This page is dedicated to
explaining New York's new tax levy cap law.
The tax levy cap is still often referred to as a "2
percent tax cap." This is a misrepresentation, because the law does not
in fact restrict any proposed tax levy increase to two percent. Learn
more about the new law by viewing the information below.
Video gives "straight talk" about property tax "cap" law
As we head into another budget
season with New York's property tax "cap" law, are you still
trying to simply understand it? You're not alone. For
starters, did you know it's actually not a 2 percent cap? Did you know
it's not really a cap at all? Watch this video to learn more!
In June 2011, the New York State Legislature passed a property tax
levy cap that took effect
last budget season and will
continue to affect district planning for the 2015-16 school year.
A major factor with the tax levy
cap -- which was continually stressed during last year's budget season
--is that although the law is constantly
referred to as a “2 percent tax cap,” it does not in fact restrict any
proposed tax levy increase to two percent. The law does, however,
require at least 60 percent voter approval for a school budget if a
portion of the proposed levy increase exceeds a certain amount. That
amount, called the “tax levy limit,” will be based on a formula outlined
in the law and will vary by district.
“Tax levy limit” and “maximum allowable
levy:” a complicated formula
The following formula demonstrates how a school
district would calculate its “tax levy limit,” as well as the “maximum
Prior year tax levy
Tax base growth factor, if any
Payments in lieu of taxes (PILOTS) receivable during prior year
Taxes levied for exemptions during prior year (applicable portion of
capital levy and court orders)
Adjusted Prior Year Tax Levy
Allowable levy growth factor (lesser of 2% or CPI)
Payments in lieu of taxes (PILOTS) receivable in the coming year
Available carryover, if any
“TAX LEVY LIMIT”
Coming school year exemptions (applicable portion of capital levy and
court orders, ERS and TRS)
“MAXIMUM ALLOWABLE LEVY”
What’s the difference between the “tax levy
limit” and the “maximum allowable levy?”
To understand the “tax levy limit,” you must first
understand a tax levy. A tax levy is the total amount of property taxes
a school must collect to balance its budget, after accounting for all
other revenue sources including state aid.
The “tax levy limit” is an important part of the new
property tax cap legislation. The “tax levy limit” is the highest
allowable tax levy – before exemptions – that a school district can
propose as part of its annual budget for which only the approval of a
simple majority of voters (more than 50 percent) is required. Any amount
proposed above this limit will require budget approval by a super
majority (60 percent or more) of voters.
Essentially, the “tax levy limit” sets a threshold
requiring districts to obtain a higher level of community support for a
proposed tax levy above a certain amount.
So what is the “maximum allowable levy?” The new
legislation does not place a limit on any taxes a school district would
levy to pay for expenditures related to specific “exempt” items,
including some court orders, some pension costs and local capital
expenditures. These items are then added to the “tax levy limit” to
arrive at the maximum allowable levy.
Simply put, the “tax levy limit” + coming school year
exemptions = “maximum allowable levy.”
Here’s another way to look at it:
Tax Levy Limit – A calculated tax
levy amount (according to a state formula) that sets the threshold
needed for 60 percent voter approval. Despite its name, it does not set
a limit on the tax levy that a school district can propose.
Maximum Allowable Levy – The final
dollar figure created by adding a district’s applicable exemptions to
its “tax levy limit” is known as the “maximum allowable tax levy.” As a
result, a district may actually propose a budget with a tax levy that is
higher than its “tax levy limit” and still be within its “cap” under the
The Tax Cap –An Eight-Part Formula
As seen in the formula above, though much-publicized,
the “lesser of 2 percent or the rate of inflation (CPI)” is only one
factor in a school district’s “tax levy limit” and “maximum allowable
limit.” In fact, there are eight different steps to the calculation as
dictated by the legislation. Those steps take into account payments in
lieu of taxes (PILOTS), the tax levy and approved exemptions for the
current school year, and growth in the tax base.
Individual school districts will each have a unique
“tax levy limit,” which must be submitted to the state by March 1 of
As previously stated, some expenses, such as certain
pension costs, court judgments and local capital expenses are exempt
from the “tax levy limit.” These exemption items are then added to the
“tax levy limit” to arrive at the “maximum allowable levy.” Because of
the addition of these exemptions, school districts may actually propose
a budget with a tax levy that is higher than its “tax levy limit” – but
still be within its “cap” under the law.
Simply put: “Tax levy limit” determines voting
“The new law is not so much a tax cap, but a voter
authorization level,” said Robert Miller, assistant superintendent for
business. “The law does not cap the tax increase; rather, it sets a new
threshold for voter approval based upon a determined tax levy increase.”
What are the Board of Education’s options?
The Board of Education has two options for the budget
vote. The first option is to propose a budget requiring a tax levy
before exemptions at or below the “tax levy limit” prescribed by law.
This requires a simple majority of 50% + 1 voter approval.
Option 2 is to propose a budget requiring a tax levy
before exemptions above the “tax levy limit.” This requires a “super
majority” of 60% voter approval. This requires a statement on the ballot
indicating the required tax levy before exemptions exceeds the “tax levy
Just because a school district can legally exceed its
“tax levy limit” does not mean that it will, though. Several factors
must first be considered, including whether students’ educational needs
can be met within the “tax levy limit” and the likelihood of voter
support for a budget that exceeds the “tax levy limit.”
That potential support, or lack thereof, is important
because the new legislation has changed what happens if a budget
proposal is defeated twice in a single year. As of next year, a district
that adopts a contingency budget can levy a tax no greater than that of
the prior budget year – a 0 percent
Breaking down the tax cap law: key points
The tax cap law does NOT cap an individual’s
school tax bill. The law applies solely to the school tax levy.
Increases in individual tax bills are often different from increases
in the tax levy due to a variety of factors outside a school
district’s control, and this will continue to be true.
The new law has been referred to as a “2 percent
tax cap,” but the law itself does not limit how much the tax levy
can actually increase under a proposed budget. The law does,
however, require at least 60 percent voter approval for a school
budget if the proposed levy increase exceeds a certain amount.
That amount, called the “tax levy limit,” will be
calculated by each district according to a formula outlined in the
law. However, by law, the “tax levy limit” does not include any
taxes we would levy to pay for expenditures related to certain
“exempt” items, including some court orders, some pension costs and
local capital expenditures. When you add the exemptions back in, the
maximum allowable levy could be greater than the “tax levy limit.”
There will still be a community vote on the
budget. Our goal will be to find the right balance between what our
community can support and the cost of providing every student with
the highest quality education.
A proposed budget that carries a tax levy (before
exemptions) at or below the levy “limit” will require approval by a
simple majority. If the tax levy (before exemptions) is above the
levy “limit,” a supermajority (60 percent or more of voters) is what
is needed for approval.
Although we have the option to exceed the “tax
levy limit,” we are well aware that any proposed school tax levy
increase will be benchmarked against our levy “limit,” adding to the
pressures we are under to control taxes even in the face of
escalating costs and expectations for teaching and learning.
Obtaining our community’s support for our budget
proposal—whatever level of voter approval is required—is more
critical than ever, given the law’s new contingent budget
restrictions. If a district fails to gain voter approval and must
adopt a contingent budget, then the levy increase is truly “capped.”
Under a contingent budget, there can be NO increase in the tax levy.
At this time, it is unclear whether the exemptions would still