School Funding Legislation

[mikekerstetter]

dailyitem.com/0100_news/x611951485/Bill-would-end-school-property-tax-bills

Finally, something that makes sense.


April 12, 2012
Bill would end school property tax bills
The Daily Item

A state representative from Reading has introduced legislation that would eliminate school property taxes in Pennsylvania replacing it with an income tax and an increase in sales tax.

Fifty other lawmakers, mostly Democrats, signed on as co-sponsors.

State Rep. Jim Cox, R-127 of Sinking Springs, said his legislation would hike the personal income tax rate from its current level of 3.07 percent to 4.01 percent.

The state sales tax would increase from 6 percent to 7 percent on existing goods and services, and the bill would also expand taxable items, eliminating many of the exemptions contained within current law.

The measure has been referred to the state House Finance Committee, which includes State Rep. C. Adam Harris, R-82, of Mifflintown, the only local legislator to sign on as a co-sponsor of the bill.

[philunderwood]

Works for me!!

[mikekerstetter]

INTRODUCTION

There is no “Holy Grail” of property tax reform. Any property tax reform measure will involve shifting the tax levy from one type of tax to another – there’s no free ride. But there are ways to fund our schools and to ensure a better education for our children that are fairer and more effective than property taxes.

Many Pennsylvanians lose their homes and a lifetime’s work to sheriff’s sales each year because they can no longer afford to pay their property taxes. Senior citizens on fixed incomes are increasingly forced to sell their homes because of unrelenting increases in their tax burden. Young families cannot afford to purchase a home because the per-month property tax escrow is simply too high. Multigenerational family farms are being sold piece by piece to pay property taxes, devastating Pennsylvania agriculture. School districts in areas of the state with limited population and no commercial tax base are in distress and are unable to afford to give their children a quality education. Job losses, outmigration, and abysmal state economic performance caused by burdensome property taxes are devastating Pennsylvania’s economy.

A sensible, broad-based, statewide and state-administered property tax replacement funding source is needed eliminate an antiquated and regressive property tax system, to end these educational inequities, to return home ownership to the homeowner instead of allowing the government to effectively own our homes, and to restore Pennsylvania’s economic vitality.

THE BOTTOM LINE: Our current system of school funding is crumbling. This decay has been occurring for many years and continues to escalate. Home foreclosures and tax sales are occurring at an expanding rate and the home market is at a standstill. The opportunity to fund education from a statewide source is rapidly vanishing as relentlessly rising property taxes outpace available revenue. This will have major implications for school districts statewide. It can no longer be ignored or diminished. Replacement of the school property tax must be accomplished now.

THE PLAN AND HOW IT IS FUNDED

After many months of work and negotiation by key legislators, a plan to eliminate and replace school property taxes has been finalized and will be formally introduced in both the Pennsylvania House or Representatives and Senate in the near future.

House Bill 1776, The Property Tax Independence Act, looks in part to the former School Property Tax Elimination Act (SPTEA) for its basic structure. While The Property Tax Independence Act mirrors some of the provisions of the former SPTEA, the plan has been comprehensively rewritten to account for lawmakers’ concerns and preferences in order to eliminate objections common to the previous legislation.

As with the former SPTEA, The Property Tax Independence Act will eliminate all school property taxes across the Commonwealth and will replace those taxes with funding from a single state source.

The most important provision of The Property Tax Independence Act is that it is tax revenue neutral. To provide absolute fairness, the legislation has been carefully crafted to ensure that the tax swap provision of the plan does not raise one dollar more than is already collected by the school property tax mechanism.

The Property Tax Independence Act utilizes a modernized school funding plan based on 21st century economic realities.

- The Property Tax Independence Act will ABOLISH the school property tax on all homesteads, farmsteads, and businesses.

- School property tax elimination will be accomplished via a two year phase-out of school property taxes. In the first year after enactment, school property taxes will be frozen at their current level; in the second year they will be completely eliminated except for a small portion that will be retained in each school district to retire the individual district’s outstanding long-term debt.

- The Property Tax Independence Act utilizes our current sales tax mechanism to fund schools, restoring the original intent of the tax. The “The PA Education Sales Tax” was enacted in 1953 for this specific purpose and virtually 100% of the revenue from the sales tax is still dedicated to education funding.

