I delivered the following testimony today to the New York State Commission on Property Tax Relief.
James Tedisco, Assembly Republican Leader
Submitted into the Record on February 12, 2008
Chairman Thomas Suozzi, Commissioner Shirley Strum Kenny, Commissioner Basil Paterson, Commissioner Nicholas Pirro, Commissioner Michael Solomon, Commissioner Merryl Tisch, Commissioner Paul Tokasz, Special Advisors, Lisa Donner, Elizabeth Lynam, Karen Scharff, and Robert Ward, thank you for this opportunity to address the Commission today.
If we all stay quiet for a moment, I think that we can hear the continuous, collective sigh of every homeowner and property taxpayer in New York State – and that sucking sound you hear would be the flow of small businesses, jobs and the general population, ripping the very heart out of our economy as they exit New York State.
Unless a property tax cap is enacted and enacted soon, our state’s motto may very well change from “I Love New York,” to “I Leave New York.”
I think we all agree that reducing New York’s tremendously high tax burden is the number one issue facing the state during the 2008 Legislative Session.
In late 2007, Comptroller Tom DiNapoli said that local property tax levies have grown by 60 percent from 1995 to 2005, more than twice the rate of inflation. Moreover, according to the Empire Center, over “1.2 million New York residents have moved to other states since 2000 – the biggest loss experienced by any state.” In 1993, Money Magazine called New York State a "Tax Hell" for having the nation's highest tax rates. Fast forward 15 years and our overall tax burden is still one of the heaviest in the nation, 56 percent higher than the national average. Even more alarming, a report issued by the Tax Foundation based on the latest Census data showed that New York’s counties hold the dubious distinction of being home to the highest tax rates in the country. In fact, when property taxes were measured as a percentage of home value, nine out of the top 10 highest-taxed counties in the nation were located in Upstate New York.
It is clear that high taxes are killing jobs and forcing people to leave the state. Out-of-control spending, coupled with skyrocketing property taxes has created a caustic financial environment for the taxpayers of New York State. Young people are finding it difficult to purchase homes, seniors are struggling to maintain their homes and businesses are facing immense challenges to retain jobs – no less create them. We need to reverse this trend and revitalize New York’s economy by providing incentives for people and businesses to move and stay here.
Governor Spitzer was right when he said, ‘economic storm clouds are gathering’ – they are. It’s a ‘perfect storm,’ a tsunami of high taxes, soaring gas prices, increasing health care costs and toll hikes that threaten to flood New Yorkers who are already working harder and longer, just to keep afloat. New Yorkers are feeling an economic squeeze that is forcing many to dip into their savings and retirement accounts or depend on credit cards or loans, just to meet everyday needs. As a result, people and businesses are departing in record numbers - leaving local governments with a dwindling tax base. Something needs to be done now!
For several years, our Conference has conducted task force hearings throughout the state on two critical issues: real property tax reform and identifying school district practices that lead to student success. Through the Assembly Republican Task Force on Real Property Tax Reform, one message was loud and clear - taxpayers want government to control spending and they want immediate tax relief, because they simply cannot afford to live in their communities anymore.
Our Assembly Republican Task Force on Successful Schools found that, above all, successful school districts stretched their funding as far as possible to achieve success.
Schools offered insight as to how they were able to “do more with less” and provide unique and creative programs that inspire student success. For instance, the task force found that successful schools stressed the importance of staff development and found that BOCES and Teacher Centers were essential to this effort. Although state aid is provided to fund professional development programs, it oftentimes is a limited resource, thus successful school districts have to be creative in their approach to stretch their finances. Through professional development programs, teachers worked together to identify overlapping and/or gaps in the curriculum and developed new uniform teaching methods focused on individual student learning needs. Often, professional development was achieved in-house and conducted above and beyond any contractual obligations. These measures not only benefited student academic growth but also taxpayers by streamlining services for a more efficient use of tax dollars.
Although the school districts the task force visited are successful, they always identified one constant impediment, unfunded, and oftentimes unnecessary, state mandates. Their request to us was simple - provide them with some relief.
Building upon these two major themes that emerged from task force events, our Conference has determined that one of the answers to controlling spending is to cap school property taxes, just as Massachusetts and other states have done successfully. Moreover, we agree that unnecessary unfunded state mandates bog down school districts and municipalities alike and that it is imperative we provide them with relief now.
