March 2008

• DOWNLOAD: ECB POSITION PAPER. PDF file is 150K.

Position

As part of his 2008 State of the State Governor Spitzer has appointed a Moreland Act commission to develop a property tax cap for New York’s School districts. The New York State Educational Conference Board strongly opposes school property tax caps.

• A property tax cap does not provide relief from high property taxes. A property tax circuit breaker would be a better approach to providing relief.
• Any property tax cap would harm the poorest districts the most – low spending districts whose students need the most help to reach higher standards would be prevented from increasing spending to provide the necessary supports.
• School districts operate under a budget process that is already more open to public input than that of any other government body in New York State. Only school districts are required to submit an annual budget for voter approval. When a school district budget is defeated, the district must adopt a contingency budget which is capped at 120% of CPI or 4 percent whichever is lower.
• Property tax caps have been tried in other states with disastrous consequences for the education of children.

Rationale

New York has a long history of the State and local school districts sharing in the cost of providing education to our state’s children. The predominate source of local revenue is the property tax. Over the past 20 years, the local share of school expenditures has ranged from a high of 56.8% in 1993-94 to a low of 46.4% in 2001-02. Since 2001-02, the local share has climbed above 50 percent. Given the unpredictability of state aid, it is nearly impossible to have local property taxes not rise each year.

In New York State, all school districts, except for the Big 5 city school districts, are required to submit their annual budget for voter approval — something no other government entity is required to do. In the Big 5 city school districts, the school budget is submitted to the mayor and city council for approval. In addition, school districts are required to provide the voters with information about the tax increase under the proposed budget and the property tax increase under a contingency budget before they vote on the proposed budget. A property tax cap would both undermine local control of education and the authority of the voters.

We find it ironic that a tax cap is being called for at this time. School districts put their budgets up for a public vote. When the budget vote fails, school districts adopt a contingency budget which caps increases at 120% of the CPI or 4 percent whichever is less. Budget adoptions have averaged nearly 90 percent. For the 2007-08 school year, over 98 percent of budgets were passed, indicating strong public support for school districts.

Since the enactment of STAR, New York’s property tax relief program and the infusion of new State Aid, school property tax increases have stabilized. In the first year of STAR 1998-99, which also included a large increase in state aid, school property taxes increased by 1.61 percent. In 1997-98 property taxes had increased by 4.22 percent. In the final year of the STAR phase-in 2001-02, property taxes actually decreased by 1.7 percent.

In 2002-03, when state aid was reduced and STAR grew a small amount, school districts were dependent on local revenues to fund cost increases. Property taxes increased by 11 percent. In 2007-08, the Governor and legislature provided a record increase in state aid. According to the property tax report card data, school property taxes increased on average3.8 percent. This increase does not reflect the $1 billion in new property tax rebates provided in 2007-08. When the rebates are taken into account, the average school property tax increase drops to 1.5 percent. Clearly, the action by the Governor and legislature in 2007-08 is working and should be allowed to succeed before a new approach is taken..

Property tax caps have been tried in other states with disastrous results. In California, after passage of “Proposition 13,” which imposed a cap on school taxes, California’s public schools descended from one of the mostly highly respected educational systems in the nation into one of the poorest. New York must not repeat California’s mistake.

Property tax caps will lock in existing disparities among school districts. As a result schools in poorer communities will not be able to raise enough revenue to cover costs while schools in wealthier communities will be able to meet these costs. In Massachusetts, the property tax cap can be exceeded by a vote of the community. The override votes fail more than 60 percent of the time and many poorer communities don’t even try to override the cap. This leaves the schools in these communities at a disadvantage.

The members of the Education Conference Board believe that school districts’ governance procedures are more open than any other government entity, and a property tax cap is an unwarranted and damaging intrusion into the process.

• DOWNLOAD: ECB POSITION PAPER. PDF file is 150K.

ECB comprises the eight major statewide education organizations representing parents, teachers, school board members, superintendents, school business officials, principals and other building administrators.