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June 23, 2011


A tax cap breach in the works

E.J. McMahon

A property tax cap hasn’t even passed both houses yet (as of late Thursday), and already the state Senate has slipped through a bill that would allow school districts to circumvent it.  The measure immediately was referred to the Assembly Ways & Means Committee, just a step away from a floor vote in the legislative session’s final hours.

An egregious fiscal abuse on its own terms, the bill (S.4067-A) would allow school districts across the state (except for New York City) to issue 15-year bonds to cover a portion of their rising teacher pension costs over the next several years — at least $1 billion in all, by one estimate.  The measure was introduced two months ago at the behest of the New York State United Teachers (NYSUT) as a way of reducing pressure on teachers to make contract concessions.

Sound familiar?  The bill — sponsored by Sen. Martin Golden and Assemblyman Peter Abbate, both of Brooklyn — was the subject of a critical blog post here back in early April.  At that time, Senate sources claimed it was going nowhere.

A version of the same bill targeting the Yonkers school district alone was introduced much more recently, as highlighted here a couple of days ago, but the Assembly version had been amended to “strike all (wording) after enact,” which is a sponsor’s way of putting on the brakes.

This afternoon, the Yonkers City Council was schedued to act on a budget partially contingent on the pension bonding plan.  And then this evening, out of the blue, a statewide version of the bill moved to the Senate floor and was passed.  NYSUT obviously struck again.  After all, why settle for a financial gimmick designed to preclude union givebacks in one district when you can persuade your friends in the Senate Republican majority to do it statewide?

If passed, the bill will not only push higher pension costs well into the 2020s–and compound them with high interest charges, since pension bonds are taxable — but it will also represent a massive breach of the tax cap. Remember: the revised version of the cap makes an exclusion for a portion of pension costs.  Under the Senate’s teacher pension bonding special, assuming the cap is enacted, districts can collect added taxes to cover rising pension costs even while bonding out those costs over a period of up to 15 years.

The spotlight turns to Gov. Cuomo. Did the governor send the Legislature a signal that this would be OK with him?  If not, how quickly will he veto it?

17 Comments »

  1. You are the ONLY credible watchdog left in the Capitol keeping an eye on the congenitally duplicitous characters in state government. Keep up the great work.

    Comment by mark — June 24, 2011 @ 9:01 am

  2. How much difference will there be between Cuomo and Obama if he does not veto this bill? It will be business as usual in Albany, the most corrupt state government in the entire country, with the possible exception of California. This whole concept of transparency that the democrats claim to embrace means transparent to them only. The public still gets blind sided and gets hit with more and more taxes. My God, when will it stop?

    Comment by Tom Prendergast — June 24, 2011 @ 9:28 am

  3. Agree with Mark, great job “outing” the little games our politicians play. That said, what is the alternative for school districts who have to deal with million dollar increases each year for pension? Although I may be wrong, it doesn’t appear there are any options to revamp or reduce Tier 2 and 3 pension costs, and those folks retirement costs are going to be what school districts are paying for in years to come.
    If you require the cap, and the pension increases amount to close to the 2%, then teachers will get laid off. And a lot of the good teachers to boot, due to LIFO. What should be done?

    Comment by sheila — June 24, 2011 @ 9:37 am

  4. My goodness. It is business as usual for the Democrats - that lousy bunch of thieves. They are just pulling the wool over the eyes of ever hard working tax payer-What a corrupt bunch of individuals-They should all lose their jobs. Albany needs a news bunch of thieves in office. Because the Republicans in Albany are no better than the Democrats. Let all the NYers vote a new crop in on the next election. We citizens might get fleeced less by the new crop of thieves we elect !!!

