Tax levy cap law changes school budget landscape

GlobalFoundries PILOT agreement will impact district’s “tax levy limit”

January 17, 2012 – By now, you’ve probably heard that school officials across New York State are analyzing the new property tax levy cap legislation to determine how it will affect school district budget planning for the 2012-13 school year.

While the new law has been referred to as a “2 percent cap” on the tax levy, in reality it creates a threshold– calculated by a complex 8-step formula – that dictates what level of voter support is needed for a school budget to pass. A proposed budget with a tax levy increase at or below the threshold requires a simple majority vote for approval (50%+1) and a proposed budget with a tax levy increase above the threshold requires a supermajority vote for approval (60%). Because of the formula used to calculate this threshold, every district will have a different tax levy limit – or threshold.

One of the nuances of the tax levy cap formula that particularly concerns Stillwater district leaders relates to the building of GlobalFoundries. The tax levy cap formula accounts for tax base growth, e.g., a new 40-home subdivision build in the district. However, the GlobalFoundries development will not be considered tax base growth because the company is making payments in lieu of taxes (PILOT) to the district.

While receiving PILOT money is beneficial for school districts in the long run, Stillwater officials expect to be “penalized” for it in 2012-13 because of the way these funds are factored into the tax levy cap formula. Officials are projecting that Stillwater’s “cap” or threshold will be substantially below its current levy. That means in order for the district to collect the same amount of money from property taxes as it did last year (a 0 percent tax levy increase) the district would need 60 percent voter approval on the proposed budget.

“As the cost of operating a school district continues to rise and taxpayers continue to feel the impact of the economic slowdown, this budget season will truly be a challenge,” said Stillwater Superintendent Dr. Stanley Maziejka.

Aside from the tax levy cap legislation, there are a number of other factors set to affect Stillwater’s 2012-13 budget. These include:

• The loss of $500,000 in Federal Education Jobs money that is being used to fund a number of current positions within the district.
• Increases in the state-mandated district retirement contributions.
• Contractual salary increases.
• Increases in other contractual areas, such as health insurance.
• Increasing energy costs.
• Declining state aid.

Keeping the tax levy flat (0% increase) would not account for any of these rising costs, which means the possibility of cuts to programs and staff, Maziejka added.

What happens if the budget is not approved by voters?

As in the past, if a district’s budget is not approved by voters, the district has two options: adopt a contingency budget or go for another vote with the same or a revised budget. If the budget is not approved a second time, the district must adopt a contingency budget.

However, along with the new tax levy cap law comes a significant new contingency budget requirement. Aside from certain spending restrictions, under a contingency budget a district would not be able to increase the tax levy over the current year – essentially a 0 percent tax cap.

“Community input as we develop our budget proposal will be more critical than ever, given the law’s new contingent budget restrictions,” said Maziejka. “If a district fails to gain voter approval and must adopt a contingent budget, then the levy increase is truly “capped.” Under a contingent budget, there can be no increase in the tax levy, which could significantly impact programs.”

Community input

Stillwater Central School District will be holding a community forum to discuss the challenges of the tax levy cap and what it means for the district on Thursday, February 16. The forum will begin at 6:30 p.m. in the middle school cafeteria. Please RSVP with the number of people attending to Erin McNulty at 373-6100, ext. 32418 or emcnulty@scsd.org.