Answering Questions on Tax Cap

South Huntington schools superintendent Dr. Thomas Shea discussed the proposed state tax cap, which could be implemented next year, with Huntington Patch.

Question: What can you tell us about the state tax cap.

Answer: “The problem with a cap on the tax levy is that it does not (as currently proposed) allow for cost increases that are beyond the district’s control like the state pension systems’ bills which this year amount to almost $1.5 million.  For example, if the tax cap were in place for this proposed budget, the two percent permissible increase would be about $1.9 million; the pension increase alone would comprise 79% of the allowable increase.  That leaves only $400,000 for all other increases like health insurance, salaries, fuel, supplies, equipment, and inflation (which total about $4.5 million).  Additionally, the governor’s initial state aid cut, before it was partially restored by the legislature, would have exceeded the tax cap’s allowable amount and increased the tax levy due to the loss of revenue.  

“Also, although it will reduce the property tax rate, it will not cap the tax rate at two percent.  If the district offered the voters a flat budget increase this year at 0%, the tax rate would still rise to 3.91% because of the loss in state aid and other revenue and the continuing reduction is total assessed valuation due to the successful tax grievances filed by residents.”          

“The only option the tax cap gives to school districts is to cut spending in order to offset the increases over which we have no control.  Unfortunately, that means reductions in academic and extra-curricular programs, transportation, support services as well as larger classes.  Since we are have numerous employee contracts that are already in place, we cannot even negotiate changes (like salary freezes and increased employee contributions toward health insurance premiums) until they come up for renewal.”

Question: What does the proposed tax cap actually cap? Can I look forward to having a small increase on my property taxes next year?

Answer: The proposed tax cap places a 2% limit on the tax levy increase.  The tax levy is the amount needed to be raised through property taxes.  It is calculated by subtracting the school district revenue (state aid, rent receipts, investment income, etc.) from the proposed budget amount.  Note that the residents do not vote on the tax rate since that is not set by the Town assessor’s office until September.  They vote on the budget amount.  The tax rate is always an estimate.

Question: Would school districts have any flexibility on this?

Answer: There is much debate right now over a tax cap that is hard and fixed or one that gives some flexibility on expenses that schools do not control. We have used the expression before "you can't cap what you can't control." The governor's proposal right now seems to be in favor of a tax cap that does not address the failure of the school funding system.