New York State Executive Chamber | Governor Eliot Spitzer

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BUDGET ADDRESSES LOCAL PROPERTY TAX BURDEN

Governor Spitzer’s Executive Budget proposes a comprehensive approach to addressing New York’s rising local property tax burden to help make New York more competitive. For the second year in a row, the Governor has held the line on taxes and proposed immediate relief targeted to the middle class tax payers who need it the most. This year he also proposed a commission to develop a proposal for a fair and effective property tax cap, and unfunded mandate reform to help hold down local property taxes.

“Despite the significant progress we made in last year’s budget with the Middle Class STAR program, property taxes have still continued to increase at an unacceptable and unsustainable rate,” said Governor Spitzer. “A fair and effective property tax cap, in concert with efforts to reduce local government costs, represents the right approach for finally tackling the root causes of high property taxes.”

In his Executive Budget, the Governor proposed creating a bipartisan commission, invested with Moreland Act powers, which will develop a fair and effective property tax cap proposal. The commission will produce a package of reforms to counteract the root causes of New York’s high property taxes and increase the fairness of the state’s current property tax relief system. Nassau County Executive Thomas Suozzi will serve as chairman of the Commission, which will deliver its recommendations later this year.

In order to offer immediate relief to taxpayers, the Executive Budget also recommends $5 billion in funding for the STAR program, an increase of $134 million over last year. Senior citizens will receive a $91 million increase in their Enhanced Rebate, which will raise their average benefit from $327 to $458 – a 40 percent increase.

Because of the fiscal difficulties facing the state, however, the planned expansion of Middle Class STAR and the accompanying New York City Personal Income Tax Credit, originally scheduled to take place in 2008-09, has been delayed by one year. The Personal Income Tax credit will also be discontinued for New York City residents with high incomes (over $250,000). These and other adjustments to the program will produce savings of $354 million.

In the Executive Budget, Governor Spitzer has also undertaken several other initiatives to help reduce the financial burden facing local governments. Overall, the 2008-09 budget will provide municipalities with a positive fiscal impact of $2.7 billion. Major actions include:

- Aid and Incentives to Municipalities (AIM): Fully funding the second installment of the four-year, $200 million increase in the AIM program initiated in last year’s budget. Additional aid totaling $6 million will also be provided to 26 cities, towns and villages that receive significantly less AIM funding on a per capita basis than peer municipalities. In total, support for the program in municipalities outside New York City will increase by $56 million. New York City’s AIM payment will also be partially restored to $164 million, with a full restoration of $328 million to be provided in 2009-10.

- Wicks Law: Reforming the Wicks Law to help reduce property taxes through the lowering of local construction costs. Under a three-way agreement between the Governor and Legislative leaders, thresholds for the application of Wicks Law regulations would rise from $50,000 to $3 million in New York City, $1.5 million in Nassau, Suffolk and Westchester counties, and $500,000 in the remainder of the State. - Medicaid Cap, Family Health Plus (FHP) Takeover: Continuing the implementation of the state takeover of Family Health Plus program and the capping of county Medicaid costs. This will save localities $914 million in the upcoming fiscal year, an increase of $224 million.

- Education Aid: Providing a total school aid increase of $1.46 billion in 2008-09 – the second year of Governor Spitzer’s four-year Educational Investment Plan, which will increase state aid to schools by over $7 billion by 2010-11.

- Preschool Special Education Cap: Capping the annual growth in local preschool special education costs for counties outside New York City to no more than 3 percent when fully implemented. The state will instead bear these excess costs.

- Local Government Efficiency: Implementing a package of recommendations from the Commission on Local Government Efficiency and Competitiveness, including restructuring the Shared Municipal Services Incentive program, improving cooperation across property tax administration jurisdictions and highway departments, and others.