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Does the tax cap work? It depends on whom you ask

From senior centers and PTAs to Kiwanis and Rotary clubs, school superintendents and finance officials have been making their annual case for school budgets that go before voters Tuesday.

They explain spending and tax levies, and the sometimes baffling 2 percent tax cap that almost never amounts to 2 percent.

"It was advertised as a 2 percent tax cap. It's not," said David Albert, a spokesman for the New York State School Boards Association. "It’s a rate of inflation cap."

The tax cap, a strategy implemented six years ago by Gov. Andrew M. Cuomo and state lawmakers, is designed to keep school and municipal property taxes from spiraling out of control. It requires school districts to limit the increase in their tax levy – the total amount of taxes they collect – to not more than 2 percent or the inflation rate, whichever is lower.

More than $1 billion in taxes in Erie and Niagara counties are up for approval by voters Tuesday in the annual public school district budget and school board elections. That's less than taxes would have been without the cap, according to the Empire Center for Public Policy, an Albany think tank.

"It absolutely is working," said Kenneth Girardin, a spokesman for the Empire Center, said of the cap.

In the four years following the implementation of the cap in 2012, the growth rate of school taxes statewide, excluding the big five city school districts, dropped by two-thirds, he said.

"That means those taxpayers paid $7 billion less in taxes over those four years than they would have had the cap not been in place," he said.

Karen Dubinsky leads her first-grade class in a discussion at Clinton Street Elementary School in West Seneca, Wednesday, May 10, 2017. (Derek Gee/Buffalo News)

This year's inflation rate was 1.26 percent, before districts applied a formula that takes growth into account. Under state law, a supermajority of voters must approve a school district tax levy that is higher than the cap.

Caps in the 37 districts in Erie and Niagara counties range from a negative – 1.1 in Niagara Falls and Hamburg to an increase of 11.2 percent in Barker. And this year, three districts in the two counties – East Aurora, Maryvale and Niagara Falls – are among 12 districts in the state looking to override the tax cap. They will need 60 percent of voters to approve their budgets Tuesday, instead of 50 percent plus one vote. It's a gamble. If budgets are defeated twice, the School Board must enact a budget that does not raise taxes at all.

[Related: See how tax rates will change under proposed school budgets in 37 school districts in Erie and Niagara counties]

Paul Blowers, East Aurora's business manager, said he thinks it is reassuring for property owners to know their taxes will be capped at some amount, he said.

But, he said, "It doesn't work at all for East Aurora."

East Aurora is considered a wealthier district by the state, he said, and that means its state aid reimbursements are often less than surrounding districts. Schools are trying to recover from years of state aid cutbacks when many districts drew down their fund balance and reserves and cut programs, draining resources. Wealthier districts are told, in effect, they can afford to make up the difference in lower reimbursements through local spending, he said. But then they come up against the tax cap, which limits the amount of taxes that can be raised.

That's where East Aurora is this year, and the district is trying to push the reset button. While the tax cap is 1.32 percent, the tax levy is projected to go up 6.9 percent under East Aurora's proposed budget.

"We need an adjustment," Blowers said. "This will do a lot to strengthen our finances going forward. It can put us on solid footing."

Maryvale is banking on at least 60 percent of voters to understand that its tax cap is a minimal 0.4 percent, and the district wants to raise the tax levy by 2 percent. It was either that or increase class sizes and cut clubs, activities, music and intramural sports, according to Stephen Lunden, assistant superintendent for administrative services.

And in Niagara Falls, the tax levy will not go up under the proposed budget, but a supermajority vote will be needed to pass it because the district has a negative tax cap.

Hamburg is lowering its taxes to stay within its negative cap.

The success of the tax cap depends on your point of view, said Michael J. Borges, the executive director of New York State Association of School Business Officials.

"It's been successful in restraining local school revenue, but has been a failure in controlling costs," he said, adding it caps revenues, but not expenses.

Health care costs keep rising higher than inflation and the cost of labor keeps going up, he said.

"When it was proposed it was supposed to be coupled with mandate relief, so that school costs would also be restrained. We got one half of the stick," Borges said.

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