New York City Independent Budget Office

Conference Paper

School Tax Relief (STAR) in New York City1


In 1997 New York State established the School Tax Relief (STAR) program, which shifts a portion of local education tax burdens from individual school districts to the state. Throughout the state, STAR provides relief from school district levies on residential properties (redirecting the burden to taxpayers statewide). The program also includes a reduction in the New York City personal income tax (PIT) burden. STAR provides state funds to reimburse localities for the foregone tax revenue.

With two years worth of data, we are now able to examine the effect of STAR on New York City taxpayers. Implementation of STAR began in the 1998-1999 school year. In this paper, we focus on STAR participation rates and property tax savings from the first two years of the program. We examine the distribution of property tax savings, both within the city and around the state and then address the additional PIT savings to New York City residents. We discuss the property tax effects of STAR as they vary by tenure type and tax class, and the overall treatment of New York City taxpayers. Finally, we project total city taxpayer savings under STAR and review potential implications for education finance within New York State once the program has been fully implemented.

STAR – What is it?

STAR shifts some of the burden of local education taxes to the state. Qualified households (who must apply to participate in STAR) receive a partial property tax exemption under the program, thereby reducing their property tax bill. Local school districts are, in turn, reimbursed by the state for property tax revenues foregone, and, in the case of New York City, for foregone income tax revenues as well.

There are two types of property tax exemptions available under STAR—an enhanced exemption of $50,000, available to lower income elderly homeowners, and for those homeowners not eligible for the enhanced exemption, there is the basic exemption of $30,000, available regardless of age or income.2 The enhanced exemption was fully implemented in 1998-1999, while the basic STAR exemption is being phased in over three years, beginning in the 1999-2000 school year.

In addition to property tax relief, New York City residents also receive tax relief via reductions in the city’s personal income tax, regardless of age, income, or tenure status. PIT relief was crafted to boost the city’s benefit share under STAR since property tax relief alone would not significantly relieve the local education burden in New York City. A $125 per couple refundable PIT credit, beginning in calendar year 1998, was implemented for all seniors regardless of income or homeownership status and is being phased in over three years for non-seniors.3 In addition to the credit, an across the board reduction in PIT base (non-surcharge) rates of approximately 6 percent for all New York City taxpayers is being phased in over three years, beginning in calendar year 1999.

How were New York City homeowners expected to fare?

By design, property tax relief under STAR concentrates rewards in districts with high levels of home-ownership. Homeowners are a minority in New York City—just 35 percent of city residents own their homes, compared with 70 percent of residents elsewhere in the state.4 This means that the target population for STAR property tax benefits is smaller in the city than in school districts elsewhere in the state.

STAR also targets the largest benefits per household to those districts with high property values and high property tax rates. Effective tax rates (ETRs) in class one housing and for class two coops and condos in New York City are lower than elsewhere in New York State.5 This means that even with higher property values than in most parts of the state, residential property tax bills are relatively low in the city, and so are the savings for each participating household. For example, New York City’s effective tax rate for one-, two-, and three-family homes was 0.858 percent in 1997, compared with 2.51 percent for the surrounding counties.6

Finally, STAR benefits are higher in districts where property taxes are the sole source of local funding for education. While most school districts in the state finance their local share of education spending primarily through property taxes, New York City—like other large city dependent districts in the state—pays for education out of its general fund.7 New York City’s general fund includes many sources besides the property tax. In fact, just one third of New York City’s general fund revenues come from residential and commercial property taxes. Ultimately, property tax relief alone does not effectively target benefits to those who pay for education in New York City.8

Given the program’s structure and the city’s residential and fiscal characteristics, city residents were not expected to reap substantial benefits from STAR property tax relief. IBO originally estimated that New York City’s share of statewide property tax savings, once fully implemented, would be 9 percent. In contrast, the Governor projected that the city would receive 12 percent of statewide property tax savings.9

How did city homeowners fare?

