Abolishes school taxes, provides for alternative taxes to fund education; repealer

Basic Quality Education, as defined by the commissioner, shall allow sufficient latitude so that choices may be made by local school districts with respect to their individual needs. "Basic" shall be defined in terms of equal services to all pupils regardless of differences in cost in different districts for those services. (2) These BASIC costs shall be borne by increases in statewide business and individual income taxes in conjunction with the elimination of school real estate taxes. New York City which does not identify the school portion of its real estate tax, and which also collects an income tax, shall apply the full amount of the school portion of its budget toward a reduction in the real estate tax. The same formula shall apply to the cities of Buffalo, Rochester, Syracuse and Yonkers.

The bill also requires that property reductions be passed through to tenants on a prorate basis where leases permit. Where this is precluded by a lease, tenants will be entitled to tax credits or rebates against their income taxes for the duration of the lease. (3) BASIC budgets shall be submitted by Boards of Education to the State Education Department for approval. However, school districts will be permitted local enrichment options (LEO) for services not covered by the BASIC state support. The LEO budget shall be submitted to the district voters for approval. Once approved, the LEO budget shall be paid for via a "supplemental tax" levied on business and individual income in the district. The LEO budget SHALL NOT exceed 20% of the BASIC budget. (4) all monies for BASIC and LEO budgets shall be collected by the state via the business and personal income tax. (5) Transition period: During the first five years after enactment, a district may opt to receive as its basic budget one of the following: a) budget amount of the school year during which this law shall take effect (dollar save harmless) or, b) the district budget of the school year during which this law will take effect increased or decreased by changes in enrollment (pupil save harmless) or, c) the amount resulting from the application of the BQE formula, but not to exceed the average statewide increase over the prior year, plus 10% (ceiling on growth). After five years, only option (c) will apply. (6) The bill requires the commissioner of taxation and finance, education and equalization and assessment to devise a plan for implementation. Municipalities and taxpayers will be given a year to compare the impact of the legislation on taxes and revenues. The amendments make technical corrections to reflect changes in existing law and to conform to current language usage and syntax.

Justification

1. This plan will end, once and for all, the dependency of public schools on the regressive and unfair real estate tax; a tax which bears little relationship to ability to pay; a tax which penalties the person who chooses to invest in his own home.

2. This plan will insure equitable education for all children of the state regardless of wealth within a school district because the BASIC budget will supply all general services necessary for quality education, and all special services required by needy districts. Approved LEO budgets in poorer districts will be supplemented by state funds.

3. This plan will simplify or eliminate most of the present hodgepodge of formulas and factors used by the state to determine state aid to school districts.

4. Present levels of local control will be retained because BASIC and LEO budgets will be prepared by local school boards, with state approval required only for the BASIC budget. The LEO budget will permit reasonable local flexibility. The 20% limit on the LEO will preclude the possibility of the proposed system eroding to the present sorry condition where the state pays an average of only 30% of school costs.

5. A "windfall" to New York tenants, of reduced federal income taxes, will result from the trade-off of reduced rents (not deductible) and increased state income taxes (deductible). Estimates run from $200 million to $400 million annually from this windfall.

6. Most businesses will benefit from the transfer of property taxes (fixed costs) to corporate franchise income taxes (variable costs). This is especially true for high capital invested manufacturing companies that employ large numbers of people. Although high income earning executives will likely be paying a net increase in total taxes, this will be reduced 50% by the increased deduction against the federal income tax.

7. All property owners will benefit, be they rich or poor, by reduced property taxes averaging 60% in New York State. Homes will be more marketable and will increase in value. Retired persons will not be forced to sell their homes. Young couples will be able to purchase homes. The concept of "homestead" will be restored.

Legislative history

2007-08, S.2070; 2005-06, S.1265; 2003-04, S.297-B; 2001-02, S.4040; 1999-00, S.1622; 1997-98, S.1357; 1995-96, S.5178; 1993-94, S.4967; 1991-92, S.4092; 1989-90, S.6209;

Fiscal implications

This is a transfer of taxation. No increases or decreases are involved.

Effective date

This act shall take effect on the first day of January next succeeding the date on which it shall have become a law, provided, however, that sections, two, five, seven, eight, nine and ten of this act shall take effect four years after such effective date.