Here's how it would affect tax bills
ALBANY – More homeowners would have to wait for a check in the mail to get their STAR savings on their school taxes under a proposal unveiled Tuesday by Gov. Andrew Cuomo.
The measure in Cuomo's budget plan would be the latest annual change to STAR, the $3 billion a year program that provides homeowners a savings on their school tax bills each fall.
Since its inception in the 1990s, STAR would give homeowners with annual incomes under $500,000 an upfront rebate on their school taxes.
But the state has slowly shifted away from the savings on tax bills, instead making new homeowners and, starting last year, those who earn between $250,000 and $500,000 wait for a check in the mail from the state tax department to get their STAR savings.
Now, Cuomo is proposing another tweak: Any household with an adjusted gross income over $200,000 would get a check in the fall rather than seeing the savings directly on their tax bill, regardless of when they bought their home.
The state budget proposal states:
"To continue the shift of administering the STAR program as a tax credit to align it with other tax relief programs, the budget limits the Basic STAR benefit for homeowners in the Exemption program to an income threshold of $200,000 while keeping the income threshold for the STAR Credit unchanged at $500,000.
Lawmakers have derided the changes over the years, but haven't been able to beat them back during budget negotiations.
"We don’t need any more changes this year," Assemblywoman Sandra Galef, D-Ossining, Westchester County, said during a hearing last week on STAR.
What the changes would mean for homeowners and STAR
STAR savings are significant for homeowners in a state with among the highest property taxes in the nation.
Basic STAR averaged about $790 last year.
Enhanced STAR, which is available for seniors with incomes of $88,050 or less, averaged $1,381 this year. Seniors who receive Enhanced STAR have not been shifted to checks.
The change can be problematic for homeowners who pay for their taxes through escrow.
Escrow amounts are based on what taxes are paid to schools, and under the original STAR system, the rebate was taken off the top of the tax bill — so the escrow amount was lower.
Now, for those who get STAR checks, the system requires homeowners to pay their full tax bill, thus a higher monthly expense, and then get reimbursed through a check.
Also, homeowners have to wait for the check, which downstate can average more than $1,000, to arrive in hopes of getting in time to pay their school taxes, which in most districts is due by Sept. 30.
Tax officials testified last week that 98% — nearly 540,000 STAR checks — were delivered on time before homeowners' school tax bills were due.
Why the state keeps moving to STAR checks?
State leaders say the change to checks is a better way to administer the program.
But there is also a fiscal benefit. The proposed budget estimates the shift would allow the state to count $74 million in state spending as a reduction in tax revenue.
So at a time when New York has a $6 billion budget deficit and Cuomo is insisting on limiting state spending to no more than 2% growth, the change helps the state's book.
In other words, the checks count as a "personal income tax credit" in the state budget. That means they are reported as a reduction in tax revenue, not as state spending.
The state also contends the change creates a more streamlined process: Originally, schools gave out the savings on homeowners' tax bills, then got reimbursed by the state.
Now homeowners simply get the checks directly from the state, cutting out the need for schools to be involved.
“The STAR program is really a tax credit program. It’s a tax credit program that was designed as a spending program in order to give people checks faster years ago," budget director Robert Mujica said Tuesday.
"So we’re trying to align that program back as it should. Everyone would get their credits in the same year. They will get the same dollar amounts in the same year. But it should not be a spending program. It is a tax-credit program and we’re going to reflect it as such.”
Includes reporting by USA TODAY Network staff writer Jon Campbell.
Joseph Spector is the New York state editor for the USA TODAY Network. He can be reached at JSPECTOR@Gannett.com or followed on Twitter: @GannettAlbany
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