New York City homeowners saved $31.8 million under enhanced STAR in 1998-1999, independent of PIT relief. This savings, attributable to the fully implemented enhanced STAR exemption, represents an average reduction in tax liability of $323 per participating household. While STAR property tax savings were received by close to 99,000 qualified households in one-, two-, and three-family homes, coops and condominiums in the city, IBO has estimated an additional 78,000 homeowners were eligible for the enhanced STAR exemption and did not claim it. Based on this estimate, New York City homeowners had the potential to reap $57.3 million in property tax savings under STAR in 1998-1999, almost twice the amount of savings actually realized.10

The 1999-2000 school year marks the beginning of a three-year phase-in of the basic STAR exemption. Under basic STAR, all homeowners are eligible for an initial property tax exemption of $10,000 that will grow to $30,000 by the 2001-2002 school year. Average property tax savings in NYC under basic STAR in 1999-2000 was $69 per participating household. In 1999-2000 average property tax savings under the enhanced STAR senior exemption grew slightly to $345 per participating household.

As in the first year, New York City homeowners have claimed just over half the property tax relief available to them. IBO estimates that city residents will receive just $60.6 million of the $104.1 million in property tax savings they could have realized under the program this year.

The foregone property tax savings, a total of $69 million over the last two years, is due to low program participation citywide. IBO estimates that only 57 percent of eligible households in the city—compared with 88 percent elsewhere in the state—took advantage of the enhanced STAR property tax exemption in its first year. In 1999-2000, participation among enhanced STAR eligible households grew to 64 percent, while basic STAR eligible households participated at a rate of just 50 percent. Moreover, of the almost 99,000 enhanced STAR participants in New York City in 1998-1999, 30 percent were already receiving the Senior Citizen Real Property Tax Exemption.11 The city automatically enrolled these households in the STAR program, leaving just 69,000 who actually filed an application to receive the enhanced STAR exemption—just 47 percent of the remaining eligible households.

Statewide, STAR property tax benefits totaled $497 million in 1998-1999. With its relatively low participation rate, New York City’s share of this total was just 6.4 percent. If New Yorkers had
participated at a rate comparable to the rest of the state in 1998-1999, the city’s share would have been 9.7 percent. New York State has not yet released data on STAR exemptions granted or property tax savings by school district for the 1999-2000 year. Therefore it is too early to determine the city’s share of statewide property tax savings for 1999-2000.

Variations in Participation by Property Tax Class and by Borough

For tax purposes, New York City properties are divided into four classes, each with its own assessment procedure and tax rate. Classes one and two comprise the city's residential properties, with one-, two-, and three-family homes falling into class one, and rental apartment buildings and most coops and condos falling into class two (some smaller coop and condo buildings are in class one).12

Participation in enhanced STAR within the city varied between classes one and two, with lower participation rates among class two coop and condo owners. Participation in basic STAR was similar between the two tax classes.


For each of the first two years of STAR, the highest participation rate for the enhanced STAR property tax benefit was in Staten Island, while participation in Manhattan was less than 50 percent.


In 1999-2000, the first year the basic STAR property tax exemption was available, it attracted half the eligible households citywide. Unlike participation in the enhanced STAR program, participation in basic STAR varied little by borough.


Distribution Effects of STAR

STAR Property Tax Relief Benefits Only Owners

School property tax relief, independent of age or income, applies only to the 35 percent of New York City taxpayers that own their homes, while renters receive no property tax relief. Residential property tax revenues in the city fund approximately 14 percent of local school spending.13 Of these revenues, 60 percent come from resident owners. This leaves 40 percent to be paid for by landlords and, to some extent, renters.

Renters pay a portion of the property tax assessed on their residence because landlords are able to shift some of their tax burden forward to tenants in the form of higher rents. Plausible estimates of the extent of this shifting in the city range from 39 percent to 75 percent of the property tax burden being passed through to tenants.14 Accordingly, between 16 and 30 percent of residential property taxes are paid by renters, although they receive no property tax relief under STAR. Renters throughout the state face a similar situation, depending on the extent to which landlords are able to shift property taxes.

STAR Property Tax Relief Favors One-, Two- and Three-Family Homeowners

In addition to favoring owners over renters, STAR favors owners of class one properties over owners of class two via an adjustment the state makes in determining the final amount of the STAR exemption. In New York City, independent of STAR, effective tax rates—levy as a percentage of market value—are higher for class two properties than for class one.15 The formulae in the STAR legislation favor owners of conventional homes over apartment owners, thereby compounding this uneven treatment of the two property classes.

