There is no “2 percent tax cap” that applies to school districts in New York.
The property tax cap law created last June does restrict how much school districts may increase the tax levy. To go above the cap, a school needs at least 60 percent of voters to approve the budget, instead of a simple majority vote.
But what percent the cap actually is depends upon circumstances specific to each district, and is likely to change each year.
At Queensbury, the school district can raise the tax levy for the 2012-13 school year by up to 4.23 percent.
Hudson Falls can go up to 7.1 percent, while in Hartford, the maximum is 11.6 percent.
Meanwhile, the tax cap for Stillwater this coming year is below zero — negative 4.5 percent.
The Stillwater tax cap illustrates how drastically the figure can fluctuate, depending upon how the formula plays out.
Stillwater is expected to receive a $648,500 increase in property tax payments from GlobalFoundries, making the 2012-13 tax levy lower than in 2011-12 and leading to the negative cap.
District officials plan on seeking a super-majority vote to override the cap.
So there is no 2 percent tax cap, at least for school districts, although that is how the rule was described when lawmakers created the regulation.
Now school district leaders across the state are trying to explain the property tax cap law to taxpayers and some worry if they propose tax increases beyond 2 percent, voters will think they’re disobeying the law.
“I think it’s confusing for people because every district is going to be different,” said Douglas Huntley, superintendent at Queensbury. “I think it’s confusing for people, because when it was originally introduced, it was introduced as a 2 percent tax cap and it’s not. Some people will have a 2 percent tax cap in mind, but districts will go out with a maximum allowable levy increase greater than 2 percent.”
The state created a formula that districts must use to determine their maximum tax levy increase, or tax cap.
For the calculation, various numbers are plugged in, such as the district’s prior year tax levy, revenue it received from payments in lieu of taxes, and increases in the full value of taxable real property in a district.
The law also allows districts to raise taxes by a certain amount to pay for expenses such as voter-approved construction projects, certain increases in pensions, and court orders and judgments.
Once these exclusions are added to the formula, a district has its “maximum allowable tax levy,” which can pass as part of the budget with a simple majority vote.
The formula is complicated, and superintendents and business officials have been attending seminars with state officials and other experts to figure it out.
But even though the law allows some districts to raise the tax levy well beyond 2 percent, some are reluctant to do it.
The caps in districts such as Hartford are so high they would probably be voted down if they were proposed.
“It’s no way it’s going that high,” said Thomas Abraham, superintendent at Hartford.
While Hartford can go up to 11.6 percent, district officials are recommending a 3.8 percent tax levy increase.
At Ticonderoga, the maximum, as of now, is 9.44 percent. But officials have no desire to propose a tax hike that high.
“We are not going with a 9.44. That is not the goal,” said Laurie Cossey, the district’s business manager.
Each district has to calculate its maximum allowable tax levy and report it to the state by March 1. But no district is required to propose a tax levy that goes up to the maximum.
The current figures could change, however, as school districts are still waiting on information from the state necessary to calculate the most precise maximum allowable tax levy.
Even if it changes, what taxpayers have to look for is the proposed tax levy that will be before them in May.
Some area districts will propose budgets with tax increases at the maximum allowed with a simple majority vote. But most will not attempt to exceed the cap.
“We are definitely not going to exceed the allowable limit. The closer we can get to 2 percent, the better everyone will feel about it,” said Mark Brand, superintendent at Indian Lake, where the cap is 3.9 percent.
The risks are high for districts that want to jump the cap. Unlike before, districts must keep the tax levy flat if they adopt a contingency budget. Achieving that would likely require significant cuts.
A contingency budget is adopted when the budget is voted down twice. School boards can also choose to adopt a contingency budget after a budget is defeated once.
The tax cap was created in response to New Yorkers demanding tax relief. But it has put districts in a bind.
Property taxes and state aid are major revenue sources for districts. But taxes are capped and state aid has not been enough to cover increases in pensions, health benefits and salaries. As a result, districts have cut jobs and programs.
While some districts have money in reserves, others don’t, and some districts are on course to become insolvent in a few years.
“Generally speaking, the tax cap, maybe not this year, but going forward, will put in place a restriction because on the expense side, there is no cap,” said Ronald Black, the business manager at Argyle.