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Allowable Tax Levy

The Three Tax Levy Numbers Under New York State’s Tax Levy “Cap”

With all the talk of New York’s “2 percent tax cap,” it may come as a surprise to learn that each school district presents three separate tax levy numbers every year in order to comply with the law. Chances are good that none of those numbers will be exactly 2 percent, too.

In 2015, none of the state’s nearly 700 school districts had a 2 percent “cap.” That’s because the 2 percent figure is just one part of a complex formula that school districts must use to calculate two of their tax levy numbers, the tax levy limit and the maximum allowable tax levy. These numbers, which establish more of a threshold than a cap, help a district determine its proposed tax levy.

    1. Tax Levy Limit

      Essentially, the tax levy limit tells a school district how much voter support it
      will need to pass a budget with its proposed tax levy. For school districts, the tax levy limit is the highest allowable tax levy (before exclusions) that a school district can propose as part of its annual budget and need the approval of only a simple majority of voters (50 percent plus 1) to pass the budget. If a district proposes a budget with a tax levy amount (before exclusions) above this limit, it will need the approval of a supermajority of voters (60 percent) to pass the budget.

      School districts are required to report their calculated tax levy limit to the state comptroller by March 1 each year.

    2. Maximum Allowable Tax Levy

      The maximum allowable tax levy is the tax levy limit PLUS certain exclusions. Taxes levied to fund the following expenses are excluded from the tax levy limit:

      • Voter-approved local capital expenditures.
      • Increases in the state-mandated employer contribution rates for teacher and employee pension systems that exceed two percentage points.
      • Court orders/judgments resulting from tort actions of any amount that exceeds 5 percent of a district’s current levy.

    3. A school district adds these exclusions to its tax levy limit without triggering the need for 60 percent voter approval.

    4. Proposed Tax Levy

      The third tax levy number is arguably the most important. It’s the tax levy
      called for by a school district’s proposed budget. By definition, the tax levy is the total amount of money to be raised locally by a municipality (e.g., school district) after factoring in all other available revenues.

      If a school district’s proposed tax levy minus exclusions is less than or equal to the district’s calculated tax levy limit, the district will need the approval of a simple majority of voters to pass its budget. If the proposed tax levy minus exclusions is greater than the district’s calculated tax levy limit, 60 percent voter approval is needed.

Comparing the Numbers

Each May, New Yorkers vote on their school districts’ proposed budgets. The level of voter support needed to pass each budget will depend on how much the tax levy would be in the proposed budget. Here is a hypothetical school
district to illustrate:

  • PRIOR YEAR TAX LEVY (2015-16): $15,000,000
  • CALCULATED TAX LEVY LIMIT (2016-17): $15,207,000
  • EXCLUSIONS FROM THE LIMIT (2016-17): $216,500
  • MAXIMUM ALLOWABLE TAX LEVY (2016-17): $15,423,500

Scenario A

  • PROPOSED TAX LEVY (2016-17): $15,373,500 (2.49% increase over 2015-16)

How does this compare with the tax levy limit?

$15,373,500 − $216,500 = $15,157,000

The proposed tax levy minus exclusions ($15,157,000) is below the district’s calculated tax levy limit ($15,207,000). Therefore, the proposed budget, with a tax levy increase of 2.49 percent, requires approval by a simple majority of voters to pass.

Scenario B

  • PROPOSED TAX LEVY (2016-17): $15,423,500 (2.82% increase over 2015-16)

How does this compare with the tax levy limit?

$15,423,500 − $216,500 = $15,207,000

The proposed tax levy minus exclusions ($15,207,000) is at the district’s calculated tax levy limit ($15,207,000). Therefore, the proposed budget, with a tax levy increase of 2.82 percent, requires approval by a simple majority of voters to pass.

Scenario C

  • PROPOSED TAX LEVY (2016-17): $15,472,500 (3.15% increase over 2015-16)

How does this compare with the tax levy limit?

$15,472,500 – $216,500 = $15,256,000

The proposed tax levy minus exclusions ($15,256,000) is above the district’s calculated tax levy limit ($15,207,000). Therefore, the proposed budget, with a tax levy increase of 3.15 percent, requires approval by a supermajority of voters (60 percent or more) to pass.

Original Information Produced by the Capital Region BOCES Communications Service, in consultation with the Questar III BOCES State Aid and Financial Planning Service. Published January 2016.