In 1997, Governor Pataki, as part of his Executive Budget proposal, introduced the STAR program. While thousands of taxpayers across the state are familiar with the benefits of this program, few may remember that the original STAR proposal included a cap on school district tax levy growth. While this provision was excluded from the enacted STAR program, it was not the first time such a proposal was presented. In 1995, Speaker Sheldon Silver had his own “Real Property Tax Limitation Act,” which passed the Assembly (A.6171, Passed 144-1).
In 1998, taxpayers and school districts first started receiving their STAR benefits without Governor Pataki’s original cap proposal. From 1998 to 2002, the local share of education funding grew moderately on average of 1.6 percent annually.
During this same time period, it appeared that school districts were passing the STAR savings on to the property taxpayer and holding the line on local school spending. However, starting in 2002 to the present, a different trend began to emerge. From 2002-2006, local spending grew on average by 9.8 percent annually, while state aid to schools increased by even greater margins – more than $8.86 billion or 81 percent. This inflated local growth has essentially stifled the impact of STAR for homeowners and is one of the main contributors to higher property tax bills.
The Governor was right when he suggested in his State of the State Address what good is a rebate on Monday when it is taken away with a tax increase on Tuesday. Our Conference believes that had a cap been included with the STAR program, this exorbitant increase in local spending would have been mitigated.
The original STAR tax levy limitation was primarily modeled after a 1980s law known as “Proposition 2 ½” which drastically lowered property taxes in Massachusetts without endangering school performance. Massachusetts once had the highest property taxes nationwide and, as a result of “Proposition 2 ½,” is now ranked 28th in overall taxes. Although critics of property tax caps claim student success will be negatively impacted, Proposition 2 ½ proved otherwise.
In 2004-05, Massachusetts ranked fifth in per pupil spending behind New York (#1), New Jersey (#2), Vermont (#3) and Connecticut (#4) yet, according to Morgan Quinto’s annual 2006-07 “Smartest State Award Publication,” Massachusetts ranks “Second Smartest” nationwide and New Jersey ranks “Fourth Smartest.” This ranking is based on 21 factors including: graduation rates, 4th and 8th grade testing proficiencies, average teacher salary and average class size, etc.
In stark contrast, New York is home to one of the heaviest tax burdens in the nation and spends more per pupil than any other state; however, it ranks “16th Smartest.” If the critics were right that more dollars spent equals higher student success, then New York would have the smartest kids on the planet. Even the state of Montana, which spends considerably less per pupil than New York, ranks as the “Seventh Smartest” state – nine spots better than New York. Taxpayers, school districts and, above all, students should be getting more “bang for their buck.”
In 2007, after studying Massachusetts’ “Proposition 2 ½,” as well as other state caps, the Assembly Republican Conference introduced the “New York State Taxpayer Protection Act” (A.8775-A) in an effort to address the property tax crisis our constituents face. This plan includes a cap on property taxes by limiting to 4 percent or the rate of inflation, the amount a school district can hike tax levies.
Voters have the ability to override this limitation by a two-thirds majority vote. If a school district is experiencing enrollment growth, the tax limit may be increased in proportion to the increased enrollment. It is the intent of this legislation to provide annual state aid increases to school districts within the Foundation Aid category at a rate not less than the rate of inflation. The State Constitution guarantees a “sound, basic education” and therefore the state should ensure that districts have the appropriate funds to operate on a daily basis.
Our plan also reduces property taxes by relieving school districts and localities of unfunded mandates by requiring any state mandate that costs more than $10,000 annually for a local municipality (or $1 million statewide) to be funded by the state. It consolidates school district paperwork by giving the Commissioner of Education the power and responsibility to merge some of the 125 mandated school reporting requirements and directs the state to take over the school district cost of 4th and 8th grade testing.
The plan also provides relief to counties by gradually taking over the cost of Medicaid Optional Services in five years and enables local governments, through software grants, to combat Medicaid fraud.
Finally, our plan promotes local government efficiency through consolidation – such as the potential sharing of equipment and other resources – and encourages local option insurance pooling.
When fully implemented, this plan will save property taxpayers and school districts approximately $16 billion over five years.
