Word of the Month for July - Cooperation
August 4, 2014
Board of Education Meeting
Golding Middle School Library at 7:00 p.m.
updated Nov. 22, 2011
Oct. 25, 2011
Property Tax Levy Limit Q&A
Below are some common questions about the new property tax legislation. We will continue to post more information about the legislation as it is made available by the state.
As always, parents, staff, students and taxpayers are urged to voice their opinions on these matters to our elected leaders. Click here for elected leaders' contact information.
Keep in Mind
The tax levy is the total dollars that a school district collects from property owners within the district in order to balance its budget. The levy is determined after accounting for all other sources of income, including state aid.
The tax rate is used to calculate what each property owner will pay in school taxes. The district tax levy rate is just one factor, along with assessment rates and equalization rates, that figure into determining the tax rate. The district does not set individual tax rates.
Does the new cap mean school tax
levies can't increase by more than
No, the law does not prohibit tax levy increases greater than 2 percent.
The law has been misconstrued and misrepresented in media sound bites as a “2 percent tax cap.” Instead of imposing a true cap, the law establishes a threshold — or tax levy limit — that determines what level of support is needed for a school budget to pass. Each district is required to calculate its own tax levy limit by following a complicated, eight-step formula established by the state.
If the proposed tax levy increase is above the tax levy limit — after accounting for exemptions — the support of a supermajority (60 percent) of voters would be required for budget passage. If the levy is within the limit, a simple majority is needed for budget approval.
Q: What is a "tax levy limit?”
A: For school districts, the “tax levy limit” is the highest allowable tax levy (before exemptions) that a school district can propose as part of its annual budget for which only a simple majority of voters (more than 50 percent) is required for budget passage. Any proposed tax levy amount above that limit requires budget approval by a supermajority (60 percent or more) of voters.
Essentially, the “tax levy limit” sets a threshold that requires districts to obtain a higher level of community support for a proposed tax levy above the “tax levy limit.”
However, the new legislation does not place a limit on any taxes a school district would levy to pay for expenses related to specific “exempt” items, including some court orders, some pension costs and local capital expenditures. The costs of these exempt items are added to the “tax levy limit” to come up with the “allowable tax levy” limit.
It is important to note that:
(1) Tax levy limits will vary by school
(2) The new law does not limit an individual’s tax bill.
What’s the difference between the “tax levy limit” and the “maximum allowable levy?”
To understand the “tax levy limit,” you must first understand a tax levy. A tax levy is the total amount of property taxes a school must collect to balance its budget, after accounting for all other revenue sources including state aid.
The “tax levy limit” is an important part of the new property tax cap legislation. The “tax levy limit” is the highest allowable tax levy – before exemptions – that a school district can propose as part of its annual budget for which only the approval of a simple majority of voters (more than 50 percent) is required. Any amount proposed above this limit will require budget approval by a super majority (60 percent or more) of voters.
Essentially, the “tax levy limit” sets a threshold requiring districts to obtain a higher level of community support for a proposed tax levy above a certain amount.
So what is the “maximum allowable levy?” The new legislation does not place a limit on any taxes a school district would levy to pay for expenditures related to specific “exempt” items, including some court orders, some pension costs and local capital expenditures. These items are then added to the “tax levy limit” to arrive at the maximum allowable levy.
Simply put, the “tax levy limit” + coming school year exemptions = “maximum allowable levy.”
Here’s another way to look at it:
Tax Levy Limit – A calculated tax levy amount (according to a state formula) that sets the threshold needed for 60 percent voter approval. Despite its name, it does not set a limit on the tax levy that a school district can propose.
Maximum Allowable Levy – The final dollar figure created by adding a district’s applicable exemptions to its “tax levy limit” is known as the “maximum allowable tax levy.” As a result, a district may actually propose a budget with a tax levy that is higher than its “tax levy limit” and still be within its “cap” under the law.
Q: How is the district’s tax levy limit determined?
A: By law, each school district’s tax levy is determined by a complex, eight-step formula that was developed by the state. The formula takes into consideration a number of variables, including growth in the local tax base (if any), exemptions, the previous year’s tax levy, as well as the current and coming years’ PILOTs (Payment In Lieu Of Taxes). The rate of inflation or 2 percent (whichever is lower) is also part of the equation. Consideration is also made for any allowable “carryover” funds from previous years, as districts are allowed to “bank” some unused portions of their tax levy limits to use in future years (details on this are still emerging from the state).
Individual school districts will each have a unique tax levy limit, which must be submitted to the state by March 1 each year. Once the tax levy limit is determined, the district will then add coming school year’s exemptions to the tax levy limit, creating a “maximum allowable levy.” As a result, a district may actually propose a budget with a tax levy that is higher than its lax levy limit and still be within its “cap” under the law.
Q: How does the new law take into account the fact that some expenses are currently beyond a school district’s control?
