STATE SENATE VOTES TO MAKE 2% PROPERTY TAX HIKE LIMIT PERMANENT

Most suburban school districts in the New York City area used to get decent school budget increases before the Great Recession led eventually to the New York State Legislature passing the 2% annual property tax increase limit for school districts (NYC is exempt), fire districts, towns, cities (not NYC) and villages. The 2% limit (or rate of inflation if less than 2%) could only be exceeded with a super-majority 60% vote, instead of a majority vote.

The tax cap is a big reason why school spending increases, including salary increases for teachers, have been so anemic in New York State over the past decade. NYC teachers were able to catch up to many surrounding district pay scales because of limits on their salary increases caused in large part by the tax cap. NYC teacher salaries aren't rising fast for teachers to gain pay parity with the suburbs but rather pay is rising even slower in many surrounding areas or barely at all. It is long term austerity. The Great Recession is long since over but the 2% tax limit continues and just may never end. 

The new Democratic Party majority last week in the New York State Senate voted 58-2 to make the 2% property tax cap permanent. This is a major Andrew Cuomo priority. Where is that big change in Albany? Nobody likes paying taxes but if a majority of voters vote to go over 2%, shouldn't the majority rule?

From the Democrat and Chronicle:

Democrats took control of the Senate this month and pledged to keep taxes under control. 

In the Senate, though, protecting the tax cap has long been a priority of Senate Republicans, who held the majority for a decade before losing it in last November's elections.

Now Republicans are urging Senate Democrats to get Assembly Democrats to also approve the measure.

Assembly Democrats have been reluctant to make the cap permanent amid criticism by the powerful teachers' union that it is too restrictive and limits schools' ability to raise tax revenue for programs and staff.

At least NYSUT is on the right side of this issue.

This is from the NYSUT weekly Leader Update:

Why would they make a bad law permanent?

The state Senate passed S.1904, the bill that would make the tax cap permanent, but it can be stopped in the Assembly. NYSUT opposes any plan to make a bad law permanent unless it is amended to include key reforms.

To see why the 2% limit is not good for municipalities, read this from Patch.

The Tax Cap, enacted in 2011, is almost universally misunderstood by taxpayers who are affected by it.  Most think that it means that their tax rate cannot increase more than 2%.   Wrong. The Tax Cap stipulates that the taxing jurisdiction's tax LEVY cannot increase more than 2% or the rate of inflation as determined by the NYS Comptroller.   Under the law, a taxing entity can pass along to the taxpayer an increase of 2% over its previous year's tax levy.   This sounds reasonable to most people but the reality is that municipalities have so many  State-mandated costs, that the entire 2% is used up, and more, just meeting these costs allowing for no expansion of local programs and projects.

Pension contributions, unemployment insurance, health benefits make up the largest of these mandates but there are other smaller ones as well.   This means that by the time the taxing entity accounts for these mandates, their discretionary budget is already less than the prior year's.  As a very simple example,  if a municipality raised $10 million last year through taxes,  this year the Tax Cap would allow them to raise that levy by $200,000 to $10,200,000.  But if State-mandated costs have increased the expenses by $400,000 (not unusual), this year's operating budget must be reduced  to $9,800,000. This is, of course, a simplification as there are some exceptions.  Likewise, there are also financial penalties if a taxing entity exceeds the 2% Tax Cap levy without officially opting out of it.  

What this means to the tax payer is that cuts to a municipality's discretionary spending are going to be made – services, infrastructure and personnel are the most likely places for these cuts to occur.  Looking at local Towns currently undergoing their budget processes, two things are occurring amongst almost all of them – 1) they are passing resolutions to opt out of the 2% cap to protect themselves against future penalties  and 2) they are cutting things that are likely
to cost them more in the future – road resurfacing,  vehicle replacements and repair, amenities such as recreation and leaf removal,  important capital expenditures, and also personnel, leaving fewer people to do the essential tasks.  One way of keeping some of these services intact is to raise revenues outside of taxing. Of course, this results in higher fees for permits, applications, recreation programs, parking, etc. Another form of taxation.

While the 2% tax cap may sound good to the taxpayer right now, in the long run local governments are not going to be able to live up to their taxpayers' expectations as a result of an inflexible tax cap and mounting State mandates.