Local Taxes in New York:
Easing the Burden
Citizens Budget Commission Conference
December 6, 2007
Held at the Rockefeller Institute, Albany, NY
I.
II.
III.
IV.
New York’s Tax Burden is High
and Inequitable
State Policies Result in High
Local Tax Burdens
State Leaders Have Tried to
Address the Local Tax Burden
Options for Local Tax Relief
2
New York’s Combined State and
Local Tax Burden is the 2nd Highest
in the Nation.
 While state taxes are in line with national
norms, local taxes are 79 percent higher than
the national average.
 New York’s state and local burden is 26
percent higher than all other large and
neighboring competitor states.
3
New York’s Comparative Tax Burden
Table 2
State and Local Taxes per $1,000 of Personal Income
New York and Selected Competitor States
Fiscal Year 2004-05
New York
Combined State and Local Taxes
Percent of
Per $1,000
U.S.
Personal
Average Rank
Income
2
133%
$150
State Taxes
Percent of
Per $1,000
U.S.
Personal
Average Rank
Income
30
101%
$68
Local Taxes
Per $1,000
Percent of
Personal
U.S. Average Rank
Income
1
179%
$82
Connecticut
Ohio
New Jersey
California
Pennsylvania
Illinios
Michigan
North Carolina
Massachusetts
Florida
Georgia
Texas
119
118
117
116
111
111
110
108
107
106
104
100
106%
105%
104%
103%
99%
99%
98%
96%
95%
94%
92%
89%
11
12
15
16
25
26
27
32
34
36
40
44
73
68
63
78
66
60
73
74
67
60
59
47
109%
102%
94%
116%
99%
89%
110%
110%
100%
90%
89%
71%
20
28
36
13
33
41
19
17
31
40
43
47
46
50
54
38
45
51
37
34
40
46
45
53
101%
110%
118%
83%
99%
112%
80%
75%
87%
100%
97%
115%
16
8
3
33
18
6
35
36
30
17
22
4
U.S. Average
$113
100%
NAP
$67
100%
NAP
$46
100%
NAP
Note: Calculated as fiscal year taxes divided by prior year personal income.
Does not include the District of Columbia.
Competitor states are the 10 most populous states plus Connecticut, New Jersey and Massachusetts.
NAP = Not Applicable.
Sources: U.S. Census Bureau, State and Local Government Finances: 2004-2005; U.S. Department of Commerce, Bureau of Economic Analysis.
4
Even without New York City, New
York’s local tax burden is 32 percent
higher the next highest state.


