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A local school property tax cap is a Capitol idea

February 12, 2008

New York State’s local property taxes, particularly its school property taxes, are out of control. Local taxes in the state are 70 percent above the national average, and school property taxes alone have risen by a similar amount over the past decade.

During my 2006 campaign for governor, I advocated placing a cap on local school taxes. While he opposed the cap during the campaign, Gov. Eliot Spitzer has now, to his credit, responded by proposing a commission to recommend a property tax cap plan. It’s headed by another former political opponent of the governor’s, Nassau County Executive Tom Suozzi.

Virtually everyone, both upstate and downstate, is complaining about school taxes. It’s not that some solutions haven’t been tried. In 1997, the Legislature enacted Gov. George Pataki’s STAR program, which was supposed to fix the problem. Today, just over 10 years later and despite billions in STAR subsidies to homeowners, most taxpayers feel the situation is worse than ever.

The reason school property taxes are out of control is that there are no effective controls on spending. School boards and administrators are constantly grappling with state mandates, which add new costs. Unlike private-sector employers, school districts and local governments are constrained by state laws governing how pension and health benefits are determined, leaving little ability to bargain for a better deal.

New state mandates that add costs are routinely enacted with little or no consideration as to their effect on homeowners. While the federal government has mandated costs for special education and testing, the vast majority of the most costly mandates emanate from Albany, not Washington.

Meanwhile, New Yorkers continue to vote with their feet and leave the state. The Empire State grows more slowly than virtually every other state. On Long Island, population growth is stagnant. The prime reasons most give for leaving are high taxes and housing costs.

If New York is going to successfully compete for jobs and business, it simply must change its ways. A property tax cap is the most important step New York should take if it is to contain the cost of government. And just as important, a property tax cap will still leave plenty of resources necessary to ensure that our children receive a quality education.

Neighboring Massachusetts offers a constructive approach. In the 27 years since Proposition 2½ was adopted, Massachusetts has gone from having the second highest property taxes in the nation to around 30th. And Massachusetts avoided the mistake of California’s Proposition 13, which, by arbitrarily limiting assessments, has fostered tremendous disparities in taxes paid for homes of similar value.

Some say that a tax cap will harm education. Again, the Massachusetts experience in instructive. There, K-12 spending per pupil isn’t far below what New York spends, and Massachusetts’ academic performance is higher than ours. And, despite its reputation as a liberal state with a heavy union presence, no one in Massachusetts is suggesting that it repeal its property tax cap for one simple reason: It works.

A property tax cap in New York State would limit how much the local school district tax levy can increase from year to year. A good limit would be 4 percent or the inflation rate, whichever is less. If a district has particular spending needs that are above this limit and citizens agree with that need, they can vote to break the cap. Most important, a strict tax cap would force the State Legislature and governor to lift or modify existing mandates that drive up school spending without benefiting education.

For instance, state laws dictating how contracts get negotiated greatly limit the ability of public employers to bargain effectively on behalf of taxpayers. Pension costs are a prime example. While existing pension benefits for current employees are protected from change, why not allow districts to use 401(k)-type plans for new workers?

State law dictates that public construction projects can’t use general contractors and must instead bid four separate contracts for each construction job. This law drives up costs for taxpayers from 10 percent to 25 percent. Rather than slightly modifying this law, as some in Albany want to do, it should be totally repealed.

Moreover, the state should require districts to consolidate noninstructional functions, such as transportation, food service and the purchase of health insurance for school employees. Tremendous duplication and inefficiency exists among the more than 700 school districts in our state. We should sweep away barriers to efficiency and modernize the model.

The only way to address high taxes is to focus on spending. Magic wands, silver bullets and gimmicks won’t work. Capping school property taxes and a top-to-bottom reform of mandates are no longer optional for New York - they’re imperative.

BY JOHN J. FASO | John Faso was the Republican candidate for governor in 2006 and is a former minority leader of the State Assembly.

Source: Newsday

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