**Citizens Budget Commission Hosts Conference on Local Taxes**
See Below for What the Panel Said on Tax Caps, Circuit Breakers,
Medicaid, Labor Costs, STAR and More
On December 6, 2007 the Citizens
Budget Commission hosted a half-day conference at the Rockefeller Institute in Albany, NY. The conference focused on high local tax
burdens in New York and
the state’s role in addressing those burdens. The event began with a
presentation by CBC’s President, Diana Fortuna on
the Commission’s recent findings. A
panel of experts followed the presentation with a discussion of options to
address New York’s
high and inequitable local tax structure.
The panel included Laura Anglin, Budget Director of the
NYS Division of the Budget; Kenneth
Adams, President and CEO of Business Council of the NYS; the Honorable John Faso, former
Minority Leader of the NYS Assembly; the
Honorable Sandra Galef, Chair of the Real
Property Tax Committee in the NYS Assembly; Edmund J. McMahon, Jr., Director of the Empire Center for NYS
Policy; and the Honorable Martha Stark,
Commissioner of the NYC Department of Finance.
William Hammond of the New
York Daily News moderated the panel.
The Honorable Thomas Suozzi, County Executive of Nassau County,
closed the event with a keynote address on why local taxes are high and what New
York needs to do to address the problem.
Click on THE links below
to see summaries and video CLIPS of the event. summaries and clips organized by topic.
(Conference Page | CBC
Full Report | CBC
PowerPoint Presentation)
1. CBC PRESENTATION
2. PANEL DISCUSSION
I.
The Local tax burden
II. local medicaid expenditure and growth cap
III. school tax relief program
IV.
tax caps
V. property assessments
VI. pension and labor reforms
VII. state education aid
VIII. circuit breakers
IX. consolidation and shared services
3. response from county executives
1. CBC Presentation
(Click Here for CBC Full Report and CBC PowerPoint Presentation)
Diana Fortuna,
President of the Citizens Budget Commission, began the event by presenting the
Commission’s findings and options to address the problem. The CBC finds that New
York has the 2nd
highest combined state and local tax burden in the nation, with the local tax
burden by far the highest in the nation.
Even without New
York City, the local tax burden
is 32 percent higher than the second highest state.
Not only are taxes high, they are
inequitable. Despite state education
aid, a district’s tax base largely determines local school tax efforts and
spending per pupil. Due to districts’ dependence on their local tax base,
property tax rates are 45 percent higher upstate than downstate outside New
York City.
The CBC finds that state policies are
responsible for these high and inequitable local tax burdens and concludes the
following:
- For counties, labor and
Medicaid costs are the biggest cost drivers.
- New
York
has more local governments than competitors and more school districts than
average.
- New
York
employs more local government workers and pays higher wages than national
averages.
- State labor and pension
laws undermine local control of labor costs.
Although state leaders have tried to
address the local tax burden, the largest relief effort, STAR or School Tax Relief,
is poorly designed tax relief and poorly designed state aid. STAR induces school spending, which negates
some of the relief and increases taxes for commercial property. Moreover, STAR’s benefit depends on county wealth. If STAR were
allocated as education aid, it would provide greater relief to less wealthy
districts. The newly-enacted Middle-Class STAR rebates are better targeted but
embody the same equity flaws as STAR.
Other state measures to address local taxes – including the Medicaid
cap, foundation-based school aid and shared services and consolidation efforts
– are a move in the right direction but could go further.
Diana
Fortuna outlined the following options for panel
discussion:
- Tax caps
- Converting new STAR
funding into a circuit breaker
- State takeover of local
Medicaid costs
- Strict adherence to
foundation-based education aid
- Reducing Medicaid
expenditures
- Pension benefit reforms
- Defined contribution
system
- Restructure benefits for
new hires
- Revising the framework
for collective bargaining
- More timely process
- Alter arbitration
criteria and constraints
- Adopt another model of
negotiations, such as last-best
- Additional consolidation
initiatives
- Small school districts
- Property assessing units
2. Panel Discussion
I. The Local Tax Burden
EJ McMahon says CBC’s numbers actually understate the burden. We need to lower taxes first before we can
address issues of equity. We have to
“stop the bleeding.”
[View video clip1 (1:18) –
McMahon speaks on local tax burden, tax caps and labor costs]
Martha
Stark says it is important to look
at the expense side of the tax burden and the role of the federal government.
[View video clip1 (3:56) –
Stark speaks on local tax burden, Medicaid and tax caps]
John
Faso says upstate New
York is hemorrhaging people and jobs. If upstate New
York were its own state, it would have the 3rd
slowest rate of population growth in the nation. If we do not limit the cost of government, we
will have “a very gloomy future.”
[View video clip1 (6:23) –
Faso speaks on local tax burden and tax caps]
Property taxes impact the cost of living and affect
residents’ and businesses’ decisions to leave New
York.