A: By allowing for exemptions. After a school district calculates its “tax levy limit,” it then adds exemptions into that amount, allowing a district to propose a tax levy greater than the amount set by the “limit” without triggering the need for approval by 60 percent of voters. These exemptions include:
Voter-approved local capital expenditures;
Increases in the state-mandated employer contribution rates for teacher and employee pensions that exceed two percentage points;
Court orders/judgments resulting in any amount that exceeds 5 percent of a district’s current levy. However, tax certioraris are not exempt.
As a result of these exemptions, a district's final tax levy after exemptions are added could be greater than this published tax levy limit and still be considered within that limit under the law.
What are the Board of Education’s options?
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.
Q: What will the new property tax levy law mean for MY tax bill?
A: That remains to be seen. First, the new law applies to the tax levy, not to tax rates or to individual tax bills. Second, it does not impose a universal 2 percent cap on taxes, or any other specific amount. The law does require a greater number of voters to approve a proposed budget that exceeds a school district’s individual “tax levy limit,” as calculated by a complex state formula. And third, there are several factors (assessments, STAR, equalization rates, etc.) that dictate how your school tax bill is calculated after the district sets the final tax levy; these factors are beyond the district’s control.
Q: Do residents still vote on school district budgets?
A: Yes. Residents will still be voting on the district’s proposed spending plan on the third Tuesday in May. This year, the date is Tuesday, May 15, 2012. Under the new law, the level of voter approval needed to pass a budget will now depend on the amount of tax levy required under the school budget proposal.
If the district meets or stays below the “tax levy limit” threshold (before exemptions), it only needs a simple majority (more than 50 percent) of "yes" votes for budget passage/approval.
If the district goes beyond the “tax levy limit” threshold (before exemptions), it must secure support from 60 percent or more (a supermajority) of voters for budget passage.
Q: How will I know if C-RCS is proposing a tax levy above its maximum allowable tax levy limit, requiring 60 percent voter approval?
A: By law, any school district that proposes a budget that requires a tax levy (before exemptions) above its “tax levy limit” must include a statement on the ballot indicating this to voters. Information will also be available on the district website and district budget newsletter.
Q: Are all the details of the new law finalized?
A: No. In this first year of the property tax levy cap, information about its provisions and implementation continues to evolve. We’re providing the information as it becomes available. C-RCS and other school districts across the state are now awaiting further clarification from the New York State Office of the Comptroller, the Department of Taxation and Finance, the New York State Education Department, the Division of the Budget and the governor’s office.
What happens if the district budget is not approved by voters?
If a proposed budget is defeated by voters, the school district—as in the past—has the option of putting the same or a revised budget up for a revote, or adopting a contingent budget.
If a proposed budget is defeated twice by voters, the district must adopt a contingent budget. Certain existing contingent budget requirements remain in effect that prohibit spending in specific areas including community use of buildings, certain salary increases and new equipment purchases. More significantly, under the new law, a district that adopts a contingent budget may not increase its current tax levy by any amount—which would impose, in effect, a zero percent cap. As of this writing, it is unclear if exemptions will apply.
Will the tax cap legislation affect all school districts equally?
No. The tax cap legislation will affect all districts to varying degrees, but it is clear that some will be affected much more than others. In particular, for poor and/or rural school districts with low property wealth and declining tax bases, staying within their “tax levy limits” will severely restrict their ability to generate the revenues needed to sustain core educational programs. This discrepancy is largely rooted in what an increasing number of school leaders say is an unfair formula for distributing state aid to districts around the state.
What can I do?
The property tax cap law poses an enormous challenge not just for C-RCS, but for all public schools. C-RCS district leaders encourage the community to join in the budget process and help generate creative ideas and alternative solutions to budget issues. Difficult decisions will need to be made. It is more important than ever to become informed about the complex issues shaping school district budgets and educational programs. Attend board of education meetings, join a community committee, sign up for the community e-newsletter, follow developments on the district’s budge page and visit the district’s website for more information. And— whether you’ve ever done so in the past or not-—please remember to vote on the school budget on Tuesday, May 15!
Q: How can I get more information on the property tax legislation?
A: We will continue to post the most up-to-date information on the district website as it becomes available, so please continue to check the Tax Levy Limit section regularly. Updates will also be posted to our Facebook and Twitter accounts and included in the community e-newsletter. To sign up for the community e-newsletter, please send an email to firstname.lastname@example.org.
This page is maintained according to Web publishing guidelines used by the Cobleskill-Richmondville Central School District. All rights reserved. This Web site was produced in cooperation with Nanette Morges Blake, C-RCS Public Information Specialist, and the Capital Region BOCES Communications Service. © 2013. The district is not responsible for facts or opinions contained in linked Web sites. Click here for the C-RCS Web site accessibility policy statement.