Blogs

School Business Matters: Costs Will Increase While Tax Cap Remains Flat

By Kimberly Shannon posted 11-18-2015 13:03

  

Written collaboratively by Deborah Cunningham and Kimberly Shannon

The Bureau of Labor Statistics reported on November 17 that the Consumer Price Index (CPI) increased 0.2 percent in October. Based on the first ten months of the year, inflation was running on par with last year at a 0.02 percent increase. If the CPI remains low for the rest of 2015, the allowable levy growth allowed in the tax cap law will be less than one or even zero. (The law does not allow the allowable levy growth factor to be less than zero.)

As NYSASBO has mentioned before, this poses a serious problem for districts in that costs will be increasing despite the low inflation, but districts will not be able to increase their tax levy for the 2016-17 school year one dollar if they stay within the tax cap.

Two other factors make this low tax cap particularly concerning: First, the Division of Budget predicts that inflation will rise by two percent next year, but tax cap growth is determined by looking at inflation in the prior year. In other words, while inflation is rising, districts will be budgeting within a tax cap that assumes no inflation.

Second, the CPI measure used is based on household costs for all urban consumers, whereas school districts costs are based on a different set of expenses, heavily influenced by the cost of paying teacher salaries. That means that the tax cap is based on a measure that might not accurately reflect school districts’ economic conditions.

The New York State School Boards Association released this week the results of a survey showing that 40 percent of school board members intend to seek an override of the tax cap next year. This tax cap issue has board members and administrators in a tough spot, particularly as a tax cap override could mean that taxpayers would lose out on a new STAR tax credit that was established in 2015.

I’ve spoken to a number of people who hadn’t heard about this tax credit, so I did some research that I’d like to share. According to Tax Law 606, the amount of the credit varies by year and ranges from $185 to a percent of the STAR tax savings for taxpayers at various income levels.  Most importantly, the tax credit wouldn’t be allowed if the district adopts a budget in excess of the tax levy limit. Similar requirements are in place for the fiscally dependent city school districts (Rochester, Buffalo, Yonkers, and Syracuse).

I encourage education stakeholders to be wary about this tax credit issue, as it does pose a bit of a gamble. It seems that if your district does get an override, you can increase your tax levy but your taxpayers can’t get the new tax credit. If you don’t get an override, you can’t increase your tax levy but your taxpayers would still be eligible for the tax credit.

It’s also important that we continue advocating for a solution to this low tax cap. The Education Conference Board and the Regents are both requesting funds to offset the losses incurred by this low cap, and NYSASBO supports this request. Our schools need adequate, predictable funding that provides opportunities for all children to receive a meaningful education. More than ever, our state needs an educated workforce that contributes to a strong economy in an uncertain world.


3 comments
202 views

Permalink

Comments

11-23-2015 14:10

And here is section 3 on the calculation:
(3) Amount of credit. (a) For the two thousand sixteen taxable year
(i) for a taxpayer residing in real property located within the
metropolitan commuter transportation district (MCTD) and outside the
city of New York, the amount of the credit shall be $130; (ii) for a
taxpayer residing in real property located outside the MCTD, the amount
of the credit shall be $185.
(b) For the two thousand seventeen, two thousand eighteen and two
thousand nineteen taxable years (i) For a taxpayer who owned and
primarily resided in real property receiving the basic STAR exemption,
the amount of the credit shall equal the STAR tax savings associated
with such basic STAR exemption, multiplied by the following percentage:
(A) for the two thousand seventeen taxable year:
Qualified Gross Income Percentage
Not over $75,000 28%
Over $75,000 but not over $150,000 20.5%
Over $150,000 but not over $200,000 13%
Over $200,000 but not over $275,000 5.5%
Over $275,000 No credit
(B) for the two thousand eighteen taxable year:
Qualified Gross Income Percentage
Not over $75,000 60%
Over $75,000 but not over $150,000 42.5%
Over $150,000 but not over $200,000 25%
Over $200,000 but not over $275,000 7.5%
Over $275,000 No credit
(C) for the two thousand nineteen taxable year:
Qualified Gross Income Percentage
Not over $75,000 85%
Over $75,000 but not over $150,000 60%
Over $150,000 but not over $200,000 35%
Over $200,000 but not over $275,000 10%
Over $275,000 No credit
(c) For a taxpayer who owned and primarily resided in real property
receiving the enhanced STAR exemption, the amount of the credit shall
equal the STAR tax savings associated with such enhanced STAR exemption,
multiplied by the following percentage:
Taxable Year Percentage
two thousand seventeen 12%
two thousand eighteen 26%
two thousand nineteen 34%
(d) In no case may the amount of the credit allowed under this
subsection exceed the school district taxes due with respect to the
residence for that school year.

11-23-2015 14:07

Here is the law:
Tax Law section 606 (n-1) Property tax relief credit. (1) An individual taxpayer who meets
the eligibility standards in paragraph two of this subsection shall be
allowed a credit against the taxes imposed by this article in the amount
specified in paragraph three of this subsection for tax years two
thousand sixteen, two thousand seventeen, two thousand eighteen, and two
thousand nineteen.
(2) (a) To be eligible for the credit, the taxpayer (or taxpayers
filing joint returns) on the personal income tax return filed for the
taxable year two years prior, must have (i) been a resident, (ii) owned
and primarily resided in real property receiving the STAR exemption
authorized by section four hundred twenty-five of the real property tax
law, and (iii) had qualified gross income no greater than two hundred
seventy-five thousand dollars. Provided, however, that no credit shall
be allowed if any of the following apply:
(i) Such property is located in an independent school district that is
subject to the provisions of section two thousand twenty-three-a of the
education law and that has adopted a budget in excess of the tax levy
limit prescribed by that section. To render its taxpayers eligible for
the credit authorized by this subsection, the school district must
certify its compliance with such tax levy limit in the manner prescribed
by subdivision two of section two thousand twenty-three-b of the
education law.
(ii) Such property is located in a city with a dependent school
district that is subject to the provisions of section three-c of the
general municipal law and that has adopted a budget in excess of the tax
levy limit prescribed by that section. To render its taxpayers eligible
for the credit authorized by this subsection, the city must certify its
compliance with such tax levy limit in the manner prescribed by
subdivision two of section three-d of the general municipal law.
(iii) Such property is located in the city of New York.

11-23-2015 14:05

Some people have suggested the STAR rebate will be a major obstacle in their efforts to override the Tax Cap in 2016. Others have asked for more information. We agree and are following up in two ways. First, I will provide the law in a separate comment including the calculation of the STAR rebate which varies by year and by income level of the taxpayer. Second, I would like some sense from the membership whether, given this knowledge, you are likely to override or not. We know that much will go into that ultimate decision, but at this point in time, do you believe your board of education is likely to pursue an override in 2016?