New Report: New York IDAs’ Reckless Assault on Public School Funding 

Albany, New York – New York’s Industrial Development Agencies (IDAs) cost public schools much more than the $1.8 billion per year previously documented. 

Because of a well-known flaw in the state’s property tax cap law, properties getting tax breaks from IDAs are not included in local tax bases, forcing homeowners and businesses to pay higher taxes. Given that New York schools are unusually dependent upon local property taxes, this also causes great harm to school budgets. In 2023, the State Legislature, supported by a large coalition of teachers unions, schools, local government associations and the IDAs, passed a bill that put tax abated properties back into the tax base calculation. Unfortunately, Governor Hochul vetoed this sensible fix without providing a coherent explanation.

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Those are the findings of a report published today by Reinvent Albany and Good Jobs First, New York IDAs’ Reckless Assault on Public School Funding. 

 Key findings from the report include:

• NY schools are among the top three most dependent states in the nation on property taxes.
• School districts are already known to lose $1.8 billion annually in IDA property tax abatements. 
• Making things worse, the state’s flawed state tax cap formula fails to include subsidized properties in the overall tax base, artificially shrinking local tax revenues. Bizarrely, this can even create a “negative tax cap,” limiting the amount of revenue school districts can raise.
• IDA-abated properties often receive artificially low property assessments after abatements expire, leading to decades of additional revenue losses for local schools.

The report also outlines a series of policy recommendations aimed at addressing the issue:

• Shield school districts’ share of property taxes from IDAs’ tax abatement deals.
• Revise the state tax cap formula to include IDA-subsidized properties in the overall tax base, preventing artificially low property tax levies.
• Ensure full property assessments after IDA subsidy agreements expire to restore equity in local property tax rates.

Senator Jeremy Cooney said, “Our public school districts rely on property taxes to provide much-needed resources to students and teachers. That’s why my bill (S3245) would amend our tax laws relating to payments in lieu of taxes to more accurately reflect the growth of our communities’ tax bases and help our school districts and municipalities thrive. While I was disappointed to see this bill vetoed by the Governor last year, I will continue working with my colleagues to make these changes and ensure our next generation of leaders are being given the tools they need to succeed both in and out of the classroom.”

“NYSSBA very much supports legislation to amend the property tax cap law, specifically the tax base growth factor to include properties under PILOT payments. PILOTs can have a significant and challenging impact on school district budgets, from reducing anticipated revenue to forcing negative tax caps. It is due time for adjustments to be made to this process to better support our school districts and students throughout the state,” stated Robert Schneider, Executive Director, New York State School Boards Association.

Charles Dedrick, Executive Director, New York State Council of School Superintendents stated, “We welcome the report’s recommendations. Payments in lieu of taxes should be treated the same as property tax revenue in the state’s property tax cap. That would avoid the possibility of school districts facing a negative cap and would allow both schools and local governments to receive revenue to support additional service needs that PILOT properties can create.”

“Rural school districts in particular have been challenged by our state’s approach to school funding.  First rural communities experienced a tremendous outward migration during the Great Recession, without any response from the state.  Rural communities lost their tax base without the state adjusting or making any attempt to retain business.  Some rural districts don’t raise $100,000 under the tax cap and so when IDA projects create their negative effect on a district, schools have no flexibility.  Without adequate state funding and a sufficient local tax base, any revenue loss has to be made up by those few residents who remain (increasing the likelihood that they too will make their exit.) It’s a vicious cycle of decline, made worse by the state’s ignoring the effect of ill thought out policies,” said David Little, Executive Director, Rural Schools Association of New York State.

Greg LeRoy, Executive Director of Good Jobs First, emphasized the need for these corrections. “New York’s flawed tax incentive system creates a useless tension between education and economic development. If state policymakers fixed this specific problem in the property tax cap law, it would help school boards focus on kids instead of levy rates.”“Tax dollars should go to supporting schools, not subsidizing private developers,” said Ron Deutsch, Senior Policy Fellow at Reinvent Albany. “New York’s over-reliance on property taxes for school funding makes school districts especially vulnerable to the harmful effects of these tax abatements. This system is unsustainable, and it’s time to reform it before our schools are pushed to the breaking point.”

Click here or below to view the report as a PDF.