By JOHN J. FASO

New York's state and local taxes are some 70 percent above the national average. Our local school property taxes are significantly higher than those in other states, mainly because of state requirements. During my 2006 campaign for governor, I proposed a 4 percent tax cap with major reforms to state laws that drive school spending without benefiting students.

My cap plan was modeled after the successful Massachusetts Proposition 2 1/2, in place in that state since 1980. Massachusetts has gone from having the second-highest tax burden among the states to ranking 28th nationally. Massachusetts also spends only slightly less than New York on K-12 education, but with better results. The tax cap enforces a discipline on local spending and is so successful no significant effort exists to repeal the law in a state that is arguably more liberal than New York.

To his credit, Gov. David Paterson has proposed a similar cap limiting how much taxes could increase in any one year. Opponents, like the teacher unions and the state Working Families Party, argue instead for a ``circuit breaker'' program that would limit property taxes to a percentage of household income. And they want a big income tax increase to pay for it.

If New York is going to get a grip on ever-rising school property taxes, the tax cap must come first. Only a strict limit on how much local school taxes can increase on a yearly basis will force the state Legislature and governor to enact reforms to the laws that drive school spending.

The circuit breaker, on the other hand, doesn't address spending; it simply shifts the burden from local taxpayers to state taxpayers, without reform to the laws and practices that ensure school spending continues to spiral upward. Just like the STAR program enacted in 1997, a circuit breaker provides temporary relief but doesn't address the real reason for high taxes: out-of-control spending.

The state reimburses school districts for the cost of the STAR exemption, about $3 billion annually. A circuit breaker, depending on income eligibility, would similarly cost the state a significant amount of money. Yet, neither program addresses the spending side of the ledger. Nor does either program help bring about long-overdue reforms. Instead, these approaches perpetuate the unaffordable system now in place.

State laws dictating how contracts are negotiated, benefits are paid and pensions are provided drive state and local spending beyond taxpayers' capacity to pay. The Legislature needs to enact pension and contract reform.

A new Tier 5 pension plan or 401(k) retirement savings plans should be offered to new employees. The ``Triborough'' law that governs how contracts are negotiated needs amendment to equalize the bargaining position of school districts and local governments with employee unions. Right now, local government and school employees continue to receive raises even when contracts expire, providing little incentive to negotiate with employers.

The state's more than 700 school districts should be required to consolidate noninstructional functions such as health insurance, transportation, food services and other administrative functions.

New York, particularly upstate, is in real economic trouble.

The Census Bureau has reported that nine of the nation's 10 highest-taxed counties (including Schenectady County) are in upstate New York, when incomes are compared with home values. Downstate, Nassau, Suffolk and Westchester counties are in the top 10 in the nation in actual property taxes paid. Most significantly, people are leaving New York in droves, continuing the long-term exodus of people and jobs.

The bottom line is that government costs too much in New York, especially at the local government and school district levels. State government is largely responsible for this situation and only action by state government will fix this problem.

It is true that school districts are feeling pinched by rising energy costs, but so are taxpayers. A cap is not a panacea, but it is a useful tool that will force government to live within the means of the taxpayers, instead of the other way around. Most importantly, a cap will force the Legislature to finally address the real causes of high property taxes in New York.

John J. Faso was Assembly minority leader from 1998 to 2002 and the Republican candidate for governor in 2006. He is partner in the law firm of Manatt Phelps & Phillips in Albany.

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