Here are the answers to some commonly asked questions about school district budgets in New York.
Q: What is the difference between the tax levy and tax rate?
A: The tax levy is the total amount of money a school district raises in taxes each year from all property owners in the district.
Tax rates are calculated by dividing the total amount of the levy by the total taxable assessed value in a community. Tax rates are affected by changes in both municipal assessments and state equalization rates, which are determined in the summer. The tax rate is used to calculate each individual property tax bill.
Q: What is an equalization rate?
A: Equalization rates are intended to spread the tax burden across all municipalities (cities, towns and/or villages) within the school district as fairly as possible. The rates are intended to “equalize” or compensate for differing assessment practices. For example, one municipality’s assessments may be more recently updated than others, and property values don’t change equally in all municipalities within the school district.
A municipality’s equalization rate is set by New York state to reflect a municipality’s level of assessment. It is calculated by dividing total assessed value by total market value.
● An equalization rate of 100 means that the municipality is assessing property at 100 percent of market value.
● An equalization rate of less than 100 means that the municipality’s total market value is greater than its assessed value.
● An equalization rate of greater than 100 means that the municipality’s total market value is less than its assessed value.
Q: What is the tax levy limit, or tax cap?
A: The tax levy limit is the highest allowable tax levy (before exemptions) a school district can propose as part of its annual budget for which a simple majority of voters (50 percent + 1) is required. Any proposed tax levy amount above this limit would require approval by a supermajority (60 percent or more) of voters. The tax levy limit sets a threshold requiring districts to obtain a higher level of community support for a proposed tax levy above a certain amount.
Q: What happens if the budget is defeated?
A: Under state law, if the school budget is defeated, the board of education can put the same or a modified budget up for another vote, or immediately adopt a contingent budget. If residents defeat the proposed budget during a second vote, the board must adopt a contingent budget.
Q: What is a contingent budget?
A: Under a contingent budget a school district must adopt a budget with no tax levy increase and eliminate all non-contingent expenses such as certain student supplies, certain equipment purchases and the free community use of school facilities (the district must charge a fee). The administrative budget would also be subject to restrictions.
Q: What is a “fund balance” and how does it help offset my school taxes?
A: A fund balance is created when a district receives more revenue than expected and/or spends less than the amount budgeted. School districts often use fund balance funds to lower the total tax levy and reduce the tax impact on district residents in the coming year.
Q: How could STAR reduce my school taxes?
A: STAR provides partial school property tax savings to eligible homeowners. Most New Yorkers who own and live in their homes are eligible for STAR savings on their primary residences. There are two STAR programs with different eligibility requirements:
● Basic STAR exemption is available to homeowners with incomes below $500,000.
● Enhanced STAR exemption is available to senior citizens (age 65 and older) with yearly household incomes not exceeding $86,300. Income eligibility for 2019 is calculated using information from the 2017 tax year.
More information can be found here: https://www.tax.ny.gov/pit/property/star/eligibility.htm Contact your town assessor at [insert phone number of each town assessor in the district with area code] to apply for STAR.
Q: Are taxpayers’ STAR savings factored into the budget?
A: No. The STAR program is tax relief for homeowners paid for by New York state through state taxes. This tax relief for homeowners does not affect the school district budget.
Q: What are BOCES services and BOCES aid?
A: Boards of Cooperative Educational Services, or BOCES, provide shared services to school districts as a way to pool resources and share costs. Sharing allows districts to provide programs and services that they might not be able to afford otherwise. A district using BOCES services for the current school year is reimbursed a portion of the cost of the services in the following school year by New York state. The amount returned to each district varies by services and is based on a formula that takes into account the district’s financial resources.
Q: Why do salaries and benefits comprise so much of a school budget?
A: It takes many people to create and maintain a safe and productive learning environment. Employees teach, transport, coach and care for the community’s children. They clean buildings, mow playing fields, order supplies and make decisions so that schools run effectively and efficiently.
Q: What is a capital reserve fund?
A: A capital reserve fund allows the district to set aside money for future construction projects and major purchases, much like a savings account. The fund cannot be established without voter approval, and reserve funds cannot be spent without voter approval. Because capital assets have a predetermined useful life expectancy, a reserve fund reduces the need to borrow funds, yet still maximizes state aid, to replace those assets in the future.