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Thiele Grilled Over Tax Cap

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By Kathryn G. Menu


A town-hall style meeting convened by New York State Assemblyman Fred W. Thiele, Jr. at Rogers Memorial Library in Southampton last week was meant to cover a number of issues including the state budget, the MTA payroll tax, the future of Southampton College and the safety of the Millstone Nuclear Power Station.

However, with nearly half the two-dozen people in attendance members of various school boards and administrations, the conversation quickly became focused on a proposed two-percent tax levy cap – a cap that Thiele said will likely be approved in some form this year and that school districts and local governments alike need to begin preparing for.

The proposed cap currently in front of the state legislature has the full support of Governor Andrew Cuomo, who has made it one of his top priorities in his inaugural year. The state senate has already approved it.

The law would cap the amount of money  – not the tax rate, individual tax bills, or spending – that any school district or local government can collect in property taxes at two percent or the rate of inflation, whichever is less.

“Which means this year if you collected $100, all you could collect next year would be $102,” explained Thiele.

School districts and libraries – the two entities affected by the cap which require voter approval for their budgets – can ask voters to override the cap, said Thiele, but would need a 60 percent vote in favor of any spending plan that would increase the tax levy by more than two percent.

If they fail to gain support after two budget votes, they are then limited to a zero-percent increase in the amount of taxes they collect from their district.

On the town or village level, said Thiele, an override can occur if four of five board members approve it.

If adopted the tax levy cap would take effect in 2012.

Thiele said while the assembly is debating the bill, it has a good chance of being approved, in part, because a majority – many from New York City – appear willing to strike a bargain allowing a cap in return for the continuance of rent control in the city.

“There are those of us, including myself, who feel the governor’s proposal needs some work,” said Thiele.

Thiele said he would like to see the cap tied to a provision that state school aid is increased each year based on the rate of increases in personal income and that no new unfunded state mandates on school districts be allowed once the cap is in place. Thiele said he also will look to cap the cost of existing unfunded mandates, with the state having to pick up the bill on anything beyond that cap.

Thiele added he would like to see school districts able to override the vote with a simple majority, or 51 percent.

“To create a situation where 40 percent of the population can veto what the majority wants is absurd,” said Springs School Board President Chris Kelley.

Kelley added he believes the cap is being proposed as an alternative to the state dealing with the teachers’ union.

“Rather than deal with the true costs, you are telling school districts, ‘You deal with it,’” he said.

“Given the undeniable damage the tax cap will have on East End schools and students, how can you support the tax cap,” asked Walter Tice, a former president of the Sag Harbor Board of Education.

Thiele said he would only support a measure that would institute the cap along with the promise of increased state aid and decreased unfunded mandates, and a return to a simple majority override of the cap.

“We already have a system where the majority approves our budgets,” said Sag Harbor School Board member Chris Tice, questioning why the cap is needed at all if a majority of voters can limit the spending of a school district.

“People support education, but they don’t necessarily support the use of property taxes as a way to fund quality education,” said Thiele.

Thiele added the downturn in the economy has only made it worse and he is looking for a way to continue to provide quality education, but to keep property taxes more stable.

“The property tax cap is a blunt instrument,” he allowed.

Thiele said if he “ruled the world” he would prefer a system where the state provides a basic, quality education to all of its school districts with each district responsible for funding anything additional. However, he said, that scenario is not currently on the table.

Chris Tice said one of the concerns she has is the sense amongst the populace, evidenced by the Governor’s own speeches, that the tax cap will not be as painful for school districts because they have large reserves on hand.

She added the school district has worked hard at becoming more efficient, moving its transportation in-house to save money among other initiatives. To say school districts are not being efficient enough is “insulting,” said Tice.

Thiele agreed that any concept of using reserve monies to offset the tax levy is shortsighted and not advisable as it only provides relief for one year, leaving a school district back at square one the next year.

“In Sag Harbor, we don’t have a large reserve,” said Chris Tice. “We look to build between two and four percent as the state recommends.”


Assemblyman Fred W. Thiele, Jr.

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By Kathryn G. Menu

The New York State Assemblyman talks about negotiations in Albany revolving around a two-percent property tax cap, how housing has surprisingly entered the equation and why he thinks a property tax cap, if imposed correctly, will go a long way towards addressing the woes of taxpayers without taking away from the quality of education on Long Island.

The New York State Senate has already passed a bill proposed by Governor Andrew Cuomo that would limit the growth of property taxes to two percent or less than the rate inflation starting next year. As a member of the state assembly and long time supporter of a property tax cap, where does the assembly stand on passing the bill?

The assembly has held public hearings on the bill and I think the feeling of the majority is there needs to be modifications to the governor’s proposal. Where it stands now is the assembly wants changes, the governor is willing to negotiate and the senate is saying it likes the bill they passed.

The other thing I would say about where it stands is it seems to be linked to rent control in New York City. That expires on June 15 of this year and the politics of how this is breaking down is the governor and the senate want the tax cap and a lot of members of the assembly are not thrilled about the idea, but they want rent control reinstated because a bulk of the majority is from New York City. Although it has not been acknowledged publicly — the link between the property tax cap and rent control — because of the governor’s commitment to the cap, the senate’s support, the rent control factor and that the polls I have seen have shown 75 to 80 percent of the public supports the tax cap, I have been telling my local government leaders since January that there will be some kind of tax cap. The question now is what it will look like and those specifics will determine how it impacts local governments and school districts. There have been a wide variety of tax caps passed across the nation. The one in California was a disaster, but in Massachusetts it has worked well, so the details will be very important in determining the impacts locally.


