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Report Tax Cap

Report Tax Cap

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Published by: jspector on Oct 26, 2012
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24 Century Hill DriveSuite 200Latham, NY 12110-2125518.783.0200www.nyssba.org
In May of 2012, school districts for thefirst time ever held budget votes under NewYork’s new property tax levy cap. Taxpayersapproved 96.5 percent of budgets, the secondhighest approval rate since the New York StateSchool Boards Association began trackingresults in 1969.Now, as school districts prepare their bud-gets for the 2013-14 school year, school boardmembers and administrators should take noteof four key lessons from the first go-roundunder New York’s tax cap law.
Tax levy increases at or below the tax capwere one-and-a-half times more likely to gainvoter approval than tax levy increases thatexceeded the cap.
Budget approval rates varied greatlydepending on whether a budget required simplemajority or supermajority voter approval (seesidebar at left). Of the 671 school districts inour analysis,
623 districts proposed budgetswith tax levy increases that did not exceed theircaps and therefore required approval by a sim-ple majority of voters. Overall, these districtshad relatively small tax levy increases; theaverage proposed tax levy increase of thesespending plans (2.1 percent) was considerablylower than their average tax levy caps (3.6 per-cent). Ninety-nine percent of these budgetswere approved by voters.Only 48 of the 671 school districts pro-posed budgets that exceeded their tax levycaps – mostly to keep pace with the burgeoningcosts of pensions, health care and educationalprograms – and therefore required the approvalof at least 60 percent of voters. Of those dis-tricts, 29 budgets passed and 19 were defeated– an approval rate of just 60 percent.
 Districts whose tax levy caps were less than 2 percent fared better in exceeding the cap and obtaining a supermajority.
While budgets with tax levy increases thatexceeded their caps were much less likely togain voter approval overall, overrides were
Planning for 2013:Lessons from Year 1 of the Tax Levy Cap
An Overview of the Tax Levy Cap
New York law limitsproposed tax levy increas-es to 2 percent or the rateof inflation, whichever isless. However, school dis-tricts may exempt certainexpenditures, such as aportion of pension costs,PILOT* payments andcertain capital expendi-tures, so the cap variesfrom district to districtand may actually exceed2 percent.If a school districtbudget has a tax levyincrease equal to or lessthan its maximum allow-able amount, or cap, thebudget needs only a sim-ple majority approvalfrom voters to pass.If a school districtbudget carries a tax levyincrease greater than itscapped amount, a super-majority of voters –60 percent – must vote infavor of the plan in orderfor it to pass.*
Payments in lieu of taxes
Number of budgetsat or below tax levy cap
Number of budgetsabove tax levy cap
Lesson 1: Less is more
May Budget Vote
Lesson 2:Not all overrides are created equal
Taxpayers voted on a total of 678 spending plans, approving 654 of them. Since the State Education Department doesnot report tax levy information for school districts with fewer than eight teachers, this analysis excludes the seven smallschool districts that fall into that category. Thus, the report focuses on the remaining 671 school districts across the statethat put their annual budgets up to a public vote on May 15, 2012, of which 647 gained voter approval and 24 did not.
Fall 2012
more successful when a district’s maxi-mum tax levy cap was at or below 2 per-cent.Twenty-one districts that wererequired by law to limit their tax levyincreases to 2 percent or less (and, insome cases, less than 0 percent), duemostly to PILOT agreements,
proposedbudgets with tax levy increases thatexceeded their caps, and all but four of them were approved. In fact, the 17 suc-cessful districts had maximum allowabletax levy increase limits that averaged neg-ative 0.44 percent. In overriding theircaps, these 17 districts passed budgetswith an average tax levy increase of 2.75percent. This suggests that districts maybe more likely to obtain voter supermajor-ity approval when their tax levy cap isviewed as overly restrictive.The Ballston Spa school district inSaratoga County provides a good illustra-tion. Ballston Spa had a tax levy cap of negative 2.9 percent, meaning the districtactually had to cut its tax levy by that per-centage to stay within its cap. The reason:PILOT payments.Under existing PILOT agreementsBallston Spa haswith several localbusinesses, the dis-trict will receive anadditional $2.1 mil-lion for 2012-13.
Bylaw, these paymentsmust be subtractedfrom the district’stax cap calculation,creating a situationwhereby it had anegative tax levycap.Ballston Spa’sproposed budget called for a tax cut of 0.4percent to avoid layoffs and program cutsas enrollment rises.
