WXXI Local Stories
Wed February 4, 2009
NYS Budget: The STAR Rebate
By Rachel Ward
Rochester, NY –
The Pittsford center entrance colonial has a formal two-story foyer, a den that could double as a bedroom, and a first-floor laundry - that's an essential according to realtor Heather Affronti.
Affronti is a 21-year veteran of the Rochester real estate market, who's seen the economy drop and drag, and swoop and fall, just as the popularity of great rooms has risen with the decline of the formal dining room. But she says right now, the center entrance colonial she's showing is largely being ignored by buyers looking to trade up - they can't afford to move. At the moment, the real estate marketplace belongs to first time homeowners looking to capitalize on historically low interest rates.
But Affronti says for cash-strapped young people, scraping together a down payment isn't the only challenge. Budgeting for some of the nation's highest property taxes - which always seem to go up - is also an impediment to home ownership.
Affronti says with consistently on the rise, her first-time home buyers are paying more and more attention to programs that seek to defray those costs. And that's where STAR comes in.
The exemption and the check
The School Tax Relief Program, or STAR, combines an exemption on school property taxes with an annual rebate check, to help keep homeowners in their houses. With the exemption, the state knocks down the value of your house for the purpose of school property taxes, and your savings appear as a discount on your bill. The balance of taxes on what you would have paid without STAR, and what you actually paid, is dished out to the schools from state coffers.
The rebate check portion of STAR is more flexible. Tom Bergin, with the State Department of Finance and Taxation, says the program is a simply transfer of funds from the state's general fund to homeowners, meant to defray the cost of property taxes. At the outset of the program Bergin says the checks were one-size-fits all, but now income is taken into account to determine what level check a resident gets.
Nearly three million people got that money in 2008, with the average check running $386. But because that cash can be used for anything, the rebate check program doesn't directly reduce property tax bills like the STAR exemption does. And because it's paid out to homeowners and not to schools, it doesn't cut back the cost of education for school districts either.
The rebate has only been around for about three years, and it was instituted at a time of surplus. Now the state is in deep deficit - a projected $13 billion in the 2009-2010 fiscal year - and the governor has proposed getting rid of the STAR rebate checks as part of the balancing act for the spending plan.
Jeffrey Gordon is a spokesman for the New York State Budget Division, which helps the governor craft his budget. He says the decision to get rid of the rebate checks - but keep the STAR exemption - was made in part because the rebate doesn't have an effect on how much people pay directly in property or school taxes.
"No one is excited about losing a benefit that they've received for a number of years ... but I believe that the public definitely understands that state spending does need to be reduced. And the governor is clearly making the case of how difficult our fiscal outlook is at this point, so he believes that there must be shared sacrifice."
Homeowners might not be looking forward to sharing in that sacrifice by giving up the STAR checks. But policy wonks on both sides of the aisle are enthusiastic about the idea - though their proposals for what would replace STAR differ.
The Fiscal Policy Institute (FPI), a left-leaning research group, says they'd like to see the STAR check replaced by a more generous program. They're proposing a rebate that would be based on high how property taxes are - and how much of a homeowner's income they consume. The greater proportion of your income that taxes take up, the bigger the check. On average, FPI says they'd like to see checks clock in at about $1,600 a year, through what they're calling a "circuit breaker."
Another think-tank, the Empire Center for New York State Policy, within the conservative-leaning Manhattan Institute, says rather than doling out the rebate cash, they'd like to see property taxes kept in check through a legislated property tax cap.
Both groups agree that getting rid of the STAR rebate is politically feasible, because it hasn't been around as long as the STAR exemption. That's the despite the fact that homeowners like getting the checks - and politicians like giving them out.
One of those politicians who says he's seen the positive effect of those checks is 56th senate district Republican Joe Robach.
Robach says the STAR program - the exemption and the rebate check - is a lifesaver. He's received letters from constituents who say the program helped them keep their homes as taxes rose and their incomes waned. But when it comes to the budget, Robach says he'll vote on the proposal as a whole. He hasn't yet decided whether or not the STAR rebate has been around long enough - or become important enough to his constituency - to be the lynch pin of his budget vote.
"Do I think people like getting something hard and tangible that they can spend to help their bottom line, whether they're working families, people on a fixed income? I do. I don't know if that means its entrenched. I think that they like it, it's something they can understand, and that they get."
Halting the checks would save the state about $1.4 billion dollars, and Bergin says getting rid of the program won't cost any jobs.
But as the economy continues its downward spiral, those $386 checks could be the difference for some New Yorkers, between making a mortgage payment one month, or missing it.
And as Affronti points out, the state isn't doing the economy any favors. Once buyers get into that center entrance colonial, and apply for the STAR check, they start to spend that little pot of cash at the local hardware store or with contractors, to do some sprucing up around the house.
It's up to the state legislature to determine whether or not the STAR rebate check will stay or go. Hearings on the budget are already underway. The finished spending plan is due on April 1.