Governor Andrew Cuomo’s proposed executive budget includes a novel way to save the state money and cut school aid.
You may have heard that under Cuomo’s proposal, he squeezes several aid categories into a single funding stream that cuts $700 million in state aid to schools.
But there’s another element of the governor’s plan that could cause school districts even more acute pain. He wants to cut the STAR reimbursement that the state provides to school districts.
Typically, STAR recipients pay less on their property tax bills and then the state reimburses the districts for the difference. But this year, the governor’s executive budget cuts the reimbursement to districts by $1.3 billion.
"It is unique that STAR is included in the state aid runs this year. In some ways, it’s led to confusion out in the field in how to understand how much money you’re going to get under the governor’s proposal," Executive Director of ASBO New York Brian Cechnicki told Capital Tonight.
When asked why the governor is proposing this cut, Bob Lowry of the New York State Council for School Superintendents told Capital Tonight that it may have to do with a maintenance of effort requirement included in CARES Act federal aid used for education.
"The assumption among public school groups is that the state will attempt to argue that in cutting STAR, it is not cutting education funding, and is therefore in compliance with the MOE requirement, even though $2 billion out of the $3.8 billion in federal aid is being offset by cuts in state support," Lowry said.
NYSCOSS and other groups disagree with the governor’s position that a cut in the STAR reimbursement is somehow not a cut to education funding.
"Stop and think. If this money is gone, and there’s no federal aid, then schools will be worse off," Lowry said. "Either they would have to significantly raise local property taxes, or cut spending to offset the loss of the STAR reimbursements."
Let’s back up for a moment. STAR, the School Tax Relief program, is designed to subsidize a portion of taxpayers’ local school district tax bills to reduce their tax burden without affecting school district revenues.
Under STAR, the state essentially pays a portion of everybody’s tax bill.
Under Basic STAR, the school tax a homeowner owes is calculated using a lower assessed home value. Under Enhanced STAR, lower income seniors receive a more generous tax break.
The homeowner’s tax savings is then paid by the state directly to the school district, so that the district doesn’t lose revenue.
Over the last few years, the state has been shifting STAR from a tax exemption to a tax credit program. For example, if you purchase a new home, you will be automatically steered into the new tax credit program. A STAR tax credit recipient pays the full bill upfront, and the state cuts the taxpayer a check directly for the STAR reduction.
In theory, the check is supposed to arrive before the school tax bill does. If the check is late, too bad. You will still owe the full amount of your school taxes at tax time. Under the tax exemption, the savings is automatic.
While the governor’s budget includes language to end new enrollment in Enhanced STAR, the changes to the program detailed above will not affect homeowners, whether they are tax exemption or tax credit recipients.
Instead, the burden of these changes threatens to fall on school districts, because the governor is reducing the amount of money the state reimburses them under the STAR tax exemption program.
While this year, the governor proposes backfilling the gap with federal money, there will most likely not be federal money next year, yet the governor is proposing that the state reduction remain permanent.
Star exemption payments total about $2 billion statewide.
"We hope that in addition to some of the more draconian elements of the proposal being rectified by the legislature, that some general clarity is provided, especially for our members who do the school district budgets," Cechnicki said. "It’s really important that they fully understand exactly how much money they’re going to receive next year."