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Cuomo to veto borrowing bill for schools; Critics say measure would skirt tax limit

Aides to Gov. Andrew M. Cuomo say he will veto a bill that would allow school districts to borrow as much as $1 billion, to cover pension contributions. Critics have charged that the measure would undermine the state's recently enacted limit on property tax increases.

Before passing the property tax limit last week, the Legislature, in a last-minute flurry, also approved the bill that, for the first time, would allow such borrowing without voter approval -- and exempt from the restriction on tax increases.

Cuomo had not definitively said he would veto the bill, which worried proponents of the tax increase limit. But after a meeting of Cuomo's Cabinet in the Capitol, his aides said Tuesday that he definitely would reject it.

"That's great," E.J. McMahon of the Empire Center for New York State Policy said of the impending veto. "It dispels a cloud that was hanging over the tax cap itself, and it sends a really important message that the governor is clearly not going to tolerate attempts to circumvent the cap or to permit fiscal abuses on the local level."

Each year, beginning next year, localities, including school districts, cannot raise their property tax levies by more than 2 percent or the inflation rate, whichever is lower.

The final measure would allow localities to exclude a portion of rising pension costs from the limit. That, McMahon said, will allow increases of 3 percent, or higher, in many upstate, poorer districts that rely heavily on state aid.

Critics of the borrowing bill say it would gut the intent of the tax limit by letting school districts borrow to cover spikes in required pension contributions over the next few years.

It would allow districts to retire the nontax-exempt bonds over 15 years, which, with interest, would more than double the amount to be paid back.

The borrowing bill passed in the last 24 hours of a session when a flurry of major bills had much of the attention of Albany. Assemblyman Peter Abbate, the Brooklyn Democrat who sponsored it in the Assembly, said last week such borrowing would be voluntary and an attempt "to try something new." He also compared it to a borrowing bill enacted last year for other local governments.

Cuomo signed the tax limit bill late Friday and is taking a victory tour this week to some areas of the state to tout its effect. Like the other 576 bills passed by the Legislature, mostly in the last several weeks, the pension borrowing bill has yet to go to Cuomo, who could take a couple of months to act on all the remaining measures.

In an interview, Abbate described school districts as the prime pushers of the borrowing bill. On the floor, he specified the state's Big Five districts, which include Buffalo. Others said the request came from the New York State United Teachers union.

"We did not push it at all," said Timothy Kremer, executive director of the New York State School Boards Association.

"I must say we were careful about this particular bill because the idea of borrowing against the pension concerns us. It's kind of like paying for groceries with a MasterCard," he added.

The school association had advised its members to "be very, very careful" about borrowing under the bill, Kremer said.

Critics are warning of cuts in services -- from county health programs to public education. Such reductions followed Massachusetts' enactment of a 2.5 percent property tax increase limit 30 years ago. But several years later, the state started pumping up aid to communities to make up for the lost property tax revenues.

Like Massachusetts, New York's wealthier school districts, especially on Long Island, are more likely than poorer districts, especially upstate where tax bases are stagnant, to override the limit -- which require a majority of at least 60 percent in a vote by residents.

How a 2 percent limit will control property tax increases will remain unknown for years.

McMahon estimated that the pension cost provision could raise the effective tax cap to nearly 4 percent next year for some poorer districts.

But not everyone believes Cuomo has made up his mind on the borrowing bill.

Richard C. Iannuzzi, NYSUT president, said he still hopes "that the governor's staff will spend some time very carefully analyzing" the bonding measure.

"Our hope is that it is looked at very carefully and then people will appreciate that the goal is not to change anything other than to make it a little more stable for school districts," he said.

The union had opposed the tax increase limit, which Iannuzzi described as "extremely dangerous" for schools, students and teachers.