Why The State Budget Matters to County Property Taxes
The budget decisions made in Albany have a direct impact on counties and county property taxpayers.A Statement About Why The State Budget Matters to County Property Taxes
By Stephen J. Acquario, Executive Director of the New York State Association of Counties
As State Lawmakers and Governor Andrew Cuomo convene in Albany this week to negotiate the final terms of the 2017-18 New York State Budget, it is important to recognize how the decisions made in the State Capitol have a direct impact on county property taxpayers.
Governor Cuomo and the State Legislature continue to highlight that the largest tax burden New Yorkers face is the property tax. County leaders agree 100 percent – property taxes are too high in New York, especially compared to other states. From the county perspective, we believe a primary reason for high property taxes is that counties in New York are required to pay for State services and programs that other counties across the nation do not. If you want to compare our property tax rates to other states, then you also need to compare how New York state mandates directly impact local spending and revenues.
To further illustrate this point, across the nation, there are 3,069 counties. Together, the counties across the nation contribute about $9.7 billion each year in locally raised taxes to support the direct program costs of providing Medicaid services to recipients in their state (not including the costs of operating more than 1000 county owned hospitals, clinics and nursing homes). Alarmingly, the local taxpayers in New York's 57 counties and New York City are required under state law to pay $7.5 billion annually to support New York's largest in the nation Medicaid program. Counties outside of New York City must contribute $2.3 billion annual to the State's Medicaid program. That means New York's county taxpayers outside of NYC spend as much as all other county taxpayers in the nation pay combined! The amount is more than triple when New York City is included.
In another example, only about half of the states have Safety Net programs, which provide cash payments and other public assistance to low income people when federal programs expire. New York's program is one of only 11 nationwide that provide benefits to childless adults that do not have some disability. Again, unique to New York, local taxpayers in the 62 counties are required to pay for 71 percent of these Safety Net costs, exceeding $1.1 billion in 2016. Historically, this was a 50-50 partnership and the state and counties shared this cost equally. In 2011, the state shifted more of the burden to counties during the State fiscal crisis spawned by the Great Recession. Again, this a significant cost that other local taxpayers nationwide do not have to pay. Unfortunately, there are dozens more examples like this.
To make matters worse, since the Great Recession alone, the state has shifted nearly $400 million annually in these “partnership” program costs from the state to county governments. This does not include more than $90 million in new state cost shifts to foster care and other social service programs proposed in the pending state budget in Albany. The programs targeted for state funding reductions are the same ones that will be called upon to provide basic services if we raise the age of criminal responsibility, and are currently aiding families ravaged by opioid and heroin addiction in so many of our communities. If anyone expects success in responding to the opioid/heroin epidemic or raising the age of criminal responsibility, cutting state funding for foster care and social service programs undermines that goal.
Furthermore, there are two major state spending proposals in the state budget that counties must finance up front and then seek partial state reimbursement for later. First, is an expansion of indigent defense services and eligibility. Second, is a proposal to raise the age of criminal responsibility. While counties may support some of the policy goals of these state proposals, local taxpayers should not be the ones who ultimately pay for the expansion and the then hope for reimbursement from the state in the future.
The proposed expansion of indigent defense services for the poor (which the state says they will fully reimburse) is combined with a doubling of the income eligibility threshold (which the state will not pay for) will require counties (outside NYC) to pay $300 million or more per year for the new services when fully phased in. This is on top of the nearly $400 million that county taxpayers are already required to spend for indigent defense. Raising the age of criminal responsibility is expected to increase county and New York City costs by more than $100 million annually (at least $22 million in unreimbursed costs to counties outside NYC). Together, counties will need to pay for nearly $320 million annually in new costs and then seek partial reimbursement from the state later as proposed in the state budget.
On a more positive note, the budget proposes to smartly modernize current tax law requirements regarding sales tax collection for purchases of tangible goods made over the Internet. Today, New York businesses and consumers are required to pay sales tax on these transactions, but often this does not happen. The Governor's budget estimates that on a full annual basis nearly $140 million in local sales tax goes uncollected due to loopholes and outdated procedures in the state's tax law. Counties use local sales taxes to reduce pressure on property taxes, while also sharing about 25 percent of these locally raised sales taxes with other local governments. This, in turn, helps them to keep property taxes lower. A sales tax dollar that is owed, but not collected, must come from some other local taxpayer's pocket or through a cut in a locally delivered service.
These are important policy issues and they can have significant property tax implications for homeowners and small businesses across New York. To prevent unnecessary increases in local taxes to pay for these state proposed expansions and cost shifts, state elected leaders need to fund these service expansions up front rather than asking local taxpayers to pay first and hope they will be reimbursed later. They also need to update our tax code to ensure the erosion of the local sales tax base does not continue placing more pressure on property taxes. Without these actions, New York will likely continue to fall further behind the rest of the nation regarding our high property tax burden.