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Hochul wants school districts to cut taxes to pay for proposed Medicaid change: Can schools afford it?

Governor Kathy Hochul is under fire from county leaders for her Medicaid plan and is pressuring school districts to cut property taxes. However, schools in New York are already facing financial pressures due to inflation and personnel shortages, despite receiving an influx of aid from the federal and state governments. The governor is in talks with state lawmakers regarding a $227 billion spending plan that is expected to pass by April 1. The plan includes no broad-based increases in the state’s personal income tax, but Hochul is seeking to boost revenue for mass transit in New York City through a payroll tax hike.

Hochul is seeking to shift Medicaid money away from county governments, which has worried county officials who are warning of potential property tax increases. However, Hochul has defended the proposal, arguing that school districts, which have received state and federal aid, can cut their taxes. Schools are expected to receive more than $2 billion in direct aid as part of the budget on top of a boost in aid received last year.

Finger Lakes Partners (Billboard)

The school budget situation is complicated, with schools facing inflationary pressures, rising costs of textbooks, supplies, fuel, electricity, and a personnel shortage that’s affected everything from teachers to bus drivers. The federal pandemic aid to schools is set to expire in 2023 and 2024. Although school districts are grateful for the aid, they are already looking to the future when the aid may no longer be reliable.

Despite the challenges, only a handful of school districts out of more than 800 overrode their tax cap last year. The cap limits annual property tax levy increases at 2% or the rate of inflation, whichever is lower. Schools have also called for an assessment of how money from Albany is distributed each year to schools, recognizing that relying on future aid is not a long-term solution.