TAX NEWS - June 2010

Property tax relief stalled in Albany

ALBANY — Attempts to control rising local property taxes are stalled in a philosophical and financial tug of war between Democrats who control the Assembly and Senate.

Although the two Democrats who lead the Legislature insisted Thursday that serious progress is being made on the stalled 2010 budget, how and whether to do something about property taxes remains at a standstill.

Earlier this year, Democrats who control the Senate had said property tax relief was their top priority.

"We're working on property taxes. We believe there is the need for property tax relief, long-term, structural reform with respect to property taxes," said Senate Democratic Conference Leader John Sampson.

But Sampson could only say he has "hope" a property tax package will be included in the final budget deal.

Gone from the negotiating table is talk of restoring the STAR property tax rebate program, which prior to last year provided rebate checks for hundreds of thousands of homeowners just prior to Election Day in the fall.

Instead, the Senate Democrats are left pushing a $250 million rebate program just for senior citizen homeowners. And even that, given the $9.2 billion deficit, appears unaffordable unless a budget deal includes a massive borrowing to help pay for such a politically popular idea, lawmakers say.

Also in trouble is a meaningful cap on annual property tax growth. Even if they were close on such a plan, no such cap could take effect this year on school taxes because nearly all have already adopted their 2010-11 budgets and tax levy rates.

Gov. David A. Paterson proposed what fiscal conservatives say is a modest program to prevent local property taxes from growing annually by more than 4 percent or 120 percent of the inflation rate, whichever is lower.

Modest or not, it is unlikely to happen. "I do not believe at this time we are looking at a cap," said Assembly Speaker Sheldon Silver.

Instead, Silver said, Assembly Democrats are pushing a plan to restore a large portion of the $1.4 billion in state aid Paterson proposed to cut from the state's 700 school districts, which get more than $20 billion a year from Albany. Such restorations, the Assembly leader insists, benefit homeowners facing rising property taxes.

"Property tax relief is school aid," Silver said of state funding that would otherwise have to come from property taxpayers. "It's money that the local school districts don't have to raise."

With the exception of the Big Five districts, which include Buffalo, school district budgets for the coming year have already been set. Many conservatively based their forecasts for state aid on Paterson's big cut number.

By law, then, any additional money that might come from the state can only be put into reserves or given to property owners in the form of lower tax levies when the school district tax bills go out later this summer.

But Assembly Democrats are pushing a provision to permit the additional, unexpected money to be used for district operating purposes, letting them spend more than what voters approved during statewide school budget voting in May. Some Senate Democrats, meanwhile, want an alternative: Any additional state aid a district gets beyond what it budgeted must go to property tax relief this year.

"It's a way to offer immediate property tax relief," said Senate Deputy Majority Leader Jeff Klein, a Bronx Democrat.

But even that idea has met resistance from fellow Democrats, who say many districts have exhausted their reserve accounts and need any extra money to help restore funding for teachers facing layoff in September. In the Senate, the issue has long political legs. Democrats are struggling to retain their slim 32-30 majority and see property taxes as a key campaign issue in races this fall upstate and the New York City suburbs.

Senate Republicans say they have long been the proponents of property tax relief and say that anything the Democrats come up with will be half a loaf and likely paid for through bonds that won't be paid back for years.

"They're going to come up with some gimmick for a campaign mailing to say we voted against property relief, when they will be funding through this borrowing. It's the ultimate Albany shell game," said Sen. George Maziarz, R-Newfane.

Some school officials say districts should be given flexibility with any additional funding lawmakers might steer their way over what Paterson has proposed in the way of cutbacks. They say the issue affects districts differently.

In some cases, schools could use any money for restoring classroom cuts. In others, school boards will want to use the money to lower tax levies with the August property tax bills. And still others might need to replenish reserve accounts in anticipation of another sour fiscal year in 2011.