New York City’s local tax burden is $94 per
$1,000 personal income – more than double the
national average.
The local tax burden outside the City is $72 per
$1,000 personal income – 58 percent above
average.
5
Local school tax efforts are inequitable.
Table 6
Fiscal Characteristics of Selected School Districts
School Year 2004-2005
District
New York City
"Big 4" Cities
Buffalo
Rochester
Syracuse
Yonkers
Other Upstate Urban
Binghamton
Utica
Albany
Upstate Rural
Massena
Upstate Suburban
Saratoga Springs
Wealthy Downstate Suburban
Great Neck
Scarsdale
Poor Downstate Suburban
Roosevelt
Mount Vernon
New York State
Local School Tax
Local Tax
Effort
Local Revenue Total Revenue
Pupils Base per Pupil (per $1,000 Tax Base)
per Pupil
per Pupil
1,043,816
$603,564
$12.03
$7,259
$15,025
43,329
36,613
22,957
24,118
193,292
192,680
217,072
789,315
11.48
16.15
14.19
7.58
2,219
3,112
3,081
5,980
14,871
15,356
15,028
18,203
6,311
9,169
10,482
310,059
184,647
465,407
13.68
12.56
19.54
4,243
2,319
9,093
12,469
12,010
16,994
2,875
329,183
15.26
5,023
12,970
6,878
673,550
11.37
7,658
13,319
6,262
4,714
2,395,304
2,394,917
8.68
7.71
20,786
18,460
23,489
21,688
3,116
9,976
2,848,242
398,078
564,498
$645,404
10.98
11.86
$11.79
4,373
6,693
$7,608
17,932
15,860
$15,118
Despite state
education aid, a
district’s tax base
– wealth and
income – largely
determine local
tax effort and
spending per
pupil.
Note: Tax Base is an equally weighted average of personal income and real property values.
Source: New York State Department of Education, Office of Management Services, Fiscal Analysis and Research Unit, School District Fiscal Profiles, Masterfile for 20042005.
6
Property tax rates are 45 percent higher
upstate than downstate (outside NYC).
Property values in downstate counties increased 5 times faster than
in the upstate counties from 1995 to 2005. Upstate counties
increased property taxes only 28 percent from 1995 to 2005, yet
have been unable to lower property tax rates.
Full Value (Effective) Property Tax Rate
Fiscal Years 1995, 2000 and 2005
$35
Per $1,000 Value
$30
$25
$29 $28
$25
$28 $27
$30
$26
$30 $30 $31
$28
$21
$20
$15
$10
$5
$0
New York State
New York City
FY 1995
NYC Suburbs
FY 2000
FY 2005
All Other Upstate
Counties
Note: NYC Suburbs are Dutchess, Nassau, Putnam, Rockland, Orange, Suffolk, Ulster and Westchester Counties.
7
State Laws Result in High Local Tax
Burdens
 Labor and Medicaid costs are the biggest cost drivers for
counties.
 New York has more local governments than competitors
and more school districts than the national average.
 New York employs more local government workers and
pays higher wages than national averages.
 State labor and pension laws undermine local control of
labor costs.
8
Labor and Medicaid costs are the
biggest cost drivers for counties.
Police expenditures rose
83 percent and were the
# 1 driver of county
expenses.
Medicaid costs grew 72
percent over the
previous decade and
were the # 2 driver of
county expenses.
Counties have
increasingly turned to
sales tax revenues to
fund expenditures.
Table 7
Change in Total County Revenues and Expenditures
Excluding New York City
State Fiscal Year 1995 to 2005
(dollars in millions)
Total Revenues
Sales Tax
Property Tax
State Aid
Federal Aid
Other Taxes
Other Government Aid
Other Revenues
FY 1995
$12,388
2,514
3,165
1,916
1,538
198
269
2,789
FY 2005
$17,524
4,621
4,385
2,687
1,885
323
353
3,270
Change
$5,135
2,107
1,220
771
347
125
84
481
Percent of
Total Change
100%
41%
24%
15%
7%
2%
2%
9%
Total Expenditures
Police
Medicaid
General Government
Economic Assistance (Excluding Medicaid)
Transportation
Education
Utilities
Culture-Recreation
Fire
Debt Service and Repayments
Other Expenditures
$13,329
1,567
1,255
1,585
3,170
873
616
378
239
25
814
2,807
$18,724
2,868
2,156
2,482
3,696
1,333
998
659
353
59
1,174
2,946
$5,395
1,301
901
897
526
461
382
281
113
33
360
138
100%
24%
17%
17%
10%
9%
7%
5%
2%
1%
7%
3%
Note: Data is not intended to provide detailed accounting or legal information concerning county finances. In any given year, total
revenues and expenditures may not add due to the exclusion of other financing sources such as borrowings or the appropriation of fund
balances. The fact that changes in revenues is less than changes in expenditures does not signify operating deficits.
Source: New York State Office of the Comptroller, Financial Data for Local Governments; CBC Staff Calculations.
9
New York has 84 percent more local
governments per capita than NJ and CT
and 16 percent more school districts per
capita than the national average.
Table 9
Number of Local Governments Per 10,000 Residents
New York and Selected Competitor States
Fiscal Year 2001-2002
State
New York
New York (excluding New York City)
County General
Sub-County
School
Purpose
General Purpose Districts
0.03
0.81
0.36
0.05
1.41
0.62
Special
Districts
0.60
1.03
All Units
1.80
3.12
50-State
1
Rank
34
28
Illinois
Pennsylvania
Ohio
Michigan
Texas
Georgia
Connecticut
New Jersey
Massachusetts
California
North Carolina
Florida
0.08
0.05
0.08
0.08
0.12
0.19
0.00
0.02
0.01
0.02
0.12
0.04
2.19
2.09
1.98
1.79
0.57
0.65
0.53
0.67
0.55
0.14
0.67
0.25
0.75
0.42
0.59
0.58
0.52
0.22
0.05
0.65
0.13
0.31
0.00
0.06
2.53
1.53
0.56
0.37
1.08
0.71
1.13
0.33
0.63
0.84
0.40
0.39
5.56
4.10
3.20
2.82
2.29
1.77
1.70
1.68
1.32
1.30
1.19
0.75
15
23
27
29
33
35
37
38
40
41
43
47
U.S. Average
0.12
1.43
0.54
1.39
3.47
NAP
Note: Population as of April 1, 2000.
Competitor states are the 10 most populous states plus Connecticut, New Jersey and Massachusetts.
(1) 50-State Rank outside New York does not include "New York State (excluding New York City)."
NAP = Not Applicable.
Source: U.S. Census Bureau, 2002 Census of Governments: Organization Phase.
10
New York employs 23 percent more
local government workers per capita
and pays wages 30 percent higher
than national averages.
Table 10
Number of State and Local Full-Time Equivalent Employees Per 10,000 Residents
New York and Selected Competitor States
Fiscal Year 2001-2002
State
New York
New York (excluding local NYC employees)
50-State Rank - Average Annual
1
2
Local FTEs
Local Pay
2
$53,520
2
$44,536
50-State Rank Average Local
1
Pay
1
10
Total
621
NA
State
132
NA
Local
489
459
Texas
Ohio
Georgia
California
Illinois
New Jersey
Michigan
Florida
Massachusetts
Connecticut
Pennsylvania
North Carolina
573
533
554
506
510
565
504
472
510
522
449
296
124
121
144
108
116
172
142
111
148
193
127
62
450
412
411
398
394
392
362
361
361
329
321
233
3
4
5
8
10
11
16
17
18
20
22
41
33,732
39,444
33,996
52,680
43,392
50,952
44,304
37,908
44,700
47,580
42,360
35,088
33
20
32
2
12
3
11
22
10
7
13
29
U.S. Average
541
146
395
NAP
$41,040
NAP
Note: Population as of April 1, 2000.
Competitor states are the 10 most populous states plus Connecticut, New Jersey and Massachusetts.
(1) 50-State Rank outside New York does not include "New York State (excluding local New York City employees)."
(2) Based on average March 2002 full-time monthly payroll for local government employees.
NA = Not Available.
NAP = Not Applicable.
Source: U.S. Census Bureau, 2002 Census of Governments: Employment Phase.
11
The State’s Taylor Law and PERB
undermine local control of labor
costs.
 Arbitration does not emphasize ability of the employer


