Acknowledging that school districts' tax increases may be soaking up property-tax relief intended for homeowners, Governor Pataki has proposed that the state take over the distribution of tax-relief payments and impose caps on school spending increases.
The Governor said the state will spend $2 billion in the next fiscal year to support property-tax relief under the STAR program, which provides exemptions to homeowners.
Currently, school taxes imposed on homeowners are reduced by the exemption, and the state's money is paid directly to school districts to make up for the revenue loss.
But The Business Council predicted when STAR was enacted three years ago that many school districts would simply use the homeowner relief to mask larger-than-usual tax increases. And many critics say that has now happened, despite a 22 percent increase in state school aid over the last three years.
Governor Pataki's new proposal would have the state mail checks directly to most homeowners as a rebate on their school taxes, which he said would prevent school districts from using STAR "to mask excessive spending increases." Senior citizens would continue to receive the reduction directly in their property taxes.
The Governor also proposed that the state require school districts to obtain a two-thirds vote of approval from the voters if they increase spending significantly faster than inflation.
Businesses do not receive the STAR exemptions. To the extent that school districts are using STAR monies to mask a general increase in school tax rates, STAR has helped to push up property taxes on business, since businesses pay the full cost of any increase in tax rates without getting the exemption.