The state property tax cap was designed to halt the practice employed by school districts and local governments of raising taxes significantly in order to support their excessive spending.
And by all accounts, it has done just that. No longer do New Yorkers see regular property tax hikes of 5 or 6 or 10 or 12 percent, amounts that were once common at school budget votes.
New Yorkers are still paying for those tax hikes through a generation of higher teacher salaries, benefits and pension costs, the result of school boards being overly generous with the taxpayers' money.
While New York still needs a cap to prevent a return to those days, some unintended consequences of the five-year-old cap formula are actually discouraging districts from taking actions to lower costs for taxpayers.
For instance, districts that pay off debt early — a fiscally responsible act that relieves taxpayers of interest payments and frees up money otherwise spent on debt payments for programs and staffing — are punished under the formula with a lowering of their tax cap. Lowering their cap essentially removes the district’s incentive to pay off debt early. How does that help taxpayers?
Another flaw in the way the state administers the cap relates to payment-in-lieu-of-taxes (PILOT) agreements. Properties assessed under those PILOTs aren’t included in the calculation of the tax cap. That means districts aren’t being credited with their full tax levy for tax cap purposes, artificially reducing their caps and how much they’re entitled to spend.
Factoring in the current low rate of inflation, some districts are actually presenting budgets that contain tax caps requiring them to lower, not just cap, their annual tax levies. So, you say, what's wrong with that?
Well, the backwards legislative incentive means districts could actually be forced to adopt a budget with a higher tax levy, depending on what percentage of voters support it. Again, how does that help taxpayers?
The situation needs to be fixed in order to encourage districts to continue to budget frugally.
Some education groups would like to see the tax cap set at a consistent 2 percent. That shouldn't happen. Nor should the state make it easier for voters to override the tax cap by eliminating the super-majority requirement for an override. Such measures will only encourage districts to spend and tax even more.
But the state could make adjustments to the way the cap is calculated to encourage fiscal responsibility and reward districts for tight spending. That includes allowing assessments in PILOT agreements to be included in the tax cap calculation, eliminating negative tax caps, and changing the way debt and debt elimination affect the cap.
State lawmakers also need to stop imposing unfunded mandates on districts. That includes not handing down special tax breaks that reduce the amount of money districts have to spend.
The tax cap has been a valuable tool in reining in out-of-control taxes and spending.
Making certain adjustments will make it even better.