    Comment by Anna B. — June 24, 2011 @ 9:41 am

  5. THE WAY THAT SCHOOL DISTRICTS ARE STRUCTURED IN NEW YORK STATE IS AN EXCELLENT EXAMPLE OF THE USURPING OF DEMOCRACY. THE FIVE MEMBERS OF A SCHOOL BOARD HAVE MORE DIRECT TAXING POWER THAN THE STATE LEGISLATURE ITSELF.
    MEMBERS OF SCHOOL BOARDS COMMONLY HAVE CLOSE RELATIVES WORKING IN THE SCHOOLS, CONFLICT OF INTEREST AND NEPOTISM AT ITS BEST.
    WITH NOBODY TO REALLY REPRESENT THE TAXPAYER THE SCHOOL BOARD, THE UNIONS AND THE ADMINISTRATION WORK IN COLLUSION TO PROMOTE THEIR OWN INTEREST. HENCE, OVERPAID TEACHERS WITH FREE BENEFITS, OUTRAGEOUS ADMINISTRATIVE COMPENSATION AND SCHOOLS REPLETE WITH SPORTS AND CLUBS THAT ARE COSTLY AND PUT ‘PER SESSION’ DOLLARS IN THE POCKETS OF TEACHERS, COACHES, AND ‘CLUB LEADERSS’.
    THE STATE SHOULD MANDATE A 2% LIMIT ON ANNUAL BUDGET INCREASES AND REQUIRE THE SCHOOLS TO LIVE WITHIN THEIR MEANS. THE SYSTEM ALREADY PROVIDES STATE AID TO THE SCHOOLS TO FUND MANDATES TO REQUIRED CURRICULUM.
    ANY MEANS OF CIRCUMSCRIBING THE BUDGET LIMITS, SUCH AS THE 60% OF ‘YES’ VOTERS FOR BUDGET INCREASES BEYOND THE STATE LIMIT AND/OR BONDING SHOULD BE OUTLAWED.
    PRIVATE INDUSTRY EMPLOYEES WHO, LIKE THE TEACHERS AND ADMINISTRATORS WHO HAVE $100,000 ANNUAL SALARIES PAY THEIR OWN HEALTH INSURANCE COSTS. WHY SHOULDN’T PUBLIC EMPLOYEES PAY THEIR OWN BENEFITS AS DOES THE REST OF THE POPULATION?

    Comment by BILL — June 24, 2011 @ 11:41 am

  6. “Sound familiar? The bill — sponsored by Sen. Martin Golden and Assemblyman Peter Abbate, both of Brooklyn — was the subject of a critical blog post here back in early April. At that time, Senate sources claimed it was going nowhere.”

    Why to legislator from outside the city continually introduce and pass bills to wreck the city, and legislators from inside the city introduce bills like this one to wreck the rest of the state?

    At least Abbate is consistent. He wants the whole state wrecked about the time his crowd is finished moving out.

    Golden and Abbate’s constituents, at least, should be told that he is pushing to allow the rest of the state to shirk their financial obligations, in the hopes that NYC taxpayers would be forced to bail them out in the future.

    Comment by Larry Littlefield — June 24, 2011 @ 12:19 pm

  7. We need total reform of the State Government. What don’t these legislators knopw about the ecomomic climate in NY. We need legislators who are interested in listening to their constituents instead od lobbyists and Unions. I am confident the Governor willl take appropriate action and kill the bill….

    Comment by Joseph J Ambrose — June 24, 2011 @ 1:22 pm

  8. Although I agree that this is a breach of the Tax Cap concept, I disagree with Mark. You cannot be a credible watchdog when you post comments laden with negative overtones. The original article should have reported the facts as they are, and let the reader determine if the situation is good or bad. Now lets talk about the Tax Cap and this breach.
    It is disturbing that the Senate acted as reported. It shows once again that Special Interests are worth more than ordinary citizens. It also shows the Tax Cap is a bad idea. If it (the Tax cap) is worth circumventing, then it should be off the table as legislation alltogether. Instead it is put up as Legislation just to sway the ordinary citizen and cull votes.
    Personally, my opinion is that a Tax Cap is a bad idea. A tax cap ensures a rise in tax every year in the future. It also ensures the School Districts will be unable to meet their operating budgets and thus cause them to cut expenditures. Their expenditures also happen to fund other businesses and the resulting loss may impact jobs in private enterprises while the taxes continue to rise. I fail to see how this will benefit anyone. But what is the solution?
    While School Budgets get ever tighter, I keep hearing about the unfunded mandates imposed on the schools. Undoubtedly there are some mandates which lead to higher expenses. But what are they? Is there a list somewhere? Has anyone ever studied if these so-called Mandates have produced the results desired? Has any Legislator ever ventured to suggest eliminating the ineffective mandates? I think this is where we stand a realistic chance of returning fiscal sensibility to the issue of school costs.

