BOARD INSIGHT: Tax Cap and Tax Rate: What's the difference?
In the months leading up to the school budget vote, our Board of Education receives many questions regarding the difference between the tax levy cap and tax rate. Therefore, we have worked with the Monroe County School Board Association (MCSBA) to develop a question and answer guide to share with our school communities. We hope the following information helps build understanding of this complex issue.
Q. What is the tax levy cap?
A. The tax levy cap was legislated in 2011 and became effective in 2012. The legislation placed a cap on the growth of school property taxes at 2% or the Consumer Price Index (CPI), whichever is less. NYS uses the CPI-U program which produces monthly data on changes in the prices paid by urban consumers for a representative basket of goods and services.
Since the tax cap has been in place, the CPI-U for schools has been:
What that means for schools is that for the school years 2012, 2013 and 2018, the tax cap was a flat 2%. From 2014 to 2017, the CPI-U percentage was used because it was less.
Q. How is the tax levy cap determined?
A. The tax levy cap is determined by a complex 8-step formula. Each school district is assigned a tax base “growth factor” each year by the state, and once the CPI is determined each January, two of the major pieces of the formula are then ready for districts to calculate. The other pieces of the formula have to do with “payments in lieu of taxes” (PILOT agreements) and exclusions. From that formula, districts are able to derive their “tax levy limit.”
Q. Why isn’t the tax levy cap really 2%?
A. The tax cap legislation was seen as a huge legislative win for both the Senate and the Governor who were seeking to rein in property taxes that they believed were strangling the state and making residents flee. The media blitzes regarding the legislation presented the simple message that property taxes would be capped at 2%. However, the formula itself and the impact of the CPI rarely results in a 2% levy limit and creates mixed messages to the community that school districts must then clarify. Tax levy limits can be above 2%, below 2% or even below zero (negative tax levy cap).
Q. How is the tax levy limit different than the tax rate?
A. The tax levy limit is the total amount of property tax dollars that a school district can ask for from the taxpayers for the expenditure budget that they vote on each May. Combined with state aid and other revenues, this makes up the total revenues for a school district budget.
The tax rate is the amount of money/per thousand dollars that a homeowner would pay in school taxes based on the assessment of their home. For many tax payers, the rate is more significant to them than the tax levy limit.
MCSBA 2018 Tax Levy Cap Talking Points