[View video clip2 (4:24) –
Faso speaks on local tax burden, tax caps and state education aid]
Sandra
Galef says “the public is screaming for change.” It has been hard to get movement on the issue
in the Assembly. The Assembly has not
moved on her bill to create a Blue Ribbon Commission to examine property tax
issues.
[View video clip1 (6:10) – Galef speaks on local tax burden, Medicaid, STAR, tax caps,
property assessments and circuit breakers]
Ken
Adams says the property tax is the
largest single tax on businesses in New
York State. Two large retail chains upstate pay $1,100
per full-time employee in property taxes.
Business owners want to see something going in the right direction. The message to businesses right now is
property taxes keep going up. STAR does
nothing for businesses or economic development and sends the wrong message.
[View video clip1 (4:30) –
Adams speaks on local tax burden and STAR]
Laura Anglin says
that the Governor is committed to increasing state education aid and tying aid
to local property wealth. The Governor is also committed to linking Medicaid
dollars to Medicaid patients. Due to state cost containment initiatives last
year, Medicaid growth is negative through the Mid-Year estimates.
[View clip1 (2:01) – Anglin speaks on local tax burden]
II. Local Medicaid
Expenditures and Growth Cap
EJ McMahon says
Medicaid cap froze existing inequities.
New STAR money for rebate checks should be used to take over local
Medicaid costs. Some
economically-distressed counties are literally “dying” and a significant
portion of their costs are tied to Medicaid.
However, Medicaid takeover for all counties would require state to
increase personal income tax 20 percent, which would have serious
competitiveness implications.
[View video clip2 (2:23) –
McMahon speaks on Medicaid]
Martha Stark says Medicaid
funding is unfair in New York City,
given the number of poor people in the City.
[View video clip1 (3:56) –
Stark speaks on local tax burden, Medicaid and tax caps]
Sandra
Galef says a state takeover of Medicaid would be more equitable and would
enable consolidation of counties and more shared services.
[View video clip1 (6:10) – Galef speaks on local tax burden, Medicaid, STAR, tax caps,
property assessments and circuit breakers]
Laura Anglin says that the State assumes local
Medicaid spending above 3 percent annual growth; counties fund their portion of
any annual growth under 3 percent.
[View video clip4 (0:22) – Anglin speaks on Medicaid]
III. School Tax Relief (STAR) Program
EJ McMahon says
STAR subsidized spending – “when you subsidize something you get more of
it.” Historically, increases in state
education aid have led to increases in school spending. More and more people want to totally
eliminate the property tax but a fairly administered and reasonable property
tax is a good, stable source of revenue.
[View video clip3 (3:52) –
McMahon speaks on STAR]
Sandra Galef says Westchester does
not get a lot of school aid, and STAR helped drive more aid to the county,
especially for senior citizens. However,
targeting STAR to income, as the Middle-Class STAR rebates do, may have been a
better way to go originally.
[View video clip1 (6:10) – Galef speaks on local tax burden, Medicaid, STAR, tax caps,
property assessments and circuit breakers]
Kenneth
Adams says taxes keep going up and
STAR does not make any difference to business.
[View video clip1 (4:30) –
Adams speaks on local tax burden and STAR]
STAR is a tax shift not only
from local to state but also from residential to commercial property. From 1995 to 2005, property tax on businesses
rose $1 billion or 58 percent.
IV. Tax Caps
EJ McMahon says a
tax cap would address excess taxation and “stop the bleeding.” Providing a cap with an override provision allows
for a democratic process and for districts to decide how high their taxes
should be.
[View video clip1 (1:18) –
McMahon speaks on local tax burden, tax caps and labor costs]
Wealthy districts will pass
more overrides but there will always be inequities which should be addressed at
the state level through the state aid formulas.
[View video clip4 (2:55) –
McMahon speaks on tax caps]
Tax caps would force
Legislature to cope with the consequences of its action, such as pension
benefits.
[View video clip5 (2:40) –
McMahon speaks on tax caps]
Martha
Stark says the best way to
envision any cap is to take a look at property tax levy caps. An assessment cap or rate cap puts pressure
on assessors to raise values and is not effective.
[View video clip1 (3:56) – Stark
speaks on local tax burden, Medicaid and tax caps]
New York City has a
frozen property tax rate and assessment caps for small residential property,
yet everyone’s bills are going up. Even
this year, homeowners will pay more taxes despite a rate cut.
[View video clip3 (2:50) –
Stark speaks on tax caps and property assessments]
Assessment caps are not real because the rate can
still change. Levy caps hold elected
officials responsible for tax increases.
[View video clip4 (2:10) –
Stark speaks on tax caps]
John
Faso says we need a cap. We will not control spending without a
cap. Massachusetts is
just as liberal as New York and
has the same pressure from unions. An
$800,000 home in Brookline, MA has
30 to 40 percent less property taxes than the same value home in
Manhasset.
[View video clip1 (6:23) –
Faso speaks on local tax burden and tax caps]
Circuit breakers and STAR do not address
spending. Shifting tax to state does not
lower tax. School taxes are still going
up due to a number of drivers, including pensions, benefits, and Triborough Amendment.
