UNDERSTANDING NEW YORK'S TAX LEVY CAP
This page is dedicated to explaining New York's new tax levy cap law, often referred to as a "2 percent tax cap." This reference to a 2 percent cap is a misrepresentation, because the law does not in fact restrict any proposed tax levy increase to two percent. Learn more about the new law by viewing the information below. Check back often -- new information will be added as the school year continues and as the district prepares its proposed budget for 2012-13.
Tax levy cap shapes 2012-2013 budget discussion
When Cohoes voters head to the polls in May to decide the 2012-13 school budget, they will cast votes for a budget plan shaped in part by a new law known to many as the Property Tax Cap. Approved by the State Legislature last June, this complex new law is intended to provide much needed property tax relief. While some provisions of the law and its impact remains unclear, the new law will change the way school budgets are decided.
At a recent Board of Education workshop, Superintendent Robert Libby opened discussion of the 2012-13 budget by presenting an overview of the new law. He explained that although the new law is often referred to as a "2 percent tax cap," it does not in fact restrict any proposed tax levy increase to 2 percent. The law does, however, require at least 60 percent voter approval for a school budget if the proposed levy increase exceeds a certain amount.
That amount, called the "tax levy limit" will be determined by individual school districts according to a complex, eight-part formula outlined in the law. "To call it a tax cap simplifies what is in fact a very complicated formula," Superintendent Libby explained. "The law does set a tax levy limit that determines an important voting threshold. It would be more accurate to call the new statute a Property Tax Levy Cap."
What this new law means for Cohoes residents is that in the coming months, there will be new terminology to understand and new ways the school district will present its budget information under the new law.
To help local voters understand the changes in school budget voting that are set to take place, the district is offering a free publication from Capital Region and Questar III BOCES entitled Understanding New York's Property Tax Levy Cap.
View or download a copy of the Understanding New York's Property Tax
Levy Cap (.PDF)>>
A complex, eight-part formula determines the "Tax Levy Limit"
As seen in the formula above, though much-publicized, the “lesser of
2 percent or the rate of inflation (CPI)” is only one factor in a
school district’s “tax levy limit” and “maximum allowable limit.” In
fact, there are eight different steps to the calculation as dictated
by the legislation. Those steps take into account payments in lieu
of taxes (PILOTS), the tax levy and approved exemptions for the
current school year, and growth in the tax base.
Individual school districts will each have a unique “tax levy
limit,” which must be submitted to the state by March 1 of each
year.
Some expenses, such as certain pension costs, court judgments and
local capital expenses are exempt from the “tax levy limit.” These
exemption items are then added to the “tax levy limit” to arrive at
the “maximum allowable levy.” Because of the addition of these
exemptions, school districts may actually propose a budget with a
tax levy that is higher than its “tax levy limit” – but still be
within its “cap” under the law.
What are the Board of Education’s options in formulating a budget?
The Board of Education has two options for the
budget vote. The first option is to propose a budget requiring a tax
levy before exemptions at or below the “tax levy limit” prescribed
by law. This requires a simple majority of 50% + 1 voter approval.
Option 2 is to propose a budget requiring a tax levy before
exemptions above the “tax levy limit.” This requires a “super
majority” of 60% voter approval. This requires a statement on the
ballot indicating the required tax levy before exemptions exceeds
the “tax levy limit.”
Just because a school district can legally exceed its “tax levy
limit” does not mean that it will, though. Several factors must
first be considered, including whether students’ educational needs
can be met within the “tax levy limit” and the likelihood of voter
support for a budget that exceeds the “tax levy limit.”
That potential support, or lack thereof, is important because the
new legislation has changed what happens if a budget proposal is
defeated twice in a single year. As of next year, a district that
adopts a contingency budget can levy a tax no greater than that of
the prior budget year – a 0 percent increase.
