Tax cap cuts revenue growth for schools

New York Sate's school districts will cope with half the amount of tax-revenue growth in fiscal 2013 than the average since 2005, a result of Gov. Andrew M. Cuomo's property-tax cap, Moody's Investors Service said.

Only 53 districts out of 677 sought overrides to raise levies beyond the limit under the Democratic governor's tax-limiting law, passed last year, Moody's analysts said Monday in a report. Annual revenue growth, which has averaged 4.4 percent since 2005, will drop to 2.2 percent next year, they said.

To stay under the levy limit, which took effect Jan. 1, most districts cut payrolls and services, "assisted by a modest increase in state aid," the analysts said in the report. Voters in 653 districts, or 96 percent, passed school budgets last month, compared with an average of 92 percent winning voter approval since 2004, the analysts said.

Three out of four whose spending plans failed sought to override the 2 percent tax cap.

"These results indicate significant voter resistance to any levy increases above the cap and are likely to deter districts from seeking overrides in the future," the analysts, Lawrence Bellinger and Geordie Thompson in New York, said in the report.

"The budget votes indicate school districts will face continued financial pressure."

The tax-limiting law provides certain exemptions, including one for debt issued for capital projects, that can lead to increases of more than 2 percent. The law stipulates that levies can't increase by more than the rate of inflation, measured by the U.S. consumer price index, or 2 percent, whichever is less.

"Districts face rising fixed expenditures, especially for contractual labor obligations and employee health care," in future years, the analysts said in the report. "Without the ability to increase revenues in step with spending growth, school districts may have to cut essential staff and programs."