Q. Does the tax cap law mean school tax
levies can’t increase by more than 2 percent?
A. No, the law does not prohibit
tax levy increases greater than 2 percent. Despite how it’s
been described by some politicians and the media, the legislation
signed into law in June
2011 requires each district to calculate its own tax levy limit. Two
percent (or the rate of
inflation, if less) is just one of eight factors in this
calculation. The law also establishes a higher threshold of voter
approval for a budget to pass if a district’s proposed tax levy
increase (before exclusions outlined in the law) exceeds its
individual tax levy limit.
Q. What is a tax levy limit?
A. For school districts, the tax
levy limit is the highest allowable tax levy (before exclusions)
that a school district can propose as part of its annual budget for
which only the approval of a simple majority of voters (more than 50
percent) is required. Any proposed tax levy amount above this limit
will require budget approval by a supermajority (60 percent or more)
of voters. Essentially, the tax levy limit sets a threshold
requiring districts to obtain a higher level of community support
for a proposed tax levy above a certain amount. However, the 2011
legislation does not place a limit on any taxes a school district
would levy to pay for expenditures related to specific
“exempt” items, including some court orders, some pension costs and
local capital expenditures. These items are then added to the tax
levy limit to arrive at the maximum “allowable” tax levy limit.
Q. How is the tax levy limit determined
for school districts?
A. The law dictates an
eight-step formula that each school district must use to calculate
its individual tax levy limit. In particular, the calculation
adjusts a district’s tax levy to reflect
growth in the local tax base (if any) and the rate of inflation or 2
percent (whichever is
Q. Does the law take into account that
some expenses are currently outside a district’s control?
A. Yes. Taxes that school
districts levy to pay for certain expenses are “exempt” from the tax
levy limit calculation. In other words, after a school district
calculates its tax levy limit, it then adds these exclusions to that
amount, allowing the 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 exclusions 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 from tort
actions of any amount that exceeds 5 percent of a district’s
current levy. Tax certioraris, however, are not exempt.
Far from being “loopholes,” these exclusions are
an acknowledgement among lawmakers that schools have no ability to
simply limit cost increases in these areas to the rate of inflation.
As a result, a district’s final tax levy (after the levies for these
exclusions are added in) could be greater than its published tax
levy limit and yet still be considered, under the law, within that
Q. What does a district’s “carryover”
A. Districts whose 2012-13
budgets carried levies below their tax levy limits
will have to factor that difference into their 2013-14 tax levy
limit calculations. This
so-called “carryover” is determined by subtracting the actual
2012-13 total tax levy
(in dollars) from the calculated 2012-13 tax levy limit (before
exclusions). This figure,
which can be no greater than 1.5 percent of the prior year’s tax
levy limit, is then added
into the eight-step mathematical formula used to determine the
2013-14 tax levy limit. An
estimated 106 school districts will have available carryover in
Q. What will the property tax cap law
mean for MY tax bill?
A. It’s important to remember
that the tax cap law only determines how much voter support is
needed to pass a budget. It does not impose a universal 2 percent
cap—or any other specific amount—on taxes. It applies to the tax
levy, not to tax rates or individual bills. Keep in mind, there are
several factors that dictate how an individual’s school tax bill is
calculated after a school district sets the final tax levy—including
changes in property values and equalization rates—none of which are
within the district’s control. This calculation process did not
change under New York’s property tax cap law. Tax bills continue to
be calculated by using a property’s assessed value (as determined by
the local town assessor) and the tax rate—or the amount paid in
taxes per $1,000 of assessed value. Tax rates are not solely
determined by the tax levy approved by voters; they are often
adjusted by the state using equalization rates, designed to equally
distribute the tax burden across municipalities within a district.
Tax bills can also be affected by STAR or other exclusions for which
individual taxpayers may qualify.
Q. Does the public still vote on school
A. Yes, school district
residents will still vote on a proposed budget on the third Tuesday
in May. Under the law, the level of voter approval needed to pass a
budget depends upon the amount of the tax levy required by the
proposed budget. If the tax levy (before exclusions) is at or below
the tax levy limit, a simple majority (50 percent plus one) is
needed for budget approval. If the tax levy (before exclusions)
exceeds a district’s tax levy limit, the support of a supermajority
(60 percent or more) of voters is required for budget approval.
Q. How will I know if my district is
proposing a tax levy above its tax levy limit, requiring 60 percent
A. By law, any school district
that proposes a budget that requires a tax levy (before exclusions)
above its tax levy limit must include a statement on the ballot
indicating this to voters.
Q. What happens if the budget is not
approved by voters?
A. If a proposed budget is
defeated by voters, a 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, a district must adopt a contingent budget. Adopting a
contingent budget prohibits a district from spending any money in
certain areas, including community use of school facilities (unless
all costs are reimbursed to the district); new equipment purchases;
non-essential maintenance; capital expenditures (except in
emergencies); salary increases for non-instructional, nonunionized
employees; and certain field trips and student supplies. Contingency
rules also cap the growth of the administrative component of the
budget. These requirements existed prior to the tax levy cap and
remain in effect. More significantly, under the law, a district that
adopts a contingent budget must kept its 2013-14 tax levy the same
as or less than its 2012-13 tax levy —which in effect is a zero
percent cap. In other words, a district that adopts a contingent
budget would have to levy the same amount of taxes as in the current
year—or less—without any adjustments for state pension rate
increases, contractual obligations or any other costs, whether or
not they are mandated.
Q. Does the tax cap legislation affect
all school districts equally?
A. The tax cap legislation affects all districts
to varying degrees, but some are 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. In addition, school districts with a
relatively small tax levy will generate much less revenue for every
1 percent tax levy increase, compared to school districts that have
larger tax levies as their base. This difference will only get
exacerbated over time.
Q. What can I do?
A. The property tax cap law
poses an enormous challenge for public schools, and school leaders
need to hear from their communities to help guide them through the
difficult decisions that will need to be made. It is more important
than ever to become informed about the complex issues shaping school
district budgets and educational programs. Please attend a budget
meeting this spring or contact your district with questions about
its budget development. Make sure to visit your school district’s
website for more information. And—whether you’ve ever done so in the
past or not—please remember to vote on your school budget.
The Tax Levy is:
The total amount of property
taxes a school district must
collect to balance its budget,
after accounting for all other
revenue sources including state aid. The tax levy is the basis for
determining the tax rate for each of the cities, towns or villages
that make up a school district.
The Tax Levy Limit is:
A calculated tax levy amount (according to a state formula) that is
the highest allowable amount (before exclusions) that a school
district can propose for which only the approval of a simple
majority of voters (50 percent plus one) is required. Despite its
name, it does not set a limit on the tax levy
that a school district (or
municipality) can propose.
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