In order to determine the property tax savings for each household, the full amount of the exemption is modified by a sales price adjustment factor to account for variation in median home prices around the state. The sales price adjustment is used only when the local median sales price exceeds the statewide median. In general, the sales price adjustment serves to give higher exemptions to homeowners in areas with higher property values, which benefits New York City residents. The exemption amount is then further adjusted using a state-determined equalization rate to account for the common practice of assessing at less than full value.16 For the five large city dependent school districts, including New York City, the exemption is adjusted further, to account for their use of the property tax to fund general municipal operations in addition to education.

The state maintains two separate equalization rates for New York City—in 1999-2000, 7.63 percent for class one housing and 40.74 percent for class two.17 In the city, computation of the class one property tax exemption follows the formula described above, making use of the class one equalization rate. When the class two exemption is computed, however, the STAR legislation requires use of the class one equalization rate, with a slight adjustment, as opposed to the class two equalization rate. This significantly reduces class two’s property tax savings. While the average tax savings (dollar amounts) are equal for each class, the percentage reduction in property taxes is more than twice as large for class one as it is for class two.18 Thus, the calculation of STAR property tax savings exacerbates disparate treatment of homeowners in the two tax classes.

Additional Benefit to NYC Taxpayers via NYC PIT Relief

Most local education spending in NYC is financed by means other than residential property taxation. The implication of this is that while a far greater share of households elsewhere in the state see their school tax burdens meaningfully reduced by STAR, property tax relief in the city allows a minority of city households to enjoy only modest relief from their school tax burden. In addition, the city’s share of tax relief under the property tax component of STAR alone, as anticipated, is small.

Since relief given only via the property tax would not provide large benefits to New York City, the Governor amended his initial STAR proposal to add personal income tax relief for all New York City residents. While this PIT relief extends benefits to renters, it does nothing to close the gaps in STAR’s property tax treatment of owners versus renters. Similarly, the disparate treatment of class one versus class two homeowners with regard to property tax relief is not addressed by the extension of PIT benefits. IBO estimates that the addition of PIT relief raises the city share of the total STAR benefit to a maximum of 26 percent.19 The next section analyzes whether or not the city receives a fair share of STAR benefits.

New York City and the Rest of New York State

If all those eligible had claimed their property tax exemptions, statewide, the city’s share of statewide STAR benefits—including the PIT reductions—would have been 23 percent in 1998-1999. As we have noted, however, participation in the city was lower than elsewhere in the state. Thus, the city’s share of STAR benefits, including PIT relief, totaled 20 percent in 1998-1999.

While the governor’s anticipated 95 percent enhanced STAR participation rate and 75 percent basic STAR participation rate were overly optimistic for 1999-2000, at least for New York City, it is not unreasonable to expect that participation in both programs will grow over time as more taxpayers learn of the benefits.20 Increased participation in the city will potentially increase New York City’s share of statewide property tax benefits, but to the extent that participation increases around the state, any growth in the city’s share is likely to be modest.

Based on IBO estimates of eligibility for enhanced and basic STAR, we expect total property and income tax savings claimed by city taxpayers under STAR to range from $560 million to $644 million at full implementation. The range of values assumes, at the low end, the 1999-2000 participation rates of 50 percent (basic) and 64 percent (enhanced) and, at the high end, an optimistic 100 percent participation rate for both. These estimates suggest the city will receive between 23 and 26 percent of the projected tax relief by 2001-2002. The percentage calculation is based on the state’s assertion that fully implemented STAR will cost $2.52 billion.21


In order to assess the equity of the distribution of STAR benefits around the state, it would be useful to have a single benchmark. Given the various interpretations of equity by policymakers and analysts, however, no single measure is sufficient. We have chosen three benchmarks against which the equity of STAR benefits can be measured—the city’s share of local support for education statewide; the city’s contribution to the funds that are used to pay for STAR; and the city’s share of education aid. Other possible benchmarks, which are generally higher, include those based on the city’s share of statewide enrollment or the concentration of special needs pupils in the city.

NYC’s Share of Local Support for Education Statewide

STAR is aimed at providing relief for local support of education. One way to assess the efficacy of STAR in New York City is to examine the city’s share of STAR benefits relative to the city’s share of local support for education statewide.

