Trend Signals Growing Budget Pressure on New York’s Municipalities, Fire Districts and School Districts
More local governments have reported to the Office of the New York State Comptroller (OSC) that they plan to override the property tax cap in recent years, according to a report released today by State Comptroller Thomas P. DiNapoli. More school districts, which require a ballot proposition and at least 60% voter approval to override the tax cap, have also reported plans to override the cap. While a planned override suggests that local officials may be concerned about a potential budget shortfall, it does not necessarily mean that they will exceed the cap for that year.
“Many local governments are under fiscal pressure, with rising costs and slower growth in recurring revenues,” DiNapoli said. “For local officials trying to close budget gaps or increase revenue to align with spending, overriding the tax cap is an option, and increasing numbers have reported plans to do so. I urge local officials to communicate with the public and be transparent about their fiscal challenges and plans for addressing them. My office is always here to help.”
New York’s property tax cap limits annual increases in property taxes to the lesser of 2% or the inflation factor, with some exceptions. Local governments other than school districts may override the cap if at least 60% of their governing boards vote to approve it. Every year, before they adopt their budgets, all local governments must file tax cap forms with DiNapoli’s office, indicating whether they plan to override the tax cap for the upcoming fiscal year. Even if they report their intention to override the cap, a local government can still decide to stay under it.
Pandemic relief aid, as well as a surge in sales tax revenue, contributed to a drop in the share of reported override plans, most notably in 2022. But in recent years as pandemic-related federal aid has dwindled, sales tax growth has moderated, and inflation has risen above the 2% cap, the number of municipalities reporting plans to override the tax cap has grown substantially. Cities led the increase, with nearly half (49.2%) reporting that they planned to override for the local fiscal year ending (FYE) in 2025 and 45% indicating they would override for FYE 2026, up from 13.1% in 2022.
Over one-fifth of New York’s counties also reported that they planned to override the tax cap for FYE 2025, and nearly one-fourth reported planning overrides for FYE 2026, up from 3.5% in 2022.
Towns and villages have also experienced notable increases in planned overrides in recent years. For FYE 2026, 35.5% of villages and 28.6% of towns said they were planning to override the cap, up from 22.7% and 16.6%, respectively, in 2022.
Fire districts also appear to be experiencing fiscal pressure. The share of fire districts planning overrides reached 34.9% for FYE 2025 before declining slightly to 31.5% for FYE 2026, up from 18.6% in 2022.
A smaller share of school districts have reported plans to override the cap than other local governments. However, their share has more than doubled in recent years, increasing from 2.4% to 4.9% from FYE 2024 to FYE 2026.
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