to pay. Settlements are often based on unions in
neighboring districts or patterns established by other
settlements. Some unions (e.g. NYC police) “choose”
to go to PERB.
Local governments may also “choose” not to bargain to
avoid the responsibility for large settlements.
The Triborough Amendment extends expired contracts
until new contract reached – takes pressure off unions
and management to settle before expiration of old
contract.
12
State Leaders Have Tried to Address
the Local Tax Burden.
 School Tax Relief (STAR)
 Property Tax Rebates
 Medicaid Cap
 Foundation Aid for Schools
 Government Consolidation
13
STAR is poorly designed tax relief
and state aid.


STAR motivates school districts to increase
spending – also impacts commercial property
tax rates.
STAR is poorly targeted state aid.


Exemption is based on county property wealth. The
three wealthiest counties in New York received 42
percent of STAR aid in fiscal year 2005.
Does not include renters (except in NYC) or
commercial property.
14
STAR would provide greater relief to
less wealthy districts if allocated as
state education aid.
Figure 5
STAR Per Pupil
School Year 2004-2005
1600
$1,436
1400
$1,373
STAR per Pupil
STAR per Pupil if Allocated As State Aid
$1,334
$1,151
1200
$949
$827
1000
$715
800
$766
$669
$1,145
$833
$692
$732
$348
$312
$942
$930
$857$904
$636
$603$565 $627
600 $517
400
$1,365
$290
$256
$332
200
le
sd
a
Sc
ar
Ro
os
ev
el
M
t
ou
nt
Ve
rn
on
G
re
at
N
ec
in
g
Sp
r
ga
at
o
k
s
na
as
se
an
y
Al
b
tic
a
U
to
n
am
ng
h
ke
rs
Bi
Yo
n
e
Sy
ra
cu
s
r
lo
he
st
e
Ro
c
ffa
Bu
M
Sa
r
N
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Yo
rk
Ci
ty
0
Source: New York State Department of Education, Office of Management Services, Fiscal Analysis and Research Unit, School District Fiscal Profiles, Masterfile for 20042005.
15
Property tax rebates are better
targeted but embody same equity
flaws as STAR.



