Tax cap: the ultimate unfunded mandate?

Local officials frequently complain that state and federal governments impose laws and requirements without giving a thought to how much they will cost to implement. Town and village budgets tend not to leave much area for wiggle room, and they have to be balanced each year — so a large unanticipated expense can destroy a carefully crafted spending plan and incite the ire of the taxed-enough-already crowd.

The latest and greatest of these mandates might just be the two-percent property tax cap. Across Ulster County, local officials are wondering how they’ll reconcile the cost of operating their municipalities with this cap. Last week, Saugerties Village Board officials expressed frustration at what seems to be an impossible task.

“They passed the 2 percent cap law without doing anything about the mandates that we have to fund,” said Mayor William Murphy.

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Towns and villages can seek an exemption from tax cap by putting the issue before voters. A 60 percent majority is needed.

Spending mandates that municipalities and the counties face include payments into the state pension system and Medicare.

No decision on how best to deal with the property tax cap was reached at Monday’s meeting, but discussions will continue at the board’s Oct. 17 meeting at 7 p.m.

Meanwhile, the Onteora school district is grappling with the same problem: last week, the district was advised to close an elementary school because of the tax cap.

Financial consultant Dr. Rick Timbs said increases in employee benefits are squeezing the budget into a nearly impossible scenario. Timbs is recommending closing one of the district’s three elementary schools.

The 33-page report predicts the district will go into red by 2016, and by 2017 have a deficit of $11.3 million. Timbs commended the district for having a healthy cash flow and reserves to tap into. But he cautioned trustees. “Lets put it this way, the things you are doing now, are going to turn into a luxury in two years,” he said.

With no new revenue, in the next couple of years the district will need to tap into reserves to stay afloat. An austerity contingent levy would allow no increase in spending, creating a deficit much quicker. His 2015 projections show a $2-million deficit, which then jumps to $11.6 million by 2016.

Timbs blamed an unsustainable mixture included declining state aid, unfunded mandates, decreased enrollment, increases in benefits and the two percent tax cap. “I think you need to lobby for greater state aid,” he said. “I don’t think the aid that is being distributed is very equitable in particular based on the demographics of the school district, and I would also lobby the Board of Regents on unfunded mandates … because some of them are going to be counterproductive to your mission of trying to right-size your district.”

There are 2 comments

  1. EBS

    Everyone loses with the Tax Cap (except some short-term political gains by Cuomo), because it does *not* provide tax relief. Placing a limit on the *levy increase* does not cap the *tax rate*. With falling assessments, tax rates will increase on their own – independent of the levy increase. Since healthcare and pension increases are far from capped, municipalities and school districts will cannibalize staff year-after-year just to pay for those increases. Tax bills will continue to increase, but you will get less services. Quite the ‘Game Changer’. Municipalities and school districts should override the cap until mandate relief and state reform happen.

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