- The sales tax provides a predictable and stable funding source that automatically increases revenue in sync with economic growth. This is in clear contrast to the school property tax which is not based on economic growth and is subject to much variation, forcing annual increases in the tax to increase revenue.

The sales tax is also the most desirable revenue source because, unlike the property tax that has no relationship to family income, it is directly tied to a person’s ability to pay.

While the sales tax is The Property Tax Independence Act’s primary revenue source, small increases in other taxes are blended into the total to spread the cost of education over the broadest possible base.

- The Property Tax Independence Act moderately broadens the base of the state sales tax to include more services and purchases at a new 7% rate. Items to be added to the taxable base include candy and gum, newspapers and magazines, dry cleaning and laundry services, haircuts, and spectator sports admissions. Food items not included on the WIC list and individual clothing and footwear items with a value greater than $50 will also be subject to the expanded sales tax. Generally, food items exempt from the sales tax will be fresh meats, produce, and dairy, along with many packaged and canned foods that are in their natural form, without added sugar or other adulterants.

While there are those who might object on an instinctive level to a sales tax on the last two items, consider this: If you spend eight thousand dollars annually on clothing over $50 and non-WIC food purchases combined, the total sales tax would be $560. If this is less than your school property tax bill you still will realize a substantial reduction in your overall tax burden.

Items that will continue to be exempt from the sales tax include food stamp purchases, all utilities, home heating fuels, health, hospital, and dental services, prescription drugs, home health care, tuition, day care, charitable organizations, and business-to-business transactions.

- In prior versions of property tax elimination legislation each school district was provided funding sufficient to service their outstanding long-term debt. This provision raised many objections to the plan from both taxpayers and legislators who felt that it was unfair to require taxpayers in frugal school districts to pay debt incurred by those districts that may have been financially irresponsible. Besides being politically unpopular, financing this debt from the state level would add $2.3 billion annually to the revenue that needs to be replaced, causing unnecessary tax increases.

To decrease the total revenue needed for property tax elimination, the proposed North Dakota property tax elimination plan was used as a model. At enactment of The Property Tax Independence Act, existing long-term debt will remain with each school district for them to service individually. Because of this a remnant of property tax will remain past the two year elimination phase-in but ONLY the amount of property tax necessary to meet current annual debt service. When that existing debt is retired the final bit of property tax will disappear and no further property taxes will be allowed.

On enactment of The Property Tax Independence Act each school district will be required to state the amount of property tax necessary for annual debt service and will not be allowed to increase that amount or add any new debt financed by property taxes.

The average debt service for all districts is 10% of their annual budget, with the highest district at 18%. This means that, at worst, one or more districts will enjoy an 82% reduction of property taxes at the end of the second year of the plan, with an average property tax reduction statewide of 90%. This will tremendously reduce the burden on property owners until the long term debt is retired.

As mentioned above, total elimination of the property tax in every school district will be achieved when their debt is retired, although that will vary by district depending on the length of the remaining debt term. Fifteen Pennsylvania school districts are carrying no long-term debt and will see their property taxes totally eliminated immediately at the end of the two year phase-in period.

Note that none of these funding sources are particularly burdensome by themselves but, taken together, provide the funds necessary to replace all Pennsylvania local school taxes. Further, The Property Tax Independence Act will more equally distribute the cost of school funding across all of Pennsylvania’s population and visitors to the state, rather than just depending on taxing homeowners.


THE DISTRIBUTION TO THE SCHOOLS

The Property Tax Independence Act works to fully fund all Pennsylvania schools.

- All schools will initially be fully funded at their current levels.

- Schools will receive their property tax replacement funding directly from the state. Initially, The Property Tax Independence Act will fully fund the districts at their current per-pupil level, with funding adjustments in later years to account for changes in student population. All students in Pennsylvania, regardless of their location or their area’s economic condition, will have the opportunity for a quality education.

- Equity in schools is guaranteed because the state assumes the responsibility of school funding. Each school will receive the resources it needs regardless of the local ability to pay. This solves the funding problems faced by rural, urban and fast-growing districts.

