media
August 13, 2008

AQE: New study reveals devastating effects of Massachusetts tax cap

Source: Alliance for Quality Education

The Alliance for Quality Education
FOR IMMMEDIATE RELEASE: August 13, 2008
CONTACT: Billy Easton (518) 461-9171

New Study: Property Tax Cap Had Devastating Consequences for Public Education in Massachusetts

Group Urges Paterson to Abandon “Gimmick” that Would Hurt NY Schools

alliance for quality education logoALBANY, NY – Enacting a property “tax cap” in New York would likely hurt New York schools – the way a similar “cap” did in Massachusetts – according to a new policy brief released today by the Alliance for Quality Education. (The policy brief appears below.)

Governor David Paterson has proposed a property tax cap – called a “gimmick” by Thew New York Times – that passed the State Senate in a close vote last week. Governor Paterson has urged the State Assembly to adopt the tax cap when it meets in special session on Tuesday, August 19.

“We need to learn from the experience of Massachusetts and not repeat a mistake that could devastate public education in New York state,” said Billy Easton, executive director of AQE.

The key findings of the AQE study are:

  • The Massachusetts tax “cap” failed to lower property taxes, and overall, per capita taxes and fees rose.
  • The Massachusetts cap hurt public education. In the immediate aftermath of Proposition 2½, many communities imposed a hiring freeze or laid off employees.
  • The Massachusetts tax cap was particularly harmful during bad economic times, such as those New York is experiencing right now
  • Middle class school districts fared the worst, as wealthy school districts frequently voted to override the tax cap,

AQE will be hosting a conference call media briefing, with budget and education experts – at 11:30am Wednesday morning to discuss the consequences of property tax caps in states like Massachusetts.

  • WHAT: Media Conference Call to discuss effects of property tax cap on public education in other states and new developments in the campaign against the Paterson tax cap gimmick.
  • WHERE: Dial-in: 1.800.704.9804 Password: Contact Sumaya Saati 518-432-5315 x603
  • WHEN: Wednesday, August 13, 2008 – 11:30 a.m.

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Policy Brief: Cuts to Schools, Not Taxes

The Impact of the Massachusetts Property Tax Cap

In 1980, Massachusetts voters approved Proposition 2½, which “capped” property tax revenue growth at no more than 2.5% per year and 2.5% of a community’s assessed property value.

The cap of 2.5% was set arbitrarily and was not designed to adjust for rising costs beyond the control of a school district, like healthcare, heat and fuel costs, or special education.

The Massachusetts tax “cap” failed to lower property taxes, and overall, per capita taxes and fees rose.

The cap slowed the rate of increase in property taxes, but that was offset by growth in other non-tax fees and charges to make up for lost revenue.

In the eight year period after the cap, property taxes per person grew by 16.8%, less than the pre-cap rate of increase.1

At the same time, however, Massachusetts began to make up lost revenue through rapidly growing non-tax fees and charges, which are less visible to voters than taxes. This growth resulted in a higher level of overall taxation by 1990 ($1,281 per person) than before the property tax cap ($1,162 per person).2

The Massachusetts cap hurt public education

Between 2002 and 2006 the percentage of school district operating budgets devoted to teachers’ salaries fell from 40.3 percent to 36.8 percent, professional development spending fell from 2.2 percent to 1.6 percent, and instructional materials and equipment fell from 3.7 percent to 3.0 percent. In the immediate aftermath of Proposition 2½, many communities imposed a hiring freeze or laid off employees.3 The Massachusetts tax cap applies to all local property taxes and has negatively impacted an area of local services.

In a comprehensive analysis of the impact of the Massachusetts tax cap, the Center on Budget and Policy Priorities reported the following examples of cuts in school and municipal services in just the last two years alone:

  • In April 2008, Chelmsford closed an elementary school and a fire station, laid off four firefighters, two police officers and 14 teachers.
  • In 2007, Bridgewater cut its library hours from 52 to 15 hours a week.
  • Newburyport eliminated middle school foreign language programs and a dozen teaching positions in 2007.
  • In 2006, Lexington eliminated 31 teaching positions and its elementary school Spanish program, and implemented fees for its elementary school music program.
  • Saugus closed its library in 2007.
  • Randolph eliminated two elementary schools, nearly all busing, over 60 classroom teachers and almost all freshman and junior varsity sports. Only when the state threatened to take over the school district did voters approve a tax cap override.

These are just a few examples of cuts cited in the report. 4

The Massachusetts tax cap was particularly harmful during bad economic times, such as those New York is experiencing right now

The Massachusetts tax cap was adopted during a period of significant economic growth, the so-called “Massachusetts Miracle.” This enabled the state to increase aid to schools and localities significantly in the years after the cap was adopted. But when the economy soured in the late 80s and early 90s, aid dropped precipitously—at the rate of 12.3% each year from 1989 to 1992. It has risen and fallen again with the business cycle in the decade and a half since. Today state aid to education in Massachusetts in real terms remains at 1999 levels, and Massachusetts school districts are increasingly challenged to provide high quality services to a student population that is more and more likely to require additional educational services.

The CBPP concluded: “Tax caps can be particularly harmful if adopted during a weak economy….If a state were to adopt a property tax cap during an economic slowdown or a period of weak state revenue growth, a major sustained infusion of state aid would not be possible and property tax revenue growth would be more restrained. As a result, schools and other services dependent on the property tax would have to be cut much more severely than in Massachusetts.”

Middle class school districts fared the worst, as wealthy school districts frequently voted to override the tax cap,

Wealthy communities were able to maintain the highest rate of school budget growth because they overrode Proposition 2 ½ at rates far higher than middle and working class communities. Communities with per capita income in the top 20% successfully overrode cap limitations just over 55% of the time while communities in the bottom 40% only overrode cap limitations less than 30% of the time.4

According to the CBPP report, “services may have suffered most in middle-income communities as well. A recent article in the magazine Commonwealth noted that fiscal problems ‘are not just hitting struggling older cities, but are increasingly finding their way to middle-class suburbs. Today’s communities on the edge are…places where libraries and pools were never regarded as perks, but as time-honored touchstones of community life.’”

Overall, the Massachusetts tax cap has hurt local schools and municipal services, exacerbated inequality between wealthy and middle-class and poor districts, and been particularly harmful in bad economic times. It’s hard to imagine a worse formula to guide New York State policy on education and property taxes.

Based upon the CBPP findings, the educational problems for New York State if a tax cap is enacted are likely to be much greater. For one thing, New York State has a much higher concentration of students living in poverty. In New York, 44 percent of students are living in poverty, a much larger number than in Massachusetts where 28 percent of students are living in poverty (based on Free & Reduced Price Lunch Enrollment).

At the same time, New York has much further to go than Massachusetts in closing the funding gap between wealthier and poor districts. In fact, while New York has the largest funding gap of any state in the country, Massachusetts has the second fairest distribution of funding in the country and actually spends more per pupil spent in districts with higher poverty. 5 For this reason, a cap would likely have a greater negative impact on high need school districts in New York State.

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