limit under the law.
What will the new property tax levy law mean for MY tax bill?
That remains to be seen. First, the new law applies to the tax levy, not to tax rates or to individual tax bills. Second, it does not impose a universal 2 percent cap on taxes, or any other specific amount. The law does require a greater number of voters to approve a proposed budget that exceeds a school district’s individual “tax levy limit,” as calculated by a complex state formula. And third, there are several factors (assessments, STAR, equalization rates, etc.) that dictate how your school tax bill is calculated after the district sets the final tax levy; these factors are beyond the district’s control.
Do residents still vote on school district budgets?
Yes. Residents will
still be voting on the district’s proposed spending plan on the third
Tuesday in May. This year, the date is Tuesday, May 15, 2012. Under the
new law, the level of voter approval needed to pass a budget will now
depend on the amount of tax levy required under the school budget
proposal.
If the district meets or stays below the “tax levy limit” threshold
(before exemptions), it only needs a simple majority (more than 50
percent) of "yes" votes for budget passage/approval.
If the district goes beyond the “tax levy limit” threshold (before
exemptions), it must secure support from 60 percent or more (a
supermajority) of voters for budget passage.
How will I know if Green Island is proposing a tax levy above its maximum allowable tax levy limit, requiring 60 percent voter approval?
By law, any school district that proposes a budget that requires a tax levy (before exemptions) above its “tax levy limit” must include a statement on the ballot indicating this to voters. Information will also be available on the district website and district budget newsletter.
Are all the details of the new law finalized?
No. In this first year of the property tax levy cap, information about its provisions and implementation continues to evolve. We’re providing the information as it becomes available. Green Island and other school districts across the state are now awaiting further clarification from the New York State Office of the Comptroller, the Department of Taxation and Finance, the New York State Education Department, the Division of the Budget and the governor’s office.
What happens if the district budget is not approved by voters?
If a proposed
budget is defeated by voters, the school district—as in the past—has the
option of putting the same or a revised budget up for a revote, or
adopting a contingent budget.
If a proposed budget is defeated twice by voters, the district must
adopt a contingent budget. Certain existing contingent budget
requirements remain in effect that prohibit spending in specific areas
including community use of buildings, certain salary increases and new
equipment purchases. More significantly, under the new law, a district
that adopts a contingent budget may not increase its current tax levy by
any amount—which would impose, in effect, a zero percent cap. As of this
writing, it is unclear if exemptions will apply.
Will the tax cap legislation affect all school districts equally?
No. The tax cap legislation will affect all districts to varying degrees, but it is clear that some will be affected much more than others. In particular, for poor and/or rural school districts with low property wealth and declining tax bases, staying within their “tax levy limits” will severely restrict their ability to generate the revenues needed to sustain core educational programs. This discrepancy is largely rooted in what an increasing number of school leaders say is an unfair formula for distributing state aid to districts around the state.