Given that the explicit goal of STAR is to reduce local school tax burdens, one might expect that relief under STAR would mirror existing district shares of statewide local spending. However, our results show that STAR falls short of this measure—failing to return to New York City its share of local education spending. New York City’s local spending on education represents 34 percent of all local education spending statewide—well above the 26 percent that IBO estimates as the maximum city share of STAR benefits.22

NYC’s Contributions to State PIT Revenues

The idea of literally replacing local funding for education with state money is, of course, illusory. State money, after all, is raised locally. The benefit of STAR to New York City taxpayers is further reduced as city taxpayers are disproportionately tapped in order to finance tax breaks around the state. STAR reimbursements to local school districts (including New York City) are paid out of a school tax relief account that is funded directly from state personal income tax revenues, rather than the state’s general fund.23

Of total state personal income tax revenues, 40 percent are generated by New York City resident taxpayers.24 This means that 40 percent of the reimbursement funds will come from New York City, thus providing another benchmark against which the city’s maximum share of 26 percent of STAR benefits can be compared.25

In the first year of STAR, New York City taxpayers funded $220 million of statewide relief and received $117 million in STAR tax savings. In other words, New York City residents funded $103 million in relief for other communities. When the STAR tax cuts are fully phased in, New York City will fund as much as $952 million of the relief while receiving $644 million, thereby sending over $300 million to other school districts.

NYC’s Share of Education Aid

A final benchmark to consider when measuring STAR benefits to New York City is the city’s share of education aid. Since STAR money functions as funding for education, as discussed below, the relevant benchmark becomes the city’s 35 percent share of statewide education aid. The city’s STAR benefit share of at most 26 percent falls short against this benchmark. In fact, when counted as additional education aid, the benefit share under STAR reduces New York City’s share of education aid by 5 percent.26

Additional Equity Issues

Since STAR distributes state funds to local school districts, STAR is essentially education aid. However, the distribution of STAR benefits is strikingly at odds with the distribution of most education aid. Moreover, STAR encourages added school spending by effectively reducing the price of education.

The distribution of STAR money runs counter to the flows of education aid. While New York City receives significantly less than its 35 percent share of state aid in STAR benefits, wealthier metropolitan suburbs receive more than double their share of state aid in the form of STAR benefits.27 Similarly, using an index of fiscal health based on property values and costs within a district, it has been found that "districts with the highest potential for financing public education receive the most property tax relief" under STAR.28 In other words, while formula-driven state education aid is targeted more heavily to low-wealth districts, STAR tax relief flows more heavily to taxpayers in high-wealth districts.

Moreover, STAR creates incentives that encourage increased education spending, particularly in wealthy districts. Economic analysis of the STAR program indicates that local school property taxes function as the "tax price of education" and theory predicts that like any other price reduction, a reduction in the tax price of education will stimulate demand for education spending.29 This is expected to occur primarily in autonomous districts with significant numbers of homeowners and where all local school spending comes from property taxation—not in large city districts. Recent anecdotal evidence suggests this increase in education spending has already begun to happen.30

In New York City, renters make up 65 percent of the population and most school spending comes from sources other than the residential property tax. City residents do not directly "purchase" education with their property taxes and therefore, the price effect under STAR is minimized in the city. Similarly, the income effect associated with PIT relief in New York City is unlikely to have much of an impact on school spending. This is because income that flows to households (as opposed to the city treasury) is less likely to be converted to additional school spending. The net result of STAR’s incentive to increase education spending, primarily in wealthy districts, is the widening of existing real spending disparities between the city and its surrounding districts.


STAR is designed to shift a portion of local school tax burdens to the state, via property tax relief. In New York City, STAR property tax relief varies by property class and, as a result, eligible class one homeowners are the primary beneficiaries. They experience more than twice the percentage reduction realized by class two homeowners under both the enhanced and the basic STAR exemptions. In New York City, PIT relief supplements property tax relief, increasing the city’s share of statewide benefits. This extends benefits to renters, who make up nearly two-thirds of the city’s population.

While tax relief under STAR favors certain households within the city over others, homeowners elsewhere in the state are the primary beneficiaries of STAR. Of the $2.52 billion in anticipated total tax savings under STAR, even at 100 percent participation, New York City taxpayers would receive at most $644 million, or 26 percent. The city’s 26 percent benefit share falls short of three equity benchmarks—city share of local spending (34 percent), city contribution to state PIT revenues (40 percent), and city share of education aid (35 percent). Finally, STAR is expected to widen existing disparities in education spending across New York State.

