The SB76 School Property
Tax Elimination may be misnamed. The title of the bill provides a great sound
bite. Legislators are going to be hard pressed to vote against the illusion of
the elimination of school property tax. The goal of SB76 is to eliminate all school property
taxes across the Commonwealth and replace those taxes with a combination of
funding from the Personal Income Tax and the Sales and Use Tax. The elimination
of school property taxes effectively removes the taxing authority of locally
elected school boards and transfers local control over education programs to the
government of the Commonwealth located in Harrisburg.
SB76 Increases the Sales and Use Tax by one percentage point and
increases items to be taxed by the state sales tax. . The sales tax would
increase for 6% to 7%. More
services and products will be subject to tax. Increase in the state’s personal
income tax from 3.07 percent to 4.95 percent.
The
bill targets most school property taxes, but do not
eliminate them completely or other local property taxes (county, local
municipality). School districts would keep a portion of their taxing authority
to satisfy their respective debt service. The bill fails to be a net tax cut
for the citizens of Pennsylvania. Rather it shifts the tax burden to sales tax
increases and personal income tax increases while leaving a portion of the
local school property tax in play.
If
the property tax is eliminated, not all communities will be winners. Taxpayers
in some districts will pay simultaneous increases in the state personal income
tax and sales and use tax while still paying school property taxes. In these
districts, taxpayers will be subject to double taxation, paying significant
state tax increases while continuing to pay some or their entire current school
property tax bill and all of their county and municipal property taxes.
Additionally,
215 of the state’s 500 school districts (43 percent of all districts statewide)
will retain at least 20 percent of their existing school property tax, and 23
districts will keep at least 50 percent of their current property tax to pay
for existing debt.
A
few school districts will still need all or nearly their entire current
property tax levy to fund existing debt payments. Educators understand that
people generally hate the property tax and the threat it causes to people on
fixed incomes. However, there are ways to address that problem without
wholesale elimination.
Specifically Lawrence County schools
will be able to keep the following percentage of real estate taxes to cover
existing debt:
o
Ellwood City SD 19.12%
o
Laurel SD 29.16%
o
Mohawk SD 26.38%
o
Neshannock SD 14.51%
o
New Castle SD 51.54%
o
Shenango SD 0.00%
o
Union SD 17.70%
o
Wilmington SD 26.29%
A proposal to eliminate property taxes will further increase the
disparities in school funding. The elimination of the property tax effectively
ends the new basic education funding formula. This formula was designed to
create equity and stability. The formula not only hinges on a measure of local
tax effort, but was designed to account for student and district
characteristics. Property tax elimination would further entrench the inequities
in our funding system.
The elimination of school property taxes leaves individuals
holding the bag. Under current law, commercial businesses pay approximately $3
billion in school property tax. Under the proposal commercial business would
pay $1 billion in school property tax. The bill equates to a $2 billion tax cut
for business. The cut will supposedly be offset by increased collection of
personal income taxes or sales taxes. The offset for business comes at the
expense of employees.
The bill also trusts that the state will fund local schools
without local input. Currently, the Laurel S.D. receives approximately 2/3 of
its funding from the state. Local schools will have no control over their
financial future and stability. The inability of a district to levy property
taxes may impact the district’s ability to pay for any new federal or state
mandates, or expand the academic or extracurricular programming of the
district. The state must consider expenditures when appropriating revenues.
Also, the bill curtails school districts’ ability to incur new
debt and would prohibit districts from responding to immediate need for cash.
If the state fails to pass a budget, districts would be unable to proceed with
a Tax Anticipation Note (TAN). The doors of the school would literally be
locked and the facilities cease operation. Local school boards would unable to
respond to maintenance and repair needs for school facilities.
The bill locks in disparity. Some of
the poorest districts in the state generate only $1,100 per student in property
tax. Some of the wealthiest districts in the state generate $24,000 per student
in local property tax. The bill will send $1,100 per student to one district
and 22 times that amount to another district. Somehow, this makes sense in
Harrisburg.
The property tax is a stable and
predictable source of funding for the schools. Unlike personal income or sales, the property tax base
is less prone to fluctuate from year to year. Revenue from sales tax and income
tax obviously will be higher during economic prosperity and lower during
economic down turns. The sudden decrease of revenue would cause a significant
negative impact on programming curricular and extracurricular offered to
students.
This
legislation will have the Commonwealth assume virtually all the authority once
held by local school boards, effectively eliminating local control. With no
ability to raise revenue or make financial decisions at the local level, the
state will be responsible for ensuring that districts have the resources to
comply with all mandated costs. By removing a local school board’s authority and
ability to respond to the needs of its students and residents, the state will
be responsible for the financial health of all 500 school districts.
Should
this bill become law, the cuts would be Draconian. Taxpayers can expect reduction
in personnel and programs. Class sizes will increase. Educational resources
will be cut. Professional development will be limited or eliminated. Athletics
and other extracurricular activities will be a luxury.
The
system we have to currently fund schools is imperfect. Its replacement should
be less imperfect. SB76 is an example of creating more problems to an existing
problem rather than finding a solution.