    Comment by John — June 24, 2011 @ 3:50 pm

  9. The Tax Cap is the first step to attaining fiscal responsibility. It is the first tool that will enable the halting of the mutant-like growth of property taxes. It will empower serious discussions about prioritizing programs that are really “for the children,” getting back to the basics of education, as specified in the NYS Constitution. It will bring a reality check to the special interests that have hi-jacked our fiscal soundness. The “tax cap” is the good parent enforcing a curfew to a spoiled acting out adolescent who knows no boundaries. On Long Island, school budgets have increased 72% over a ten year period where the CPI increased only 27%. Yes, it is a “blunt instrument” – but it is needed to restore fiscal responsibility and accountability to runaway expenses that have unfortunately been “enabled” by negligent political promises of the past by both parties. Bonding pension liabilities in S-4067-A compounds the runaway expenses and brings the education model closer to a Greece-like event.

    Comment by LI TaxReform — June 24, 2011 @ 5:02 pm

  10. [...] New York State Assembly this evening followed the Senate’ lead in passing a teacher pension bonding option that would undermine a property tax cap while generating more risk for taxpayers — but a leading [...]

    Pingback by The Torch — June 24, 2011 @ 5:52 pm

  11. [...] read more [...]

    Pingback by State Senate OKs Historic Tax Cap–or Did It? | Suffolk County Liberty Report — June 24, 2011 @ 10:15 pm

  12. As an elected official in New York State I can tell you that the Tax Cap is not the solution nor the problem. The problem is that Albany refuses to stop creating legislation that forces municipalities to erect ‘tax monuments’ to special interest groups. I have an open letter to the Governor on this website Northernwestchester.lohudblogs.com that just went up yesterday. It is simple. If Albany wants to pass a bill, they need to pay for it, not dump it on the back of local property taxes which they continue to do. NYS is broken!

    Comment by Warren — June 25, 2011 @ 8:00 am

  13. [...] costs toward  pensions of retirees.Critics, including the Empire Center’s E.J. McMahon, say the measure is a bad idea in that it can shackle districts with long term debt over costs they should be [...]

    Pingback by Pension borrowing bill sparks debate on teachers unions, school costs — June 27, 2011 @ 8:46 am

  14. [...] pension bonding bill has cast a cloud on the cap, which was signed into law by the governor Friday night soon after it [...]

    Pingback by The Torch — June 27, 2011 @ 9:14 am

  15. [...] as a way of reducing pressure on teachers to make contract concessions…” Read here: Circumventing the tax cap Tags: NYSUT negating the tax [...]

    Pingback by NYSUT Strong-arming The NY Legislature — June 27, 2011 @ 6:51 pm

  16. Time to unionize homeowners,I suggest we call it “The New York State Homeowners Union” We will have a lobby in albany , instead of escrowing our tax money with our mortages we will escrow our money in our union fund,we will then tell Albany we will not pay our property taxes until albany’s fiscal house is in order and special interests are sent packing. We will then negotiate our union DEMANDS ,just like the public employee unions .Since we pay the bills and all the money to pay public employee union demands,ORIGINATES FROM OUR UNION FUND then the way I see it we HAVE ALL THE POWER! Now before anyone dismises this idea I am simply suggesting we do what governmet does on a daily bases when the federal gov’t wants some type of regulation a state may not want to adopt,they tell the state we will with hold funding “ie hwy funds if new epa regs are not implemented” the state does the same thing with school mandates they threaten to withhold school funding if there mandates are not met,so whats wrong with withholding tax funds when the state does not meet the peoples mandate? Remeber America was founded on a tax rebellion if millions get involved across the state they will have to negotiate just like they do with the unions. Imagine the headlines New York state Homeowners Union strikes!!!!Millions with held from corrupt politicians”in Albany. 1 person is easy prey for gov’t to arrest millions are not!Its a fight they DO NOT WANT! Everything up to now has failed,my suggestion has been done before it was called a revolution and many people did not support the idea of fighting the British Monarchy I believe they ended up in Canada. Its time to stand together unfortunatly this time its are own representitive government we are standing against not the Brits. Just my thoughts ..what are yours?

    Comment by steve — July 1, 2011 @ 5:18 pm

  17. [...] a tax cap, other legislation has been introduced that concerns tax-cap proponents. (Empire [...]

    Pingback by Political news today | Vote Up! - Covering the Elections in Upstate New York | Vote Up NY — November 2, 2011 @ 9:41 am

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