Appendix – Data and Methodology

City participation rates

In order to determine New York City’s STAR participation rate, we estimated the number of eligible households and compared it with the (known) number of actual participants. To qualify for the enhanced STAR exemption, households must be owner-occupied, with a combined household income of less than $60,000, with householder (or spouse) aged 65 or above. To qualify for the basic STAR exemptions, households must simply be owner-occupied.

To estimate the number of households eligible for the enhanced STAR benefit in 1998-1999, we used data from the 1996 New York City Housing and Vacancy Survey (HVS), the 1990 Public Use Microdata Samples of the Census (PUMS), and the 1999 assessment roll for New York City (RPAD file).31

Using the 1999 RPAD file, we established the universe of taxable residential units. To this universe we applied an owner occupancy rate to determine the current number of owner occupants. We had calculated owner occupancy rates for each borough, using the 1996 HVS data, and found an overall city owner occupancy rate of 35 percent.32

Once the 1998-1999 population of owner occupants and a distribution of that population among the boroughs were estimated, we used homeownership rates that were calculated using the PUMS data in order to confirm our results. The PUMS homeownership rates from 1990 were supportive of the HVS rates from 1996—similar in ordering of the boroughs and, as expected, slightly lower, reflecting slight growth in the rate of homeownership over the six-year period.

We then determined an enhanced STAR eligibility ratio, using the PUMS data. Owner occupants meeting both the age and income criteria were viewed as a percentage of all owner occupants. We applied this rate—22 percent for the city overall—to the 1998-1999 population of owner occupants. Thus we were able to estimate how many households were eligible for enhanced STAR in that year.33

With the number of eligible households estimated, the number of participating households was all that was needed in order to compute a participation rate. Our participation data on class one housing came from the 1999 RPAD, from which we knew how many units were granted the STAR exemption, citywide and within each borough.34 In addition, we know whether the participating unit was a coop, a condo or a class one housing unit. Taking a ratio of actual participation to calculated eligibility, we are able to determine enhanced STAR participation rates for each housing type, borough, and for the city as a whole.35

Statewide participation rates

Statewide participation rates were calculated in a different manner, necessitated by the lack of availability of current property tax rolls for each district. The number of eligible households in each county was estimated using Census summary statistics. Specifically, data by county on homeownership and occupancy, age and income were taken from Census Summary Tape File 4.36 Starting with owner occupants in the sample, we focused on households meeting both the income and age criteria.37 This revealed the number of households eligible for enhanced STAR in 1990.

With the number of households eligible in 1990 determined, county population growth rates, projected by the Census Bureau, were then used to grow the eligibility numbers to 1997.38 This gave us an estimated number of households eligible to receive the enhanced STAR benefit in 1997, sorted by county.39

Finally, to correct for any overstatement of eligibility due to the lower age test used from the Census summary tables—62 instead of 65—we took advantage of the fact that we had calculated New York City eligibility twice. We had the initial NYC calculation, based on the RPAD, HVS and PUMS data, as described above, and a second calculation, using the Census summary tables. As expected, the latter eligibility number was higher than the former. Assuming that the overstatement of eligibility due to the lower age test would be generally uniform throughout the state, we scaled up the participation rates for each county by equalizing the two New York City rates.

Finally, with eligibility numbers in hand, again all we needed was participation information. We used actual participation data—the number of STAR exemptions granted to those school districts that submitted STAR reimbursement forms to the Office of Real Property Services as of December 1998. These numbers allowed us to construct 1998-1999 enhanced STAR participation rates for every county in New York State.

Calculations, 1999-2000

To update the eligibility, participation and savings numbers for New York City for 1999-2000, the 2000 RPAD file was used. Homeownership rates determined earlier were applied to the universe of taxable units from the 2000 RPAD file in order to determine the number of owner occupants for 1999-2000. The enhanced STAR eligibility ratio was then applied to that number to determine the number of households eligible for the enhanced STAR benefit. The difference between the number of owner occupants and the number of households eligible for the enhanced STAR benefit was taken to be the number of households eligible for the basic STAR exemption. The 2000 RPAD file was then used to identify the number of STAR participants and the type of benefit (enhanced or basic) they received.



