The cap that worked

by Ken Girardin |  | The Citizen

When New York’s 2 percent cap on local property tax levies was about to become law in June 2011, the statewide teachers union warned of an apocalypse just around the corner.

If enacted, [the cap] would destroy our schools,” said Andy Pallotta, then-vice president of New York State United Teachers (NYSUT).

NYSUT’s newsletter predicted the cap “would be a devastating blow to New York’s public schools.” The union funded television ads claimed the cap would be “disastrous,” and communities “would suffer permanent damage.” It even claimed that capping taxes would cause property values to fall.

Eight years later, New York’s school districts are better funded than ever—still atop national expenditure rankings, now laying out nearly 90 percent more per pupil than the 50-state average. But the rise in school property taxes statewide has slowed by more than two-thirds, to an average of 1.8 percent a year, saving homeowners and businesses billions of dollars in 2018 alone.

All of which is what NYSUT really feared. With less money to spend, school districts became a bit more cautious with public funds and drove harder bargains in contract negotiations. The cap meanwhile helped taxpayers shake the feeling of inevitability that school taxes would keep rising at twice the rate of inflation, if not faster, and restored the expectation that the cost of government shouldn’t rise faster than the cost of everything else.

The cap is flexible: its baseline “allowable levy growth factor” of 2 percent or the rate of inflation, whichever is less, is modified by locally variable exceptions, and can be overridden by a 60 percent vote of district residents. Nonetheless, the teachers union and other advocates of higher school spending contend—in the face of evidence to the contrary—that the law is unduly restrictive.

At present, the long-term fate of the cap is tied to a periodically renewed temporary, and unrelated, state law regulating rents in New York City, next due to expire in mid-June.

With Governor Andrew Cuomo pushing to make the law permanent as part of the next state budget, NYSUT is doubling down on the same old rhetoric—with Pallotta (now union president) claiming the cap “hurts our poorest districts the most.”

If poorer districts are hurting, you sure wouldn’t know it from looking at Auburn, which falls into the state’s classification of lower-wealth, “high need” school systems. Under the cap, Auburn’s school tax levy has risen nearly 16 percent, an average of just over 2 percent a year, and its spending is up 17 percent.

While Auburn is an outlier on the high side of the average school property tax hike since 2011-12, the broader tax and spending data also contradict NYSUT’s claims. As the Empire Center shows in a new report on the tax cap’s impact over the past seven years:

  • On average, spending has risen faster—and taxes have increased more slowly—in low-wealth “high need” districts.
  • Adjusted for enrollment, the average annual tax hike exceeded 3 percent in all but the poorest districts.
  • Thanks largely to exceptions for tax base growth, voter-approved debt payments and a one-time teacher pension cost spike in 2013-14, average taxes for all districts have increased 23 percent faster than the headline “growth factor” would have permitted since 2011-12.

So much for destruction, devastation and permanent damage.

The case against the property tax cap boils down to the argument that the levy limit is making it harder to raise the nation’s highest local property tax burdens. In other words, a highly touted state policy initiative actually has worked. Imagine that.

The tax cap should be made permanent—and the Governor and Legislature should finally turn their attention to repealing and reforming state mandates that are the root cause of local spending. But be forewarned: NYSUT won’t like that, either.