The negative economic after-effects of the pandemic seem likely to rival if not exceed those of the Great Recession of 2008-09.

But as New Yorkers face massive job losses, falling incomes, sagging property values and widespread economic insecurity, they’ll have one layer of protection they sorely lacked in the last downturn: a tight cap on local property tax levies, enacted at Governor Cuomo’s initiative in 2011.

This is an installment in a special series of #NYCoronavirus chronicles by Empire Center analysts, focused on New York’s state and local policy response to the Coronavirus pandemic.

For independently governed school districts, counties, municipal governments and special districts outside New York City, Cuomo’s cap limits total annual property tax levy increases to 2 percent or the rate of inflation as measured by the previous year’s Consumer Price Index (CPI), whichever is less, subject to exceptions for debt service expenses on voter-approved school construction projects and taxes generated by new construction or property improvements during the preceding year.

In annual school budget referenda, proposed tax hikes above the cap must be approved by a super-majority of at least 60 percent of voters. A simple majority above 50 percent is still required to approve budgets raising taxes below the cap.

For school budgets, the law adds a two-strikes-and-out provision: if voters reject a proposed budget, the Board of Education can resubmit the same proposal or a modified version for voter approval only once. If it fails to receive the required approval threshold the second time—even if it calls for a levy hike below the cap—the property tax levy must be frozen at the previous year’s level. This risk has given school boards a powerful added incentive to avoid risking budget rejections.

For all other types of local governments, which don’t submit their budgets for public votes, the 60 percent approval threshold applies solely to governing boards. Even in those cases, the law has had a surprisingly strong restraining effect—if only because county and municipal officials seeking re-election in politically competitive environments don’t want to be labeled as cap-busters.

Unlike the state’s School Tax Relief (STAR) program, which subsidizes tax breaks only for owner-occupied primary residences, Cuomo’s cap applies to the total levy on all classifications of property.

This makes the cap especially well-suited to keeping a lid on excessive levies in the post-pandemic environment, since so many owners of commercial and apartment buildings are now under stress because their tenants are unable to pay rent during the lockdown.

The law’s link to inflation is also vitally important given the nature of the economic outlook. Discussing the vast expansion of federal debt in response to the crisis, columnist Neil Irwin of The New York Times expresses a broader consensus of economists in predicting that “deflation, or falling prices, is more likely to be a problem” than higher inflation in the foreseeable future.

“The price of oil, at around $23 a barrel, is roughly one-third the level at which it started the year, and bond prices imply that inflation will average only about 1.07 percent annually over the coming decade,” Irwin notes.

The prospect of deflation is the main reason why Cuomo and the Legislature need to reject persistent calls from public school advocates, unions and local government groups to weaken the limit by eliminating the CPI portion of the formula and raise the basic tax cap (before exclusions) to a flat 2 percent a year. A 2 percent cap could allow property tax levy growth significantly higher than the actual cost of living—especially in years such as 2016-17, when the link to the lower CPI rate held the levy limit to just 0.15 percent. Based on the average 2019 increase in the SPI, the initial levy limit for 2020-21 school taxes has been set at 1.81 percent, after two consecutive years set at 2 percent.

In the face of what’s shaping up as the worst fiscal crisis in post-World War II history, the governor can be criticized for having failed to adequately build budget reserves against a recession that was inevitable sooner or later, and for failing to acknowledge the looming crisis when the coronavirus emerged as a threat a month ago.

But Cuomo’s tax cap remains a landmark achievement for which New York taxpayers will be even more grateful during the difficult and challenging economic recovery ahead.