- The Property Tax Independence Act calls for a dedicated lockbox account for all property tax replacement revenues that is separate from the General Fund. All replacement funding for the schools will be disbursed from this account through the existing Department of Education funding mechanism, requiring no growth of the current infrastructure.

In addition, The Property Tax Independence Act completely eliminates the taxing ability of local school boards. The only exception would be a possible local EIT or personal income tax for major projects such as new school construction, and that will be subject to a no-exception taxpayer referendum.

It is important to note that The Property Tax Independence Act imposes NO mandates of any kind on Pennsylvania school districts. The plan provides replacement funding only and the funding provided by the plan may be used in any manner the school district deems necessary. The Property Tax Independence Act does not interfere in any manner with local school district decisions.


SPENDING CONTROLS

Current school spending regularly exceeds tax revenue and The Property Tax Independence Act addresses it head on.

- At enactment of The Property Tax Independence Act, all districts will receive 100% funding sufficient to meet all financial obligations. A per-student expenditure level will be determined for each district and will be re-calculated annually. Each school district will then receive annual upward or downward funding adjustments based on changes in student enrollment multiplied by the current per-pupil cost.

Additionally, every district will receive identical percentage annual base funding increases that will be limited by the increase in the Consumer Price Index (CPI), effectively tying annual school budget increases to the increase in available revenue.

- If a district desires additional revenue, they can present a no-exception ballot referendum to the voters of their district to raise additional revenue by either an earned income tax or a personal income tax. However, property taxes will not be able to be re-instituted to raise revenue.

CONSTITUTIONAL AMENDMENT

School property taxes need to be prohibited from ever being imposed on Pennsylvanians again.

Companion legislation to the The Property Tax Independence Act will provide for a constitutional amendment which GUARANTEES that, once eliminated, school property taxes would be gone forever and that a future legislature could never re-institute the taxing of our properties.


ADDITIONAL INFORMATION

The fiscal provisions of HB 1776, The Property Tax Independence Act, were developed using actual and projected revenue and school district expenditure figures provided by the House Appropriations Committee staff. Using those figures as a reference, the legislation is absolutely fiscally viable as written.

[Ritty77]

Sounds like a fair plan. Broaden the base and use very minimal tax increases (if not avoidable by adjusting buying habits). Plus it will force school districts to keep budgets lean given that no new debt will be allowed.

The idea of having school taxes based on property taxes was based on the logic that people who own property are more likely to settle in, procreate, and have need of public schools, I'm guessing.

But it's become too burdensome. As the nanny and entitlement state grew, the percentage of those more likely to have kids grew on the side of those who don't own a home.

Anyhow, I've always thought that after owning a home for, say, twenty years, that no more property tax should be levied until it is sold or transferred. It would be nice to actually "own" your property for a while.

Thanks for posting this, Mike. Perhaps there will be further articles that present valid arguments against some of the provisions, but I'm not seeing any glaring problems.

[mikekerstetter]

PTCC Archive

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URGENT PTCC Update

10 April 2012

Dear Friends,

Today’s Update starts with a question: Do you truly want to see school property taxes eliminated? If your answer is “Yes,” then you need to take a mere five minutes a week to become fully involved in the effort. The Property Tax Independence Act has terrific support and great momentum but it’s going to take a STRONG grassroots effort to push it over the finish line. For the next few months we’ll need everyone’s help, so please pitch in and let’s get this done!

On Monday, April 2, a press conference was held in Harrisburg to announce House Bill 1776 and Senate Bill 1400, the Property Tax Independence Act. You can see a replay of the press conference here. If you have a half-hour to spare, please watch the video – it contains a lot of good information.

On Thursday, April 5, HB 1776 was officially introduced in the Pennsylvania House of Representatives by Representative Jim Cox with 60 co-sponsors that include 43 Republicans and 17 Democrats. This demonstrates strong bipartisan acceptance of the plan - a very good indication of broad support - and something that we’ve never before seen for this legislation. The list of co-sponsors is listed on this page below my signature.

SB 1400, an identical version of HB 1776, will be introduced in the Pennsylvania Senate by Senator David Argall in the very near future.