So, while BallstonSpa actually reduced its tax levy, the dis-trict still required supermajority voterapproval to pass its budget because thelevy change was greater than its negative2.9 percent cap amount. Nearly 70 percentof voters approved the plan. Ballston Spawill see reduced payments under itsPILOT agreements in coming years. Thiscould lead to its tax cap calculation even-tually rising to more than 2 percent.Other unusual circumstances arose inthe first year of the tax cap that showedthere are still a number of bugs to beworked out. The New Paltz (UlsterCounty) school district budget was defeat-ed because it did not receive the 60 per-cent voter approval it needed to overridethe cap – falling just short with 59.4 per-cent. School district trustees said the over-ride provision is unfair because ‘no’ voteshave greater weight than ‘yes’ votes, mak-ing it undemocratic and possibly unconsti-tutional. The Board of Education said itwill send a letterto a state educa-tional reform com-mission suggestingthat a simplemajority of votersbe required tooverride a statecap on propertytax increasesinstead of the 60percent currentlymandated.
Comparison of total votes cast –simple majority districts
   T  o   t  a   l  v  o   t  e  s  c  a  s   t
Comparison of total votes cast –supermajority districts
   T  o   t  a   l  v  o   t  e  s  c  a  s   t
The total number of votes cast in the 623 districts that needed a simple majority for budgetpassage decreased by 11.6 percent in 2012 compared with 2011.
The total number of votes cast in the 48 districts that needed a supermajority for budgetpassage increased by 26.5 percent in 2012 compared with 2011.
A PILOT, or payment in lieu of taxes, is compensation to a local government (in this case, a school district) for some or all of the tax revenue it loses from a pieceof property that is exempt from taxes, such as federally-owned land or a commercial enterprise that was given a tax break to locate in a particular geographic area.The property tax cap calculation for each district is adjusted by any PILOT payments, which may reduce the property tax cap to less than 2 percent.
 In general, voter turnout increased in districts requiring 60 percent over- rides, but decreased in districts requiring only simple majorities.
The tax cap did not result in anincrease in overall voter turnout statewide.In fact, overall voter turnout in 2012decreased by a total of 73,398 votes – or8.4 percent – compared with 2011. Only30 percent of districts had higher voterturnouts in 2012 compared to 2011, while70 percent had lower voter turnouts in2012.In the 623 districts that did not seek to override their caps, there were 93,152fewer votes cast in 2012 than 2011, adecrease of 11.6 percent. Only about aquarter of these districts had higher voterturnout in 2012, while 74 percent hadlower voter turnout. Voters in districts thatdid not seek to override their tax caps mayhave felt less incentive to go to the pollsbecause levy increases in those districtsaveraged only about 2.2 percent.However, the opposite trend was evi-dent in districts attempting to overridetheir caps. There was a significant upsurgein voter turnout in the 48 districts thatneeded a 60 percent supermajority over-ride for budget passage. In these districts,there were 19,404 more votes cast in 2012than in 2011, an increase of 26.5 percent.Four out of five of these districts hadhigher voter turnout in 2012, while 19percent had lower voter turnout in 2012than in 2011. Tax levy increases thatexceeded the cap were likely the majorfactor contributing to greater voter turnoutin these districts.
 In general, higher voter turnout meant lower passage rates.
There appears to be an inverse rela-tionship between voter turnout and budgetpassage: the greater the turnout, the lesslikely the budget was to pass. Of the 24districts whose budgets were defeated,voter turnout increased by 19 percentfrom 2011, and 92 percent of these dis-tricts had higher voter turnout in 2012than in 2011.Conversely, of the 647 districtswhose budgets passed, voter turnoutdecreased by 10 percent from 2011. Only28 percent of these districts had highervoter turnout in 2012 than in 2011, while72 percent of districts had lower voterturnout in 2012 than in 2011.School districts in New York werewary of exceeding their property tax caplimits in the first budgets under the taxcap. According to NYSSBA’s analysis, of the 671 school budgets, 67 percent werebelow their cap limit, 26 percent wereright at their cap limit, and 7 percentexceeded their cap limit and required asupermajority for passage.School leaders understood that votersin their communities were acutely awareof the 2 percent tax levy cap. This ledthem in year 1 to craft budgets with taxlevy increases that averaged about 2.3 per-cent – even if it meant adopting budgetswith property tax levy increases that wereactually below what the law would allowif they chose to take all of their allowableexemptions.School districts are now preparing foryear 2 under New York State’s propertytax levy cap. Much more remains to bestudied in the coming years, includinghow factors such as wealth, regionaldemographics, resource equity and studentachievement are impacted by the tax cap.For example, a preliminary analysisshows that, when comparing the 48
Fall 2012
Budget passage ratesof supermajority overrides
100806040200Tax cap of 2%or less
   %   o   f   b  u   d  g  e   t  s  p  a  s  s  e   d
81%44%Tax cap of greaterthan 2%
Lesson 3:Opposites attractLesson 4:Higher means lowerConclusion
The percentage of budgets requiring supermajority overrides that were approved byvoters varied greatly depending on the magnitude of the tax levy increase.
[Avg. levy increase: 3.2%][Avg. levy increase: 5.6%]

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