What is STAR?
Most New York state homeowners are familiar with STAR, the School Tax Relief program launched in 1998-99. Originally intended to assist senior citizen homeowners, STAR was quickly increased and expanded to include residential properties of other school district taxpayers.
Qualified homeowners, who must apply to participate in STAR through their local assessor, receive a partial property tax exemption under the program. The Basic STAR and Enhanced STAR exemptions reduce what homeowners would otherwise owe on their property tax bills. Most STAR recipients save several hundred dollars on their property taxes each year.
Several factors contribute to the calculation of the actual exemption amount, including the level of assessment in the community and, for Enhanced STAR only, an annual adjustment based on the rate of inflation. Prior-year savings under STAR are also a factor, as there is now a 2 percent cap on the increase in maximum STAR savings over the previous year.
STAR exemption amounts are calculated by the Office of Real Property Tax Services, a division of the NYS Department of Taxation and Finance. A homeowner’s property tax bill clearly states the exemption amount and tax savings. If taxes are held in an escrow account, homeowners should receive a receipt that includes STAR information.
How does STAR affect school districts?
Local school districts are reimbursed by the state for property tax revenues that go uncollected as a result of STAR exemptions. Although STAR exemptions apply to school property taxes, school districts have no influence over the exemptions or tax savings. Because assessment data and equalization rates are not usually available during the spring school budget season, school districts frequently resist quoting future tax rates related to their proposed spending plans. Accurate tax information becomes available later in the summer before tax bills are sent to residents.
New for 2021-22
For the first time, the FY 2022 Executive Budget proposal included the state’s STAR Exemption payment to school districts in the Executive School Aid runs. This was included because the Executive Budget proposed to reduce state reimbursement school districts receive through the STAR program statewide by $1.3 billion for FY 2022. This reduction in STAR payments to schools would be backfilled for FY 2022 by utilizing federal funds allocated through the Coronavirus Relief and Response Supplementary Allocation Act.
Utilizing federal funds to supplant current state support to school districts, while assisting districts in their budgeting process for the 2021-2022 school year, poses a threat to school districts’ long-term financial health throughout the state. Without additional federal funds in future years, any reductions in STAR Exemption payments would result in a cost shift from the state to lo ca l school districts, who would have no way to make up for this lost revenue due to the property tax cap.