FIVE MINUTE ACTION ITEM: If your Representative is not included on the co-sponsorship list, please call, write, or email to ask him or her to co-sponsor HB 1776 and ask your friends, neighbors, and relatives to do the same. You may receive excuses, but they’re just that – excuses. The Property Tax Independence Act is an outstanding piece of legislation and there are NO good reasons to not support this plan for school property tax elimination. If they are already a co-sponsor, please contact them to offer your thanks for their support; they will be appreciative of your thanks. In all contacts, please be respectful but firm. Your Representative’s contact information by Zip Code is available here.

Taxpayer support of the Property Independence Act has been very gratifying. On April 3 the Reading Eagle published a story about the press conference that included a reader poll asking readers whether or not they agreed with the proposal. As of this writing there have been 1459 votes with 89% of them in agreement with the plan, a tremendous outpouring of public support. You can add your vote and see the results here.

There was also an excellent article published in the PA Independent about the Property Tax Independence Act that explains the financing of the bill. That piece is available here.

* * * * * * * * *

As I mentioned earlier, we’re going to need a vigorous grassroots effort to win the battle for school property tax elimination and we’ll need as many recruits to the cause as possible. There are a few simple things you can do to help.

- Please forward this email to everyone in your Pennsylvania address book and ask them to forward it to their contacts.

- If you’re a Facebook member, please join the PTCC Facebook group and “Like” the Property Tax Independence Act Facebook page. There is always an ongoing conversation about the effort and valuable up-to-the-minute news items on these two pages that would otherwise have to wait for the next PTCC Update. You can easily find these pages with a Facebook search or you can go directly to the pages from here and here.

- One of our biggest obstacles to enactment of Property Tax Independence Act is the lack of taxpayer knowledge about the plan; with more taxpayer awareness we gain valuable support. If you can, please write a letter to the editor of your local newspaper to inform homeowners of this effort and be sure to include the PTCC Web address so readers can find further information. If you wish, you can use the “Quick Facts” and “Ten Reasons” documents that are available on the PTCC website as source material for your letter. <link>

* * * * * * * * *

Finally, in the last PTCC Update I mentioned that the Pennsylvania Coalition of Taxpayer Associations (PCTA) was 64 member groups that support the Property Tax Elimination Act. Since then we’ve grown to 71 and there are more to come. The momentum is with us!

Thank you, everyone, for your support. Now let’s get this done!

David Baldinger
PTCC Administrator



Representatives Co-sponsoring House Bill 1776
as of April 13, 2012:

Aument Lancaster
Barrar Delaware
Bear Lancaster
Bloom Cumberland
Boback Columbia, Luzerne, Wyoming
Boyd Lancaster
Brown, R. Monroe
Caltagirone Berks
Christiana Beaver
Costa, D. Allegheny
Cox Berks
Creighton Lancaster
Cutler Lancaster
Daley Fayette, Washington
Davidson Delaware
Davis Bucks
Day Berks, Lehigh
Denlinger Lancaster
Everett Lycoming
Fabrizio Erie
Galloway Bucks
Gergely Allegheny
Gibbons Beaver, Butler, Lawrence
Gillen Berks
Gillespie York
Goodman Schuylkill
Harris Juniata, Mifflin, Snyder
Helm Dauphin
Hennessey Chester
Hess Bedford, Fulton, Huntingdon
Hickernell Dauphin, Lancaster
Kauffman Cumberland, Franklin
Keller, M.K. Franklin, Perry
Knowles Berks, Schuylkill
Kortz Allegheny
Kula Fayette, Westmoreland
Lawrence Chester
Mahoney Fayette
Maloney Berks
Matzie Allegheny, Beaver
McGeehan Philadelphia
Micozzie Delaware
Miller York
Mirabito Lycoming
Moul Adams, Franklin
Perry Cumberland, York
Quigley Montgomery
Reese Fayette, Westmoreland
Rock Franklin, Perry
Saccone Allegheny, Washington
Santoni Berks
Saylor York
Scavello Monroe
Schroder Chester
Stern Blair
Swanger Lebanon
Tallman Adams, York
Tobash Berks, Schuylkill
Toepel Montgomery
Truitt Chester
Vereb Montgomery