School Tax Relief (STAR)

Middle Class STAR Rebate Program

The Executive Budget, proposed creating a bipartisan commission, invested with Moreland Act powers, which will develop a fair and effective property tax cap proposal. Additionally, that body will produce a package of reforms to counteract the root causes of New York’s high property taxes and increase the fairness of the state’s current property tax relief system. Nassau County Executive Tom Suozzi will serve as chairman of the Commission, which will deliver its recommendations later this year.

In order to offer immediate relief to taxpayers, however, the Executive Budget also recommends $5 billion in funding for the STAR program, an increase of $134 million over last year. Senior citizens will receive a $91 million increase in their Enhanced Rebate, which will raise the average benefit they receive from $327 to $458 or 40 percent.

The Executive Budget continues the Middle Class STAR program begun last year, which provides additional benefits to taxpayers on a sliding scale based on income, with benefits declining as income exceeds $90,000 for upstate homeowners and $120,000 for homeowners in the higher cost New York City metropolitan region. Those with incomes over $250,000 will not receive this additional benefit.

Because of the fiscal difficulties facing the state, however, the planned expansion of Middle Class STAR and the New York City Personal Income Tax Credit, originally scheduled to take place in 2008-09, has been delayed by one year. The Personal Income Tax credit will also be discontinued for residents with high incomes (over $250,000), consistent with the provisions of Middle Class STAR. These and other adjustments to the program will produce savings of $354 million.

The Executive Budget also undertakes several other initiatives to help reduce property taxes by reducing the financial burden facing local governments. Overall, the 2008-09 budget will provide municipalities with a positive fiscal impact of $2.7 billion. Major actions include:

AIM: Fully funding the second installment of the four-year, $200 million increase in the Aid and Incentives to Municipalities program initiated in last year’s budget. Additional aid totaling $6 million will also be provided to 26 cities, towns and villages that receive significantly less AIM funding on a per capita basis than peer municipalities. In total, support for the program in municipalities outside New York City will increase by $56 million. New York City’s AIM payment will also be partially restored to $164 million, with a full restoration of $328 million to be provided in 2009-10.
Wicks Law: Reforming the Wicks Law to help reduce property taxes through the lowering of local construction costs. Under the Governor’s proposal, thresholds for the application of Wicks Law regulations would rise from $50,000 to $3 million in New York City, $1.5 million in Nassau, Suffolk and Westchester counties, and $500,000 in the remainder of the State.
Medicaid Cap, FHP Takeover: Continuing the implementation of the state takeover of Family Health Plus program costs and the capping of county Medicaid costs will save localities $914 million in the upcoming fiscal year, an increase of $224 million.
Education Aid: Providing a total school aid increase of $1.46 billion in 2008-09 – the second year of Governor Spitzer’s Four-year Educational Investment Plan, which will increase state aid to schools by over $7 billion by 2010-11.
Preschool Special Education Cap: Capping the annual growth in local preschool special education costs for counties outside New York City to no more than 3 percent when fully implemented. The state will instead bear these additional costs.
Local Government Efficiency: Implementing a package of recommendations from the Commission on Local Government Efficiency and Competitiveness, including restructuring the Shared Municipal Services Incentive program, improving cooperation across property tax administration jurisdictions and highway departments, and others.

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