1 This is an updated version of a paper by IBO Economist Lisa Sturman Melamed presented at the 21st Annual Northeast Regional Science Conference at Cornell University, May 7-8, 1999.
2 The enhanced exemption is available to homeowners aged 65 or older with household income less than $60,000. The initial exemption values, $50,000 for enhanced STAR and $30,000 for basic STAR, are then adjusted in a process described later in the paper.
3 Taxpayers 65 and older received the $125/couple benefit in the first year ($62.50 for singles), while the credit for everyone else began its phase-in at $12/household (independent of marital status). Of the $85 million in PIT relief in 1998, approximately $77 million was targeted to those aged 65 and above.
4 See Appendix for calculation of city homeownership rate. Nationwide, the homeownership rate is 65 percent (1995 American Housing Survey summary tables at
5 The effective tax rate measures the final tax levy as a percentage of the property's market value. Under the city's classified property tax system, variations in assessment ratios and nominal tax rates by class result in low ETRs for residential property, though overall, New York City's ETR is among the highest in the state.
6 Netzer, Dick and Thomas Conoscenti. "Effective Real Property Tax Rates for the New York Metropolitan Area," 1997. Sponsored by Crain's New York Business.
7 Dependent school districts are financially dependent upon the city in which they are housed. They cannot independently raise tax revenues to finance the operation of schools, but rather they depend on tax revenues raised for the general fund of the city to be directed toward local education. The state's dependent districts are the "big five" large city school districts-New York City, Buffalo, Syracuse, Yonkers, and Rochester.
8 This statement also holds true for renters throughout the state (as we discuss later) and for sales taxpayers in other dependent districts.
9 Estimates based on the March 1997 version of the STAR proposal, which had been amended to include coops and condos, but did not yet include PIT relief. New York City Independent Budget Office (April 1997), "School Tax Relief and Education Aid Proposals: Impacts on New York City," Fiscal Brief.
10 IBO's participation numbers and eligibility estimates are based on New York City property tax data, the New York City Housing and Vacancy Survey, and Census data. The data is described in greater detail, along with the methodology used, in the Appendix.
11 The Senior Citizen Homeowner Exemption (SCHE) is a separate property tax exemption applicable to home-owning seniors aged 65 or above with incomes below $26,899 in 1998-1999 ($27,900 in 1999-2000). It was authorized under Section 467 of state real property tax law. Households need only apply once to receive SCHE.
12 STAR is only available to owner-occupants, thus excluding rental units in class two. For the purposes of this paper, class two housing refers to owner-occupied coops and condos only.
13 Of all locally financed general fund spending, 14 percent comes from residential (classes 1 and 2) property tax revenues. This 14 percent can be extended to locally financed education spending since that money comes from the general fund.
14 IBO analysis suggests that taxes levied on landlords are passed through (shifted) to renters at varying rates throughout the city, with an average rate of 39 percent. Other analysts have determined that rents are shifted at rates as high as 75 percent in NYC (Chernick, H. and A. Reschovsky (1993), "Evaluating the Long Run Burden of the Residential Property Tax and Selected State and Local Consumption Taxes," paper presented at the 86th Annual Conference on Taxation, National Tax Association, St. Paul, MN).
15 For a discussion of ETRs in class one and class two housing in NYC, see Independent Budget Office, "The Coop/Condo Abatement and Residential Property Tax Reform in New York City," December 1998.
16 The equalization rate is the ratio of assessed value to market value.
17 In other words, class one housing is assessed at 7.63 percent of full value and class two at 40.74 percent.
18 Note that the official equalization rate for class two coops and condos is skewed because market values are based on imputed income, assuming units are rent regulated. A true equalization rate for class two, based on sales price, is closer to 15 percent citywide. For a discussion of sales price versus imputed rental income in valuing class two properties in NYC, see Independent Budget Office, "The Coop/Condo Abatement and Residential Property Tax Reform in New York City," December 1998.
19 Assumes 100 percent participation in property tax relief plus $464 million in PIT relief at full implementation. Note that PIT participation is automatic for filers in New York City.
20 Governor's anticipated participation rates come from State of New York, Office of the Comptroller (April 1999), "Administering STAR: The Need for Better Guidelines and Greater Uniformity in Procedures," p. 7.