Limiting the Middle-Class rebate to households
with less than $250,000 is positive first step.
But, rebate provides greater relief to districts in
wealthier counties.
Maximum rebate varies from $250 in Buffalo to
$809 in Scarsdale.
16
Other State measures to address local
taxes are a move in the right direction.

Medicaid Growth Cap


Foundation-Based School Aid


The 3 percent local growth cap eases the county tax burden,
but does not address existing inequities from deriving
funding for an assistance program at the local level.
New formulas base state aid on local tax efforts, but hold
harmless provisions and increased aid for high-tax districts
resulted in $329 million for 304 districts that should not have
received aid increases under the new formulas.
Shared Services and Consolidation Efforts

Commission on Local Government Efficiency and
Competitiveness will report recommendations next April.
17
Options for Local Tax Relief
 Cap Local Taxes
 Make Local Tax Burden Equitable
 Reduce Local Cost Drivers
18
The State could impose tax caps to
limit tax collections.
Tax caps will slow growth of tax burden, but…
 Caps are undemocratic and artificially limit
residents’ demand for public services.
 Caps affect lower income communities more
adversely than wealthier ones.
 Caps may be circumvented, putting other
problematic burdens on taxpayers.
19
New York should create a more
equitable local tax structure.



New STAR funding could be converted into an
expanded circuit breaker program.
The State could assume local Medicaid costs.
New York could base education aid entirely on
local school tax efforts.
20
New STAR funding could be
converted into an expanded circuit
breaker program.
Circuit breakers target relief to low-income
households whose property taxes increase faster
than incomes.

Lower income households spend greater share
of income on housing costs.


Renters can be easily included.
21
The State could assume local
Medicaid costs.
If funded with across-the-board state personal income tax increase…
Increase/(Decrease)
in Per Capita Taxes
Counties With Increased
Per Capita Taxes
New York
City
Rest of
State
Total
Increase Above
$100 per capita
Including
NYC
($242)
$177
27
9
Excluding
NYC
NA
$0
7
3
22
New York could base education aid
entirely on local school tax efforts.
School Tax Effort
Low or Average
Spending per Pupil
104 school
districts would
gain $1.2 billion
in state aid and
reduce local
taxes $489
million. The
State would
reduce aid to
wealthy districts
$813 million.
Figure 8
School District Spending per Pupil and Local Tax Effort
Impacts of Uniform Tax Effort Policy
School Year 2007-08
Below or At
Adequacy
(Median) Level
324 Districts
Policy Impact:
$1,602 million state aid increase
$156 million local tax increase
249 Districts
Above Adequacy
Policy Impact:
(Median) Level $813 million decrease in state aid
$47 million local tax increase
High
104 Districts
Policy Impact:
$1.2 billion state aid increase
$489 million local tax decrease
0 Districts
No Policy Impact
Note: School tax effort equals local school taxes divided by an equally weighted measure of personal income and
property values.
Source: New York State Education Department, Office of Management Services, Fiscal Analysis and Research Unit (August 14, 2007).
CBC staff calculations.
23
The State could address other local
cost drivers.

Reduce Medicaid Expenditures


Pension Benefit Reforms



Defined contribution system
Restructure benefits for new hires
Revise Framework for Collective Bargaining




Local savings of $748 million
More timely process
Alter arbitration criteria and constraints
Adopt another model of negotiations, for example last-best
Additional Consolidation Initiatives


Small school districts - $241 million in savings for schools under 900
pupils
Property assessing units
24