Tax Cap Q&A What is the Property Tax Levy Cap? The Property Tax Levy Cap was created by legislation passed in June, 2011, that places new restrictions on how school districts (and municipalities) may increase their tax levies. Although the new law has been referred to as a "2% tax cap," it does not in fact restrict any proposed tax levy increase to 2%. The law does, however, require at least 60% voter approval for a school budget if the proposed levy increase exceeds a certain amount. That amount, called the "tax levy limit," will be determined by each district according to a formula outlined in the law. It will vary by district. Does the Property Tax Cap law limit the annual increase of my property taxes to less than 2% each year? The law does not cap an individual's school tax bill. Its requirements apply only to the total school tax levy -- the total amount in property taxes a district collects. Increases in individual taxes are often different than increases in the levy due to a variety of factors outside a school district's control, including assessment values in the community.
Does the Property Tax Cap mean the total school tax levy will be limited to a 2% increase each year? No. There are exceptions that may result in a tax levy increase greater than 2%. Some of those exceptions include district growth as a result of new construction and legally mandated pension contributions. Ultimately, school districts will use a complex calculation involving eight different steps to come up with the tax levy limit.
To maintain educational programming, can the district propose a budget that exceeds the tax levy cap limit? Districts have the option to exceed their tax levy limits with 60% voter approval.
What happens if voters reject the budget? The law contains new contingent budget restrictions. If a district fails to gain voter approval and must adopt a contingent budget, then there can beNO increase in the tax levy at all. This would force incredibly difficult budget decisions for the district.