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Public Hearing on Tax Cap, Mandate Relief and Property Taxes

Much Written, Even 100 Years Ago, About Mandate Relief

New York State Senator John Flanagan, chair of the Senate Standing Committee on Education, and Senator Jack M. Martins, chair of the Standing Committee on Local Government, co-sponsored a hearing on Feb. 17 in Mineola to accumulate best practices and suggestions to take back to Albany with regard to reducing Property Taxes in New York. Some of the pressures on local government and school district budgets are directly tied to mandated costs. It follows that reduction in property taxes is linked to unfunded Mandate Relief, especially in light of the 2 percent tax cap approved by the New York State Senate in January.The recent Senate approval of Governor Andrew Cuomo’s tax cap that calls for capping the yearly growth of school and local taxes at 2 percent or the Consumer Price Index (CPI), whichever is less, was the impetus for the hearing.

Those testifying at the hearing included New York State United Teachers (NYSUT) Executive Vice President Andrew Pallotta, Deputy Nassau County Executive Robert Walker, New York City Office of the Mayor Micah C. Lasher and E.J. McMahon of the Manhattan Institute. Additionally, representatives from the New York Conference of Mayors, the Association of Towns, the Nassau County Village Officials Association, the Nassau-Suffolk School Boards Association, and superintendents all testified with almost one voice, reiterating that a 2 percent tax cap without corresponding unfunded mandate relief will do more harm than good. In succession they stated the obvious; without mandate relief increases in pension and health care costs alone—two major cost drivers—will exceed the allowed 2 percent tax cap leaving no money for anything else. They also agreed that without mandate relief there must be exemptions, such as cost of pensions and health care, from the tax cap.

Mandate relief is not a new topic in Albany, but it is clear that many local governments and school districts are facing difficult fiscal situations, and items thought to be sacred cows are no longer off the table, but are now getting the serious attention they deserve. Senator Flanagan stated they were there to listen and to follow-up with action, that for too long mandate relief had just been given lip service in Albany. Senator Martins said, “It is incumbent upon us to look into providing relief from some of the mandates that force local governments and school districts to pass certain costs on to the taxpayer.”

Marvin Natiss, mayor, Village of North Hills explained, “Nassau County pays the second highest real property taxes in the country, second only to Westchester County, and nine of the 10 highest taxed counties are located in NY State. They know our position,” he said. “You can’t have a tax cap without other mandated relief. If other costs such as health care are up 4-5 percent you can’t have a 2 percent tax cap. The tax cap is a good idea to get started, but needs corresponding reduction in expenses.”

Senator Carl L. Marcellino, Republican, 5th State Senate District, quoted ‘a crisis is a terrible thing to waste.’ Such high taxes are driving business and children away, he said, adding “we are losing the people who built the state; the children we spent a fortune educating.” Looking forward, the tax cap is unlikely to stay in the same form when passed in the Senate, but, he said, “The process is ongoing and the legislation is going to pass and we need your suggestions to be sure it accomplishes the right thing, that it helps people, doesn’t hurt them.”

Senator Suzi Oppenheimer said they have been talking about mandate relief for 30 years. She expressed how unfair it is to push payment for programs down to the lowest lever—local. She also said when she recently spoke with school superintendents they mentioned the federal program Race to the Top, that they experienced problems with the assessments and evaluations. While they understood it is important in some school districts, many districts in Nassau County are already graduating 95 percent of students who go on to college. So, Oppenheimer related, the superintendents said they get nothing from the program but it costs them money. The program is important to some districts, and not at all to others, she concluded, and that flexibility needs to be built into the programs. She stressed there are major mandates stemming from the federal government, including No Child Left Behind.

Peter Baynes, executive director of the New York Conference of Mayors, said that prior to appearing at the hearing he looked over area records from about 100 years ago and there was much written, even then, about mandate relief, causing him to comment, “Says a lot about why we’re here today.” Property taxes are the biggest problem and mandate relief is tied to this, he said.

Baynes testified, like so many others, that pension and healthcare costs are projected to outgrow the rate of property tax levies allowed under the tax cap, highlighting the critical need for mandate relief. Mayors want Albany to know, Baynes said, that you can’t cap what you can’t control.

Andrew Pallotta, United Teachers Union, predicted massive cuts in education. Pallotta said education will be hollowed out in the state in years to come. He said the tax cap is an illusion of relief, a gimmick and that the school budget vote would be eliminated and replaced with a 2 percent cap. A community would need a 60 percent vote to override the cap. Pallotta said you cannot cut your way to educational excellence.

Manhattan Institute Senior Fellow E.J. McMahon noted property taxes in New York continued going up even as property values, personal incomes and consumer prices were going down during the severe recession of 2007-2009. “For school districts and municipalities, in particular, the budgetary cost center is employee compensation. Therefore, you need to give schools and local governments more tools to control personnel costs,” he said in his testimony.

While the hearing focused in part on how the tax cap will provide tax savings to New York State residents, it also examined how relieving school districts and localities from state mandates could lessen any potential impact the cap may have on essential services. These mandates have long been cited by school districts and local governments as a source of increasing costs and the hearing examined the connection between these state requirements and property taxes.

A mandate relief recommendation mentioned often by those who testified were to repeal or reform the 1982 Triborough Amendment which can lock a municipality or school district into multi-year collective bargaining agreements that require unaffordable salary increases. Even if there is no contract currently in effect, step increases must still be granted due to the Triborough Amendment. Consequently, while private sector employers may avoid layoffs by freezing salaries, local government employers have no such option.

Among other recommendations mentioned often were to restructure pension cost-sharing and benefits since the state and its local governments operate under a defined benefit plan. It was suggested the state should reinstate the 3 percent employee pension contribution that was eliminated in 2000 for Tier 3 and Tier 4 members of the state Employees’ Retirement System upon completion of 10 years of service. It was suggested that the state must also undertake a thorough analysis of the benefits, funding methodology and oversight structures of the public pension system. Going forward, several suggested, the state should offer new hires the option of a defined contribution plan.

Still others claimed the Taylor Law needs reform in compulsory arbitration. Over the years that the compulsory arbitration law has been in existence, it was said, many bargaining units have sought to rush to arbitration and avoid substantive negotiations. Also mentioned as needing reform under the Taylor Law were to define ability to pay; limit access to binding arbitration; and add transparency to the arbitration process. Also mentioned were reforms to Police and Firefighter Disability.

Mentioned, too, were the costs of special education, and the Wicks Law. The transportation requirement was also cited as needing reform. It mandates that a seat must be reserved on the bus for any student entitled to ride it causing buses to travel their routes too empty. The costs of excessive testing were also mentioned as needing reform.

As the hearing drew to a close, Senator Martins offered, “I felt it was important to have a discussion on mandate relief. State mandated programs place local taxpayers and local officials in the position of having to pay for services they do not control.” Senator Flanagan added, “Any effort to provide property tax relief through the use of a tax cap must be coupled with mandate relief to make sure that residents continue to get the services they need. While everyone knows rising taxes are driving our residents out of our state, a significant loss of services would have the same effect and we must proceed cautiously. This hearing was very helpful in providing us with a clear view of the impact both of these actions will have on our residents.”