Originally published in Issue 9 - May 12, 1997

NYC Won’t Receive Fair Share from School Tax Relief Proposals

On April 24, IBO issued a report highlighting the disproportionately low share of property tax relief and education aid that would accrue to New York City residents under three school tax proposals the State is currently considering. School Tax Relief and Education Aid Proposals: Impacts on New York City analyzes the Governor’s School Tax Relief (STAR) program, Senate Bill 1 (S.1), and Assembly Bill 7530 (A.7530) which includes the Learning, Achieving and Developing by Directing Educational Resources (LADDER) plan.

According to IBO Director Doug Criscitello, "Both the Governor's STAR proposal and Senate Bill 1 would penalize New York City relative to the rest of the State primarily because the property tax relief offered under these proposals is heavily skewed to benefit areas with high effective residential property tax rates and few renters—in other words, anywhere else in the State other than New York City. Further, while the jury is still out on the Assembly's LADDER proposal because details of the proposal remain sketchy, neither STAR nor S.1 would raise the City's share of State education aid—presently 34.8 percent—to a level commensurate with its 37.2 percent of statewide enrollment."

Under the Governor’s STAR proposal, City homeowners would receive 8.6 percent of the $1.8 billion in total statewide property tax savings, although the City accounts for 28 percent of the $12 billion in revenues collected by school districts statewide. The Governor’s Office has indicated that the City would receive $682 million in additional school aid in 2001-02 if the initiative is enacted. This new aid would increase the City’s share of State aid to 35.5 percent, about $200 million short of achieving school aid equity. The combined value of the tax exemption and new State education aid for New York City and its homeowners would be $838 million annually, 24 percent of the $3.5 billion statewide initiative in 2001-02.

The proposed property tax reductions in the Senate bill are identical to those included in STAR. The City could receive $274 million in new school aid each year once the plan is fully implemented in 2001-02. This sum would not eliminate existing disparity between the City’s share of school aid and its share of total enrollment. Furthermore, a requirement that the City freeze its own spending to qualify for the new aid makes it questionable that the City would participate and thus receive any benefit. If the City were to freeze its education spending, the total combined value of the tax exemption and the new State aid would be about $430 million, 14 percent of the $3 billion initiative in 2001-02.

IThe Assembly bill proposes $650 million in property tax relief for the coming fiscal year, with no indication that the tax reduction would extend beyond next year or how benefits would be distributed. Given this lack of detail, it is not possible to estimate City homeowners’ share of total tax savings. IBO estimates that new statewide school aid attributable to changes in policy under A.7530 would be $3.7 billion. The City would require $1.6 billion–nearly half of the projected statewide total–to achieve school aid equity in 2001-02. To receive a copy of the full report, call IBO at (212) 442-0632 or check the Publications section of this IBO website.