The State Capitol building is pictured in Albany on April...

The State Capitol building is pictured in Albany on April 17, 2013. Credit: AP / Arno Burgi

Millions of New Yorkers will see a property tax rebate and future spending cuts by local governments and school districts under the state budget agreement sealed Saturday.

"I think that was the single greatest challenge of the budget," Gov. Andrew M. Cuomo said yesterday. "It's the structural problem we had to address this year."

The budget is scheduled to be approved by the State Legislature on Monday before the midnight deadline for an on-time budget.

The $1.5 billion property tax rebate for as many as 2.8 million taxpayers would use a state subsidy in the form of an income tax credit. The credit, to be issued by checks, could be worth up to 2 percent of a property tax bill, which could range from as little as $20 upstate to a few hundred dollars on Long Island.

The check is intended to cover the increase in the next local property bill. Taxpayers would get the tax break if their local governments and school districts keep their tax growth under the state-imposed 2 percent cap.

To benefit from Cuomo's "tax freeze" for a second year, local governments and school districts also would have to detail cost-cutting plans that would reduce the tax levy at least 1 percent for each of the following three years. That plan would have to be approved by Cuomo's budget director.

But the plan also provides credit for some undefined "extraordinary" cuts already made by local governments and schools. That would help municipalities and school districts avoid at least part of the required 1 percent annual cuts, but whether recent cuts qualify for consideration would be up to Cuomo's budget director.

"I do believe that will create a pressure on local governments to create the savings," Cuomo said. "It was exactly what we wanted to create."

Taxpayers whose governments have kept taxes flat -- such as Nassau County -- would see a rebate check.

The measure also includes a "circuit breaker" for two years for homeowners and condominium owners in New York City. That provision will factor in household income into a property tax break.

Renters in New York City will see a tax credit totaling $85 million

"I think it will force local governments and school districts to come up with a savings plan to provide tax relief," said Sen. Jeff Klein (D-Bronx), who leads the Independent Democratic Conference.

The temporary measure became an issue this election year.

"The property tax rebate credit will have no significant impact, because it doesn't address high local labor costs and spending patterns perpetuated by state mandates," said E.J. McMahon of the fiscally conservative think tank Empire Center for Public Policy.

For school districts, the measure may force further cuts.

"We have concerns the plan could be divisive in communities," said David Albert of the New York State School Boards Association.

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