[View video clip2 (4:24) –
Faso speaks on local tax burden, tax caps and state education aid]
Sandra
Galef says Massachusetts may
be a good model for a cap. Student achievement levels in Massachusetts have been
high.
[View video clip1 (6:10) – Galef speaks on local tax burden, Medicaid, STAR, tax caps,
property assessments and circuit breakers]
Not all models for a cap are good. They need to allow exemptions for growth in
pupils or needs.
[View video clip3 (1:46) – Galef speaks on tax caps and circuit breakers]
New York votes
on total budget but Massachusetts can
vote on specific overrides. New Yorkers
are unlikely to reject school budgets for fear of certain programs such as
athletics being cut out if budget fails.
[View video clip4 (5:09) – Galef speaks on tax caps]
Laura Anglin says tax caps will be one of the
many options her office is looking at for next year, but one of their concerns
is that any approach cannot compromise the state’s efforts to provide quality
education.
[View video clip3 (0:30) – Anglin speaks on tax caps]
V. Property Assessments
Martha
Stark says condo valuations are
not based on sales prices, creating inequities in residential property tax
burdens. We need to ensure everyone pays
their fair share.
[View video clip3 (2:50) –
Stark speaks on tax caps and property assessments]
Sandra
Galef says some counties – including Suffolk and Westchester – have
not been reassessed in dozens of years. New
York should have regular assessments, and we
should consider county-wide assessments.
Condo assessments should also be looked at and standardized.
[View video clip1 (6:10) – Galef speaks on local tax burden, Medicaid, STAR, tax caps,
property assessments and circuit breakers]
VI. Pension and Labor Reforms
EJ McMahon says
local governments should have options to move to other pension benefit systems.
[View video clip1 (1:18) –
McMahon speaks on local tax burden, tax caps and labor costs]
Kenneth Adams says that New
York needs to address the spending side and
the growing divide between compensation and benefits in the public sector and
private sector. Even incremental progress on the cost side would send the right
message to businesses. Businesses want
to see something moving in the right direction.
VII. State Education Aid
John
Faso says no one in the
Legislature ever thinks their districts get enough money. There used to be no rhyme or reason to education
aid. Even with more state aid, many
districts will still be willing to tax themselves more and that’s not
necessarily a bad thing.
[View video clip2 (4:24) –
Faso speaks on local tax burden, tax caps and state education aid]
Legislature thinks that more school aid reduces
local taxes but it doesn’t. In fact,
state aid accelerates spending. It’s much easier to spend someone else’s money.
[View video clip3 (1:42) –
Faso speaks on state education aid]
Sandra Galef says Westchester did
not get high tax aid last year. The high
tax aid was introduced at the last minute of the budget process, preventing
open discussions and participation.
Despite these actions, foundation-based school aid is a good
achievement.
[View video clip2 (2:01) – Galef speaks on state education aid]
Laura Anglin says
the state’s contracts for excellence were meant to address concerns for how
districts would spend new state money.
[View video clip2 (1:11) – Anglin speaks on state education aid]
VIII. Circuit Breakers
Sandra
Galef says circuit breakers would be more fair and equitable. There was lots of support for circuit
breakers at the Assembly committee hearing on real property taxes. Original STAR would be hard to take away but
we could replace the rebate program “before we get to liking it too much.”
[View video clip1 (6:10) – Galef speaks on local tax burden, Medicaid, STAR, tax caps,
property assessments and circuit breakers]
Middle-Class STAR rebates are not necessarily for
school taxes. The rebate can offset any
household expense. A circuit breaker
would be better because it would include all property taxes and be more
targeted.
[View video clip3 (1:46) – Galef speaks on tax caps and circuit breakers]
IX. Consolidation and
Shared Services
Sandra
Galef says that we need to make shared
services easier between school districts.
[View video clip4 (5:09) – Galef speaks on consolidation and shared services]
3. Response from County Executives
[View video clip (2:20)]
Scott Vanderhoef (Rockland County) says that 71 percent of his
county expenditures are state mandates. New
York needs to address policies underlying the
costs for counties.
Kathleen
Jimino (Rensselaer County) says that 89 percent of her
county expenditures are state mandates.
Under a cap for counties, the counties would be unable to provide basic
services. New
York might as well “get rid of county
governments if all [counties] are to do is raise money for state mandates.”
4. Keynote Address – Thomas Suozzi
[View video clip (37:50)]
The Honorable Thomas Suozzi, County Executive of Nassau County,
delivers keynote address on why local taxes are high and what New
York should do about it. Mr. Suozzi identifies
the following 5 key problems that New
York’s local governments share: 1) waste, fraud and abuse; 2) state
mandates; 3) inequity and not enough state aid; 4) no or slow growth; and 5)
too many layers of government.
The Citizens Budget Commission is a nonprofit, nonpartisan watchdog
group dedicated to influencing constructive change in the finances and services
of the New
York City and State governments.
www.cbcny.org
One Penn Plaza, Suite 640, New York, NY 10119 s (212) 279-2605
