OLEAN — Along with reduced aid, higher costs and uncertainty over a pandemic, local officials have to contend with yet another hurdle on their next budgets — the tax cap.
Property tax levy growth for school districts will be capped at 1.23%, down from 1.81% last year, according to data released Wednesday by State Comptroller Tom DiNapoli.
“School district and municipal officials must remain fiscally cautious to stay under the cap as they prepare their budgets,” DiNapoli said. “The financial impact of the COVID-19 pandemic, combined with a levy growth rate of 1.23% and below 2% for the second year in a row, means they must examine their budgets more closely to control expenses.”
The 1.23% cap affects the tax cap calculations for 676 school districts and 10 cities with fiscal years starting July 1, including the “Big Four” cities of Buffalo, Rochester, Syracuse and Yonkers.
It is the lowest such cap since 2017, when the same municipalities saw caps of around 1.2%. The lowest tax cap factor since the tax cap was implemented was in 2016, with an allowable growth rate of just 0.12%.
The highest allowed — 2% — was in effect for all of 2012 and 2013, as well as a stretch from late 2018 to early 2020. However, due to the global pandemic, the rate dropped through 2020 and into 2021.
The tax cap, which first applied to local governments and school districts in 2012, limits annual tax levy increases to the lesser of the rate of inflation or 2% with certain exceptions, including a provision that allows school districts to override the cap with 60% voter approval of their budget.
Along with schools, lower caps are also affecting other municipalities with non-calendar budget years.
The city of Olean will see a lower tax cap again, Mayor Bill Aiello said, with its budget set to begin June 1. Other area municipalities with June 1 starts include many villages.
“Our tax cap is 1.31% for next year,” Aiello said, down from 1.78% in the 2020-21 budget year.
Much of the city’s $28.25 million budget comes from contracted expenses, the mayor said — a large portion being salaries for the around 150 city employees represented by union contracts with planned salary increases.
“We’re going to start the budget process,” the mayor added, having already started working with department heads on requests for the next fiscal year.
The mayor’s budget is due to the Common Council by Feb. 15, after which aldermen will offer changes to the document. The final budget must be approved by April 15 for a June 1 start.
“It will be a little bit of a different look, especially with the state with withholdings,” the mayor said, noting the 20% withholding by the state for most funds — including funds to fix roads and a fifth of the $2.4 million from the annual Aid and Incentives to Municipalities revenue sharing program.