ALBANY – Local governments in New York are preparing their budgets for the new year facing a strain from state-mandated costs and pressure to comply with a property-tax-rebate program.

But counties, towns and cities are benefiting next year from a drop in pension costs and a cap on Medicaid expenses that may help limit the burden on homeowners in 2015. Sales-tax revenue, which is counties’ largest revenue source, is expected to show modest gains next year.

“There are positive and negatives in the county budget cycle going into 2015,” said Stephen Acquario, executive director of the state Association of Counties.

Most municipalities operate on a calendar fiscal year. And in 2015, they will be contending with a property-tax cap implemented in 2011 and a so-called tax freeze. The tax freeze is a three-year rebate program that provides a check to homeowners for the increase in property taxes if their municipalities stay under the tax cap.

This fall, rebate checks have been going out to homeowners for school taxes, which represent about 60 percent of a total tax bill. Next fall, homeowners will get a rebate check for the total increase in property taxes for schools and municipalities that stay under the roughly 2 percent tax cap.

Local government leaders said the tax freeze, approved by Cuomo and the Legislature in March, is another incentive to keep taxes low. In 2016, they’ll need to stay under the cap and come up with a plan to lower the tax levy — the total amount of taxes collected — by 1 percent for homeowners to get the rebate checks.

“The tax freeze serves a purpose. It’s somewhat of a gimmick, but it sets a tone,” said Chemung County Executive Thomas Santulli. “It has forced people to manage better.”

Critics said the tax freeze does little to reform a system in which local governments’ budgets largely go to fund state-mandated programs.

“It’s a gimmick that allows state officials to act as if they are doing something about property taxes when they are not doing anything about the factors that drive property taxes,” said E.J. McMahon, president of the Empire Center for State Policy, a conservative think tank in Albany.

The state estimates that the average benefit per household over the three years will total $656. Overall, more than 2.5 million households will get a check each year that will total about $1.5 billion in property-tax relief, Cuomo’s office said.

Earlier this year, Cuomo’s budget office estimated that the average rebate in 2015 would be $200 upstate and $580 in the New York City suburbs. Westchester County, which pays the highest property taxes in the nation, will see rebate checks that average at least $800.

The program is limited to households with adjusted gross income under $500,000 and only on a primary residence.

Monroe County Executive Maggie Brooks said the rebate checks would be small in comparison to the savings that could be achieved if the state lowered its mandates. She said 85 percent of the county’s $1 billion budget is for state-mandated programs.

“Why can’t we really get to talking about true tax relief, which is cutting taxes?” Brooks said. “I think people would prefer that to getting a one-time check in the mail.”

For counties, the rebate checks can be small. In Tompkins County, the county rebate is estimated to be less than $10 per household.

“If we can keep our taxes low, we will,” regardless of the freeze, said Tompkins County administrator Joe Mareane.

Dutchess County expects residents to get rebate check equal to about 2 percent of their county tax bill. County Executive Marcus Molinaro proposed cutting the tax levy about 0.5 percent, and the rebate check will add another 1.5 percent in savings.

“Anytime we can reduce the tax burden for any reason we ought to do that. And Dutchess County in 2015 can cut taxes,” Molinaro said. “It would be disingenuous at best to raise them expecting that the state of New York would send those rebate checks.”

Cuomo has said the tax freeze will force local governments to streamline services and cut costs.

“Not only does the property tax freeze provide immediate relief to homeowners, it is also encouraging local governments to work together in ways that will produce long-term savings,” Cuomo’s budget spokesman Morris Peters said.

In 2015, the state will take over the full growth in Medicaid costs for counties – meaning their share will not increase in future years. Since it was implemented in 2011, the effort has saved counties $1.2 billion over five years, Cuomo’s office said. Medicaid, the health insurance program, for the poor and disabled, is funded in New York by the state, counties and federal government, and it’s counties single biggest expense.

Cuomo also implemented a new pension tier for new employees, reformed negotiating laws with unions and proposed a $500 million fund next year to help municipalities cut expenses. A week ago, he vetoed a bill that would have boosted pensions for veterans — which drew backlash from lawmakers, but was supported by local governments who would have had to pay for the measure.

In September, Comptroller Thomas DiNapoli said local governments and the state will see a 9 percent drop in pension costs for government workers and a 11 percent decrease for police and fire pensions in the 2015-16 state fiscal year that starts each April 1. It’s the biggest decline in pension costs in five years after soaring following the recession in 2008 and 2009.

Few local governments and schools have sought to override the property-tax cap. About 75 percent of local governments have stayed under the cap in recent years, while almost all school districts —which require 60 percent of the public vote to override the cap — have stayed within the cap limit.

But local governments have said they continue to use reserves to cover operating expenses to stay under the cap, saying the fiscal move isn’t sustainable.

Santulli said state-mandated costs for the county come to $39 million in his proposed budget. The county’s entire tax levy brings in $28.8 million; so the rest has be covered through sales-tax revenue.

Broome County Executive Debbie Preston said local governments have been streamlining services and cutting costs. Still, Broome like other counties, is working on plans to cut the tax levy by 1 percent to meet the second-year requirement of the tax-rebate program.

“I take an exception to saying they are doing such a great job up there (in Albany) when they are actually just pushing the burden down onto the other municipalities,” Preston said.

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Property-tax-rebate checks

The state is giving out rebate checks this fall to homeowners in communities where their local governments stayed under the property-tax and, in year two, develop plans to cut the tax levy — the total amount of taxes collected — by one percent a year for three years.

To be eligible, the property must be the homeowner’s primary residence and total household income must be $500,000 or less.

Checks have been going out to homeowners whose school district in May stayed under the property-tax cap — which this year is about 1.5 percent.

To see if your district stayed under the cap, visit the state’s tax cap compliance page.

How to get the credit

The Tax Department is automatically mailing out the checks to eligible homeowners. So you don’t have to do anything.

In the coming weeks, the tax department will set up a process to appeal either their check amount or if a homeowner didn’t get the check and thinks they should.

© 2014 Ithaca Journal