This article I wrote appears in the New York Post on February 17, 2012.

 The following appears in the February 10-16, 2011 issue of the Long Island Business News:

Gov. Andrew Cuomo’s executive budget for the state’s fiscal year that begins on April 1 is an intriguing document that on the one hand addresses some fiscal and policy issues long ignored while on the other hand placates some special interests. Here’s my take on his proposals.

The all-funds budget calls for total spending to be about the same as last year, $132.5 billion. If enacted, this will be a major victory for taxpayers. It will be the first flat budget since 1996 when the nationally renowned Patti Woodworth was Gov. George Pataki’s budget director. Since she left Albany in 1997, annual state spending has increased on average about 2.5 times the inflation rate.

Cuomo’s claim that his budget will be balanced without raising taxes and fees is true but disingenuous. That’s because Albany raised state income taxes in December 2011. The so-called tax reform bill that was embraced by both the Democratic-controlled Assembly and the Republican Senate actually imposes higher taxes on top earners to the tune of $2 billion compared to what would have been paid under the permanent, pre-2009 tax rates.

The tax increases were necessary to fund Cuomo’s unfortunate 2011 pledge to raise school aid and Medicaid funding by 4 percent in this year’s budget. If, however, the 2 percent property tax cap law that municipalities and school districts must follow applied to state spending in these areas, there would have been no need for additional tax revenue.

According to a Tax Foundation study released in January, New York has the second highest combined income, sales, corporate and property tax rates of all the states. And the Cuomo tax increase won’t help improve our ranking next year.

Cuomo’s call for the state to take over Medicare local cost increases is a step in the right direction. But much more relief from unfunded state mandates is needed to prevent many municipalities from falling into a fiscal abyss.

The proposal to create a new pension tier that would offer future state and local government workers a 401(k)-style defined contribution pension plan as an option and would save state and municipal governments $113 billion over 30 years is a first bold step to contain unsustainable defined-benefit pension costs. (In New York City, for instance, pension contributions, which totaled $1 billion in 2000, will be $8 billion this year and are expected to continue increasing annually.) While the proposal, if enacted, will not be enough to contain the pension cost explosion, nevertheless, as the Manhattan Institute’s Ed McMahon stated, “Cuomo deserves credit for finally putting real reform on the table.”

Cuomo threw down the gauntlet to the United Federation of Teachers and the New York State United Teachers by demanding the unions drop in 30 days their lawsuit against the state Education Department concerning teacher evaluations that is imperiling $700 million in federal education aid. If they refuse, the governor will include his own evaluation plan in his revised budget resolution.

The governor also informed school districts that if tougher teacher performance standards are not implemented by January 2013, they will lose state aid increases in next year’s budget. “The equation is simple at the end of the day,” Cuomo said. “No evaluation, no money. Period.”

If he follows through by effectively using the powers of his office to implement his budget proposals, it will be a battlefield victory in the war to tame Albany’s entrenched special interests.

Nevertheless, if the Empire State is to become economically competitive and is to stop people from voting with their feet and moving to tax and job-friendly states, Cuomo will have to continue to contain spending and enact genuine reforms that slash taxes, regulatory burdens and unfunded mandates.

This article I wrote appears in the New York Post on February 8, 2012.

New York’s property tax cap only kicked in on the first of the year and already there have been widespread reports of taxpayers confused by the new law’s formulas and of computation errors made by local governments.

The New York State Comptroller’s Office, which monitors municipal budget compliance, has recently revealed that 66 percent of the budgets it has reviewed so far have made tax cap calculation mistakes.

What many New Yorkers have failed to grasp is that the cap law, which limits the increase of property tax levies imposed by municipalities and school districts to 2 percent or the rate of inflation, whichever is less, does contain loopholes.

Counties, cities, towns, villages and special districts outside of New York City can raise taxes beyond the cap if a supermajority (60 percent or more) of its governing bodies vote for a cap override. The New York State Department of Taxation and Finance set the parameters for such a move this way:

A budget officer or chief executive may prepare a tentative budget that requires a tax levy in excess of the levy limit. However, the governing body cannot, without first complying with override requirements, (i) adopt a budget that requires a levy in excess of the tax levy limit, or (ii) impose or cause the imposition of a tax levy to the extent that a budget requires a levy in excess of the levy limit.

School districts can increase taxes over the cap if 60 percent of the district voters who turn out to the polls vote to do so. If taxpayers turn down at the ballot box proposed budgets twice for a given fiscal year, however, the district must freeze their property tax levies in a contingency budget. The tax cap law clearly states there can be no exceptions:

Notwithstanding any other provision of law to the contrary, if the qualified voters fail to approve the proposed school district budget upon resubmission or upon a determination not to resubmit for a second vote … the sole trustee, trustees or board of education shall levy a tax no greater than the tax that was levied for the prior school year.

Other tax cap loopholes:

Annual pension contributions that are greater than 2 percent of the municipality or school district payroll are exempt from the cap. With pension costs expected to zoom in the coming years, due to overly generous benefits and lackluster investment returns, expect this to be the most controversial exemption. Annual contributions that have consumed, on average, about 8 percent of local budget expenditures are expected to exceed 16 percent by 2018. For many government bodies, this will mean annual tax levy increases will exceed 2 percent.

If voters approve the issuance of school district bonds to finance capital projects or improvements, the principal and interest payments on the debt are excluded from the tax cap calculation. Because capital projects bonds are backed by the full faith and credit of a given school district, a cap would violate that pledge and prevent the bonds from being underwritten by the investment community.

A governmental entity’s tax levy can exceed the cap if the cost of a tort lawsuit settlement or judicial award exceeds 5 percent of the tax levy in a fiscal year.

Finally, a municipality can carry over to the next fiscal year up to 1.5 percent of unused tax levy growth. In other words, if a township raises the tax levy only 1 percent, the remaining 1 percent of the annual 2 percent cap can be rolled into the next year’s levy cap, which would then total 3 percent.

A little confusing? Perhaps. Remember, however, despite the imperfections, the property tax cap legislation signed into law by Gov. Andrew Cuomo in 2011 is an important first step in the struggle to curb the ravenous spending appetites of New York’s municipal leviathans.