This Assembly Republican plan strikes the necessary balance between providing tax relief through a cap, while still addressing other overarching policy issues that impact property taxes and school district spending. Through the “New York State Property Taxpayers Protection Act,” our Conference recognizes the need to provide mandate relief to schools while controlling spending, without jeopardizing school performance.
Since its introduction, the “New York State Property Taxpayers Protection Act” has received widespread support. To date, 39 municipalities across the state have joined our Conference and passed their own resolutions calling on the State Legislature to adopt the plan. In fact, a 2007 Citizens Budget Commission report stated, “due to the recent increase in education aid, the most constructive way to envision a property tax cap in New York is at the school district level.”
New York must join the 14 other states - Arizona, California, Colorado, Idaho, Illinois, Kentucky, Massachusetts, Michigan, Missouri, Montana, New Jersey, New Mexico, South Dakota and West Virginia - which have already successfully capped school property taxes. Anything less than a property tax cap is a half-hearted attempt that will only serve to slow, not stop, the hemorrhaging of our people, jobs and tax base. In fact, had this property tax cap been in place since 2006, New Yorkers would have realized a savings of more than $2.8 billion over two years. That’s serious tax relief that homeowners desperately need.
The Assembly Republican “New York State Property Taxpayers Protection Act” is a well-rounded plan that introduces some new and innovative ideas for true property tax reform. We encourage the Governor, our Legislative colleagues and this Commission to examine our proposal. Within our own Conference, there is much honest debate as to the best path to follow, but there is universal agreement that change must happen now. Our goal is to stop the exodus of people and jobs by reducing New York’s property tax burden through genuine reform. There is no question that New York has an addiction to spending and aggressive measures need to be taken now to lessen government’s dependency on the taxpayers’ hard-earned dollars.
If we don’t, young people will continue to leave the state, seniors will continue to have no option but to sell their homes, and businesses will continue to move jobs and resources out of New York.
We cannot delay. As the seconds tick away, so does the American dream. I must reiterate we are in a property tax crisis in New York. Organization after organization – from the Public Policy Institute, to the Empire Center, to the Citizens Budget Commission – agree that property taxes in our state have spiraled out of control and, if left unchecked, will continue to contribute to New York’s economic decline.
The time for action is now. I urge the Commission to research the issue and develop recommendations expeditiously as the taxpayers can no longer wait.
On behalf of the Assembly Republican Conference, we would like to thank Chairman Tom Suozzi and all the members of this Commission for allowing us to address you today and submit this testimony into the record. My Conference remains committed to bringing property tax relief to New Yorkers this year and we look forward to working with our colleagues in the Legislature, the Governor and this Commission in order to do so. Thank you.
Assembly Republican Leader James Tedisco
110th Assembly District, Schenectady & Saratoga Counties
Assemblywoman Nancy Calhoun
96th Assembly District, Orange & Rockland Counties
Assemblyman Michael Fitzpatrick
7th Assembly District, Suffolk County
2006-07 Smartest State Award, Morgan Quinto Press (October 2006). http://www.morganquitno.com/edrank.htm.
Average scale scores in Reading and Mathematics, Grade 4 public schools, 2003, psk12.com. http://www.psk12.com/rating/USthreeRsphp/STATE_US_level_Elementary_CountyID_0.html.
Average scale scores in Reading and Mathematics, Grade 8 public schools, 2003, psk12.com. http://www.psk12.com/rating/USthreeRsphp/STATE_US_level_Middle_CountyID_0.html.
Financial Report on School Districts, Office of New York State Comptroller (November 2007).
Local Taxes in New York State: Easing the Burden, Citizens Budget Commission (December 2007). http://www.cbcny.org/CBC%20%20Local%20Taxes%20in%20NY%20%20FINAL1.pdf.
Property Taxes on Owner Occupied Housing by County, 2006, Tax Foundation (September 2007). http://www.taxfoundation.org/taxdata/show/1888.html.
Property Taxes on Owner Occupied Housing by State, 2006, Tax Foundation (September 2007). http://www.taxfoundation.org/taxdata/show/1913.html.
Public Education Finances, 2005, U.S. Census Bureau (April 2007). http://ftp2.census.gov/govs/school/05f33pub.pdf.
State and Local Tax Burdens Compared to Other U.S. States, 1970-2007, Tax Foundation (April 2007). http://www.taxfoundation.org/taxdata/show/336.html.