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Studies of tax caps show detriment to education

New York State has the highest local taxes in the nation, prompting Governor Paterson to propose a cap on how much property taxes can be increased for education funding. But how would a tax cap affect public education?

Studies show that tax limitations decrease revenue for public services and are associated with lower student achievement and higher class sizes, according to a briefing paper by the New York State United Teachers (NYSUT) and the American Federation of Teachers (AFT) Research and Information Services.

The briefing paper reviews more than a dozen studies and concludes that state funding does not replace local funding limited by tax caps; in fact, local funding is often used to make up for state funding cuts during economic downturns. Furthermore, tax caps affect poor families and their communities the most, widening inequality. Studies linked tax limitations with lower student achievement, both when comparing districts affected by tax caps to similar districts not affected and when looking at achievement before and after a tax limitation took effect.

Also, according to a report from the Center on Budget and Policy Priorities (CBPP), Massachusetts’ Proposition 2 1/2 made local budgets more dependent on state aid, which fluctuates along with the health of the economy. Prop. 2 1/2 took effect during the “Massachusetts Miracle,” a period of rising state revenues due to economic growth; CBPP warns against enacting a similar law during a slow economy, when state funding is unlikely to make up for local shortfalls.

 ## school enrollment in MA, 1970-2008.##
## school enrollment in MA, 1970-2008.##
Tajuana Cheshier

The report points out that Massachusetts enacted the law at a time of falling school enrollments, which allowed for belt-tightening by districts. National Center for Education Statistics projections show falling enrollment in New York state – as in much of the Northeast – for the next 8 years, though individual communities should take their own projections into account in considering the impact of this bill. Also, for perspective’s sake, Prop. 2 1/2 took effect in 1982; in the 18 years since that time, public school enrollment in Massachusetts fell slightly overall, but rose for a few years around 2000.

The New York Property Tax Cap Coalition cites high test scores, stable class sizes, increased numbers of qualified teachers, and middle-of-the-pack tax burden in Massachusetts as a reason to support the cap. In a fact sheet on the issue, the NYS Commission on Property Tax Relief asserts that reports of cuts to education in Massachusetts do not take into account context such as falling student enrollment.

CBPP has issued a rebuttal, pointing out that Proposition 2 1/2 limited tax increases for all services, which allowed communities to shift funding from other services to shelter school funding, while New York’s proposed law would limit property tax increases for school funding only, preventing communities from sheltering their schools. Furthermore, CBPP attributes Massachusetts’ high achievement to targeted state aid for high-poverty districts; New York has a higher percentage of students in poverty than Massachusetts and a much greater funding gap between low- and high-poverty districts.

In addition to a tax cap, the Property Tax Relief Commission’s preliminary report, released in June, recommended reforming the state’s STAR property tax relief program to create a “circuit breaker” that would limit property taxes to a certain percentage of an individual’s income, and requiring more detailed accounting of the local costs of implementing state education mandates.

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