21 According to the Office of the State Comptroller, STAR is projected to cost the state $2.7 billion at full implementation. This number includes $464 million in PIT relief for NYC taxpayers and a $185 million contingency fund. Yinger, John and William Duncombe, "Property Tax Relief and School Finance Reform: What is Wrong With STAR and How to Fix It," May 1999, presented at the Northeast Regional Science Conference at Cornell University. NYC's share is based on IBO analysis.
22 New York State Office of the Comptroller, Special Report on Municipal Affairs for local fiscal year ended in 1996; FY96 BOE Debt Service and Pension data provided by NYC OMB 9/30/99.
23 Laws of New York, 1998, Chapter 56, Sections 7-a and 7-b. Laws of New York, 1999, Chapter 405, Part F, Section 5, extend the PIT funding provision for a second year. PIT financing of STAR will presumably continue as long as the STAR program is in place.
24 City's share of state PIT revenues calculated by IBO, based on 1996 PIT liability data from the NY State Department of Taxation and Finance, Office of Tax Policy Analysis, and personal income growth rates from the Bureau of Economic Analysis (Survey of Current Business, May 1999).
25 Furthermore, IBO has estimated that economic activity in New York City contributes 40 percent to the state's general fund (IBO adjustment to "The Geographic Origins and Destinations of New York's State Taxes and Expenditures," Prepared for the Gleason Memorial Fund and the Greater Rochester Metro Chamber of Commerce by the Center for Governmental Research Inc.).
26 Based on 1999-2000 state aid totals (NYS Division of Budget) and projected STAR savings.
27 "STAR Tax Relief & Related Policy Issues" prepared by NYS Office of the State Comptroller for the 21st Annual Northeast Regional Science Conference, May 7, 1999 at Cornell University.
28 Yinger, John and William Duncombe. "Property Tax Relief and School Aid: Flip Sides of the Same Coin?" 1998 Annual Conference Association of Budgeting and Financial Management, Washington, DC. November 5-8, 1998.
29 For a complete exposition of the theoretical argument, see Duncombe and Yinger, Ibid.
30 Throughout the state school districts approved school budgets with higher than usual spending increases in May of 1999. For example, in Long Island, "…school budgets totaling $5.8 billion, which included the highest spending increases in a decade, passed at record rates (122 out of 125)…" (Newsday, May 19, 1999, Page A05).
31 1996 New York City Housing and Vacancy Survey, Bureau of the Census; 1990 Census of Population and Housing Public Use Microdata Samples, Bureau of the Census; New York City Department of Finance, 1999 Property Tax Assessment Roll Data File.
32 The paper refers to a statewide homeownership rate of 70 percent. That calculation is based on data from STF2 Matrix HB10, 1990 Decennial Census of Population and Housing, Bureau of the Census.
33 The same eligibility rate was constructed using HVS data and was found to be similar to and supportive of the PUMS rate. Questions regarding the reliability of income data in the HVS, however, led us to rely on the PUMS eligibility rate as more precise.
34 1998-1999 participation data for coops and condos was provided by the NYC Department of Finance.
35 Citywide and borough participation rates for all housing are more accurate than rates for housing types since deriving rates for class one housing and class two coops/condos requires an assumption that the percentage eligible from each group mirrors their proportions within the population of owner occupied housing.
36 STF4C Matrix HB59, 1990 Decennial Census of Population and Housing, Bureau of the Census.
37 Since our age test was lower (62 rather than 65 - necessitated by the organization of the summary data), we expect our eligibility predictions to be overstated, and thus our participation rates understated, at least slightly. We correct for this in a later step. Also, $60,000 of income in 1997 corresponds to $49,850 in 1989. With the STF4 data, we use an income test of $50,000.
38 Census projected growth rates reflect growth, by county, from April 1990 to July 1997. The growth rate applied to New York City comes from Census Estimates of the Population of Cities with Populations of 10,000 and Greater (April 1990 to July 1996). Both sets of growth rates come from the Population Estimates Program, Population Division, U.S. Bureau of the Census, Washington, DC.
39 Underlying the analysis is the assumption that eligibility in 1997 is not drastically different than eligibility in the 1998-1999 school year.

Lisa Sturman Melamed, an Economist at IBO, researched and wrote this presentation under the supervision of George Sweeting, Senior Economist and Team Leader for IBO's Education Branch, and Ronnie Lowenstein, Chief Economist and Deputy Director.

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