Proposal would take a toll on the quality of education, thwart ability to draw the best to help boost economy
BY BRUCE VENTIMIGLIA

(originally posted March 18, 2008)

Bruce Ventimiglia is chief executive of Saratoga Capital Management in Garden City and co-chair of the Business and Labor Coalition of New York.

A new governor takes the reins in Albany today, and property tax reform should be at the top of his to-do list. Few would argue against the need for such reform in the Empire State. New Yorkers, after all, pay among the highest property taxes in the nation, and skyrocketing costs have been a driving force in the state’s continued exodus of residents and businesses.

While it’s encouraging to see efforts to address this serious problem, a plan by the former governor to cap property-tax increases would have the effect of limiting revenue available for schools – and therefore could ultimately cause far more harm than good.

One has only to look to California, where a cap has exacted a devastating toll on the quality of public education. In the wake of the 1978 passage of Proposition 13 in the Golden State, test scores plummeted as schools and teachers struggled to overcome the loss of resources caused by budget cuts.
As New York State strays further from its manufacturing past toward a high-tech, knowledge-based economy, the worst move we could make is to jeopardize the quality of our public schools by placing a cap on their main source of revenue. Doing so would hurt not only students, but the state’s ability to attract the best and brightest when New York aims to revitalize its economy through investment in chip-fabrication technology.

In California and Massachusetts, which passed its own property-tax cap more than two decades ago, school districts have repeatedly been forced to eliminate programs from their curricula because of fiscal constraints. Should that same scenario play out in New York, districts will inevitably be forced to slash programs such as engineering, technology and advanced placement courses to ensure there is enough money to cover core-curriculum subjects.

Forcing schools to make such moves runs contrary to the state’s objective of raising standards and producing graduates who are better prepared for college and the demands of today’s marketplace. Arbitrary caps may sound appealing to tax-fatigued business people and property owners, but in reality they undercut the state’s ability to produce more high-performing graduates, which our economy needs to continue its revitalization efforts – the workforce our businesses need to produce a healthy bottom line.

The proposed cap also threatens to derail the progress students are making. Last year, for instance, New York led the nation in students scoring a 3 or above on at least one AP exam. The state’s mark of 23.4 percent outpaced the 15 percent of students nationally who scored at least a 3 on the tests, which are graded on a scale of 1 to 5.

Though the cap proposal applies only to school property taxes for now, there is reason for the business community to be concerned about a far-reaching, negative impact. In fact, during a recent hearing in Albany on the proposed cap, Assembly Ways and Means chairman Herman “Denny” Farrell (D-Manhattan) highlighted that potential ripple effect when he said, “Give us a cap that preserves the services that people need.”

Farrell knows there is only so much money to go around – especially now, when the economy is on a downward trend that many experts say will be made worse by the ongoing mortgage crisis. Once schools start feeling the pinch, the Legislature will be in the position of having to rob Peter to pay Paul. One of the first places lawmakers will look to take from is municipal aid.

Like schools, municipalities are being squeezed by rising energy, pension and health care costs. If forced to make do with less, local governments will have to seek other funding sources to maintain services people need and expect. Two of the most popular stopgap measures are raising sales taxes and user fees.

Residents in New York have already shown their willingness to travel to bordering states to do their shopping for back-to-school clothes and cigarettes to escape high sales taxes here. New York businesses would only suffer more if local governments were forced to increase sales taxes to make up for lost revenues.

Meanwhile, the cost of doing business in New York is high enough. Businesses – especially small ones – do not need to be paying even more for operational expenses such as trash collection or permit costs.

When revenues are scarce, local governments are often forced to cut road-improvement and other infrastructure projects. Such steps, however, often affect the flow of commerce, ultimately resulting in an adverse impact on business.

The Tom Suozzi-chaired commission evaluating the property tax cap is charged with reporting back by May 15. We can only hope all possible consequences are being weighed.

If not, the cure could be worse than the disease.