Homes in Mineola. The law limits property tax increases in municipalities...

Homes in Mineola. The law limits property tax increases in municipalities and school districts outside New York City to 2% or the inflation rate, whichever is lower. Credit: Newsday/John Keating

In the decade since its passage, the resiliency of New York’s property tax cap hasn’t been seriously tested.

That’s likely about to change. But the tax cap itself, and the caution with which elected officials have approached busting its limits, must not change.

The law limits property tax increases in municipalities and school districts outside New York City to 2% or the inflation rate, whichever is lower. When it passed in 2011 the economy was in shambles, and state aid to schools slashed. Income tax and sales tax revenue plummeted and home values had not yet recovered.

There was also a Republican-majority State Senate enjoying a national anti-Democratic Party backlash, and a governor, Andrew M. Cuomo, using the tax cap as a cornerstone for his common-sense moderate image.

Sales data from 2014 and a study by the Washington, D.C.-based Tax Foundation show that while homes on Long Island then cost 70% more than the national average, property taxes were 300% higher than the national average. From 1982 through 2011:

  • Annual school property taxes statewide increased from $3.5 billion to $19.7 billion.
  • The rate of increase, 6% annually, tripled the nation's average inflation rate over that period.
  • Median wage growth over that span barely matched inflation, meaning property tax rates in New York grew at nearly triple the rate of wages.

Even so, the tax cap battle was bloody. Unions for teachers and other public employees were stridently opposed, seeing a cap as a hard ceiling on compensation. Politicians dependent on those unions for support, particularly New York City Democrats whose districts would not be affected by the cap, followed their own interests.

So even as voters of both parties outside New York City made this a must, the tax cap, which generally can be exceeded only with a 60% vote, was passed only as a temporary measure.

It did not become permanent until 2019, largely because low inflation rendered the early years of the cap uncontroversial. Since its enactment, the consumer price index has only exceeded 2% twice, and then only by small margins.

Until now.

THREAT OF INFLATION

The Bureau of Labor Statistics announced last week that inflation in 2021 hit 7%, the highest since 1982. A few days later, State Comptroller Thomas DiNapoli announced that New York's midyear inflation calculation was 4.7%, official notice that school districts could increase taxes no higher than 2%.

Any New Yorker shopping for anything from sliced ham to a used Honda already knew prices were rising quickly. That will mean steep and potentially lasting cost increases for school districts and local governments. School-district contracts for teachers and other employees, which rarely stretch more than four years on Long Island, are extremely sensitive to inflation. Demands for bigger pay hikes will return.

That means higher pension contributions amid spikes in the gas, heating and health care costs to which districts are so sensitive.

But schools and governments are also flush. The $850 million in one-time federal COVID-19 funding sent to Long Island’s school districts is earmarked for specific needs like improving facilities and getting students back up to speed, but the extra cash will cushion cost increases somewhat.

And big increases in state aid to schools that began last year and will continue growing for the next two years — to ensure districts with low tax bases get their fair share — will be difficult to roll back. State aid to Long Island school districts increased 13% for the 2021-2022 school year, to $3.6 billion, and additional large increases are planned for the following two school years, with strong bipartisan support.

CAP FIGHT LOOMS

That, along with past consistent state aid hikes from Cuomo, makes the tax cap a tax swap, or it should. It makes school funding more progressive, and fairer, by tying more of it to income tax, Albany’s primary revenue stream. That places more of the burden of funding education on high-earning individuals, and corporations, and makes it easier to send more money to low-income districts and those lacking commercial property.

But the changes would stop being a tax swap, and start being a taxpayer hijacking, if school district property taxes shoot up even as state aid jumps so much.

That could happen in the coming months if districts make an argument to bust their caps. For it to occur, however, more than 60% of voters in a school district must agree, which is not likely considering the current taxpayer mood.

It could happen more easily, albeit more slowly, if sentiment in Albany shifts as inflation creates demands for relief. A chorus of education advocates and New York City Democrats are again beginning to argue that the cap, if it exists at all, should be the higher of 2% or inflation, not the lower.

But the cap was structured as it is purposely, and properly, and in response to decades of tax increases that far outstripped the ability of many Long Islanders to pay, and that forced legions of them to flee.

The law is fine. It ought to be at least a bit difficult to enact large tax increases.

MEMBERS OF THE EDITORIAL BOARD are experienced journalists who offer reasoned opinions, based on facts, to encourage informed debate about the issues facing our community.