NEW YORK - Only 53 of 677 New York school districts attempted to override the new property tax cap, suggesting strong public support for the cap and little appetite among districts to try overriding it, says Moody's Investors Service.
"The budget votes indicate school districts will face continued financial pressure in the face of the cap, despite the option to request an override from voters," says Moody's Analyst Larry Bellinger, author of the report, "Few Property Tax Overrides Point to Slow Revenue Growth for New York School Districts."
With their ability to raise more revenue from what is generally their largest source hampered, and facing rising fixed expenditures, school districts will not only be cutting costs but will likely be appropriating greater portions of their reserves to balance budgets, says Moody's.
The overall growth in reserve levels gives the districts the resources they need to manage the cap for a year, says the rating agency. The one-time use of the fund balance, however, will push any budget gaps into subsequent years.
"We expect reserve levels to fall in the coming years," says Bellinger.
Moody's states only 8% of school districts requested an override of the cap from voters, leaving the remaining 92% choosing to forgo the attempt to pierce the cap. A complete list of districts that had override votes, including results, is included in Moody's report. Any contingency budget used in the case of a failure to get voter approval cannot include any growth in the property tax levy.
Few districts took the risk of losing even a moderate increase in the property tax, which they would face if their attempt to override the cap led to budget failure, says Moody's.