To be clear, while the debate over the property tax cap has largely focused on the impact to school districts, the tax cap would be for any agency that collects property taxes as a means of funding, including local governments, correct?

It would apply to counties, cities, towns, villages and all special districts, so it covers all government including our school districts. A lot of the focus has been on the school districts because, at least on Long Island, 70 to 80 percent of your tax bill is from your school district. And while the percentage may be higher on Long Island, it is not too far out of line with what people see across the State of New York.

Is there a better way to fund education?

I clearly think there is a better way to fund education than through the property tax. Senator (Ken) LaValle and I carried a bill for a number of years that would have changed the way we fund education by having the state pay for a basic, quality education in every school district and have a provision that if individual districts wanted to add to that they could vote to do more through property taxes. So do I think that is a better way to do it? Yes. Do I think it will happen anytime soon? I don’t and the property tax cap is imminent.

The reality of the current political climate is we are going to address property tax reform through a cap and I think that comes from frustration. In 1995, my first year in the assembly, the state spent $9.8 billion on education and by 2008 that had increased to $21.5 billion, which is double the rate of inflation. We instituted the New York State School Tax Relief (STAR) Program, which generates more than $4 billion back to the school districts, but that hasn’t reduced property taxes, so it seems the more money we spend on property tax and education reform, the more our taxes go up. Some proponents of the tax cap say if you subsidize something, it will go up.

With increasing costs in health care and retirement, is the two percent property tax cap an effort to force concessions from school staff and other unions?

It is certainly not a part of my goal. In my way of thinking, if you enact a property tax cap by itself with no other reforms, it will fail. What we also need is mandate relief for local school districts so they can reduce their costs locally. There is not an elected official in Albany who thinks we can accomplish this with a tax cap alone. The difference in opinion is when the mandate relief occurs. I think it should be done in concert with the tax cap, others think we should wait and create pressure to cut spending, but I think a lot of damage could be done in that period of time.

Would you support “union busting” efforts, similar to those we have recently seen in Wisconsin?

No. Collective bargaining is a part of life in the United States of America and I support a union’s right to form and collectively bargain. I have been a town supervisor, so I have participated in collective bargaining and I felt I had all the tools I needed to get a good deal on behalf of the taxpayers and the law hasn’t changed since then. I think management, in difficult economic times, need to exercise their rights in collective bargaining. There must be mandate relief, pension reform and dealing with the rising cost of health care, but I don’t think we have to outlaw unions or take away the right to collectively bargain. It hasn’t been a productive exercise in Wisconsin and I don’t think it would be in New York State either.


Would you support, or is there, a sunset provision to a property tax cap?

I have heard that discussed and I certainly would not be opposed to a sunset provision. I don’t oppose those in general. When you enact a new program, you want to take a look at it in five years and see how it worked. I think that is a fair way to go about things.


What other revisions are currently on the table?

I am not saying any or all of these will happen, but part of the discussion includes the rate of the cap. The governor has proposed a two percent tax cap. Former Governor David Paterson proposed a four percent tax cap, so that will be an issue we continue to discuss.

Another issue will be the method by which the cap can be overridden. As it is proposed right now, you would need 60 percent of the vote to override the cap. I could see a trade off where school districts are only allowed one vote on their budgets instead of two, but only needed a simple majority to override the cap. If you tried to pierce the cap and failed, it would have to go to two percent.

My sense is a lot of these items will be negotiated and as we get close to June 15, the deadline for rent control and near the end of the legislative session, a lot of discussions will be had to deal with these issues.

If implemented, how will the state measure whether or not the cap has been a success? Will the health of our educational system be a factor in that assessment?

I think two sides need to be examined to measure success. The first is did it actually stabilize property taxes? When Massachusetts implemented their tax cap in 1981 they were number one in the nation when it came to property taxes and after 30 years they are in the 30s, so the middle of the pack. The other measure is are you still maintaining a quality system of education. To me if stabilized property taxes means the decline of quality education, it is not a good trade. However, Massachusetts actually exceeds New York in terms of quality education.

For the property tax cap to work, however, the state must commit to increase school aid at least equal to the growth of income in the state each year, which is equal to about four percent. If property taxes are capped, and we don’t increase state aid or provide mandate relief, it will be a disaster. If they go together, like they do in Massachusetts, it can be a successful way to have quality education and property tax relief.

Do you see the cap adversely affecting the ability of school districts to meet state educational standards? Why or why not?

I only see that if it is enacted in a vacuum without other reforms, but if it is done with mandate relief and a provision ensuring the state’s commitment to increasing aid I don’t see that happening. We need to transform the mechanism by which we finance education and get away from the reliance on property taxes. To me it is not the property tax cap threatening the quality of our education, it is the property taxes themselves. You have people, especially seniors and those on fixed incomes, who we are making choose between higher property taxes and the quality of education and it may have gotten to the point where they can’t choose quality of education.