Earlier this month the Department of Education raised the amount your school district can increase the school property tax before having to go to a voter referendum. This is permitted through Act 1 even though Article 3, Section 31 says: The General Assembly shall not delegate to any special commission, private corporation or association, any power to make,supervise or interfere with any municipal improvement, money, property or effects, whether held in trust or otherwise, or to levy taxes or perform any municipal function whatever.
The Department of Education is an agency of the State created through the Administrative Act of 1929 and this exemplifies how powers have been granted to such Departments and Agencies that raise certain constitutional principles. This increase did not have to go in front of the legislative bodies where the funding responsibility for a thorough and efficient system of Education is supposed to reside according to our Constitution. Furthermore, the Constitution protection of Article 1, Section 1 (All men are born equally free and independent, and have certain inherent and indefeasible rights, among which are those of enjoying and defending life and liberty, of acquiring, possessing and protecting property and reputation, and of pursuing their own happiness.) is clearly being called into question. By the end of the 3rd quarter of this year the property tax lien debt in the state had reached 1 billion dollars as more and more properties are falling on to the delinquent property tax roles.
The base index is calculated by averaging the percent increases in the Pennsylvania statewide average weekly wage and the Federal employment cost index for elementary/secondary schools.
Additionally, for school districts with a market value/personal income aid ratio (MV/PI AR) greater than 0.4000, the value of their index is adjusted upward by multiplying the base index by the sum of 0.75 and their MV/PI AR. For example, if the base index is 2.1% and the school district’s MV/PI AR is 0.6000, the school district’s adjusted index is 2.1% x (0.75 + 0.6000) = 2.8%.
For the Lebanon County School Districts the adjustment translates into the following:
- Annville-Cleona SD; MV/PI: 0.5078; Adjusted Index: 2.6%
- Cornwall-Lebanon SD; MV/PI: 0.4585; Adjusted Index: 2.5%
- Eastern Lebanon County SD; MV/PI: 0.4118; Adjusted Index: 2.4%
- Lebanon SD; MV/PI: 0.8225; Adjusted Index: 3.3%
- Northern Lebanon SD; MV/PI: 0.4723; Adjusted Index: 2.6%
- Palmyra Area SD; MV/PI: 0.4681; Adjusted Index: 2.6%
The discriminatory nature of the property tax can be seen by looking at differences in median income in the area. The median income for the city stands at $33,170 which is $20,000 than the rest of the county where the average median income stands at $53,474 (according to the Census Bureau) yet they could see a 3.3% increase and are currently already paying the highest school millage rates in the county. The county average for people below poverty stands at 9.6% while the population for the city below poverty level stands at 27%.
Countywide the population stands at 135,251 with the city population at 25,554 02 or about 1/5 of the population and yet almost 50 percent of the properties currently in tax delinquency in the county are properties inside the city.
The new allowable increase in the Act 1 index is not necessarily the actual amount of increase that may be imposed by your school district. Some districts that carefully control costs may be able to increase taxes less than the index, while others may apply for an exception by the PDE to raise taxes more than the allowable index or put the increase to a voter referendum.
Openpagov.org shows a school property tax increase of 2.56 billion over the last 10 years. This comes during a time when student enrollment in our public schools went from 1,814,311 to 1,787,351 for a drop 26,960 students while staff went from 231,770 to 264,697 for an additional 32,927 staff members (Source: Commonwealth Foundation). Today Salaries, benefits and pensions make up 70 to 75% of the average school district budget.
None of this is adjusted for the impact of the pension debacle created by the state government. For example, in Pennsylvania the official unfunded liability reported by the state’s two major pension systems is a combined $49 billion. That assumes pension funds will grow at a rate of 7.5 percent every year in perpetuity. This isn’t the case. The pension has been performing at a lower 3.22 percent. Using the lower, growth rate of 3.22 percent, the unfunded liability in Pennsylvania’s pension plans grows to a staggering $156 billion.
Members in both the House and the Senate have expressed opposition to School Property Tax Elimination through HB/SB 76 pointing specifically to using the property tax to fund these pensions. It apparently no longer matters if the school property tax is sustainable in the long term to property owners, which certainly is not going to be the case and in many instances is already unsustainable for many who have seen their home seized for tax sales in the state. An additional 2.56 billion over the next 10 years considering the past 10 years compounded by rising pension costs that will only add additional revenue needs through the School Property taxes, the path is completely unsustainable for the majority of the people in the state.
Some legislators are looking at expanding exemptions but this will only accelerate the problems for those still paying by asking even more of them while shrinking the pool of those paying into the property tax. Like the partial exemptions we’ve seen in the past, the increases in school property tax quickly exceed the exemption amounts.
Sadly, looking back to Article 1, Section 1 (All men are born equally free and independent, and have certain inherent and indefeasible rights, among which are those of enjoying and defending life and liberty, of acquiring,possessing and protecting property and reputation, and of pursuing their own happiness.) of the State Constitution, this is no longer the case for thousands in the state. Many have already lost their homes providing for the salaries, benefits and pensions of public sector employees. As the cost continues to increase that number will only increase. I see nothing in Article 1, Section 1 that states that it is the responsibility of the private sector home owners who are to provide for the acquiring, possessing and protecting of the property of public sector employees but for many in Pennsylvania, this is now the case and the protections of Article 1, Section 1 no longer applies to them.