The Property Tax Reduction Illusion in Pennsylvania

PA Independent has a story discussing some of what is going around concerned Governor Wolf’s upcoming budget.  They aren’t alone, stories have been popping up in all media outlets but the stories are generally consistent with the PA Independent article.  (  While we won’t know what his budget will be until he makes the budget available to the public there is much speculation that includes yet one more attempt at selling property tax reduction instead of school property tax elimination.

The reduction/relief mentality has never worked. All we have to do is look back to the promised relief from Casino gambling.  Every attempt at relief is just as quickly dissolved by increases in the Property Tax that, in some area of the state, have exceeded the amount of relief offered.  There is also the problem that not everyone is eligible for these property tax relief schemes.  The state picks the winners and losers and it seems that there are always more losers than winners.  Leading those increases are the School Districts.  Not all of those increases are the school districts fault with the plethora of unfunded mandates being forced on them and that’s the major problem with the whole relief instead of elimination scheme.

It is being suggested that we could see an increase in the PIT or the sales tax, or a combination of both and that this would result in a “reduction” of our property taxes.    I find it interesting that those who complained about the implementation of these taxes for the purposes of elimination of the school property taxes saying it would be harmful to the poor, even though the IFO report said otherwise, yet now those same people are saying raising those taxes for reduction and not elimination somehow won’t hurt the poor.

We’ve never denied the fact that HB/SB 76 is a revenue neutral tax shift.  If Governor Wolf proposes a reduction bill that increases the PIT, Sales Tax or both, we won’t see a tax shift, we’ll see a tax increase.   Worse yet, it will kill the ability of getting HB/SB 76 passed.  We’ve been warning that they want to increase the PIT and Sales Tax and that has been behind some of the resistance to School Property Tax Elimination.  If they give us Elimination, they will have a harder time raising those taxes for their own design and that’s where the red flags go up for me.  If they raise the PIT and SUT for reduction instead of elimination, we’ll never see elimination…the problem is we won’t really see a reduction either;  not in the long run

HB/SB 76 has built in controls that cap future education spending to the rate of inflation.  HB/SB 76 would make the State Legislators and their regulating Departments, Agencies and Commissions more accountable for mandates.  If it’s going to increase the school district revenue needs, they’ll have to provide for the funding.  HB/SB 76 also places a no-exemption voter referendum for all school district spending that exceeds their budget allowance.  HB/SB 76 also includes a clause that says that if the revenue collected by the increase in PIT and Sales Tax for elimination exceeds 6% of the necessary revenue, that money is returned to the tax payers by lowering the PIT tax.   That’s what happens when citizen advocates are involved in the writing of legislation; accountability to the people gets built into the legislation.  I have serious doubt that the same measure would be built into the Governor’s proposal if this is the path he chooses to follow.

Don’t be fooled.  We’ll be told that this is a reasonable compromise.  That simply is not true.  The pension debt problem is going to keep growing and that’s going to result in dramatic increases, especially in the school property tax.  This year the employer contribution to PSRS will go from 16% to 21.4%.  It is estimated that this will add an additional $250 million dollars to statewide education costs.  Even if we shift to a 401(k) system that won’t stop the pension problem for existing teachers. It will help but its a band-aid, not a real solution.

We have a first in-last out policy based on seniority, not merit.   The U.S. Bureau of Labor Statistics documents the loss of more than 23,000 education jobs in Pennsylvania through the end of 2012. (U.S. Bureau of Labor Statistics, Quarterly Census of Employment and Wages). According to the Pennsylvania Department of Education, nearly 11,000 professional positions were lost in just three years (2010-2011 to 2013-2014) (PDE: 2010-2011 Professional Personnel Summary and 2013-2014 Professional Personnel Summary,  Even with the cuts to staff, the pension problem still grows. All future cuts in education employment, unless the first in-last out policy is changed, will result in the new hires under the 401(k) programs losing their jobs doing little to alleviate the existing pension problem.

It’s not just the Pension Tsunami.  The PASA-PASBO Report on School District Budgets was released this month (February) and includes some statistics that we should be aware of before we buy into this whole reduction scheme.  You can read the full report here (

Healthcare costs:  In the last five fiscal years, 93 percent of respondent districts have faced increased health care costs at least once. Looking specifically at increases from 2013-2014 to the current fiscal year, 81 percent of respondent districts reported higher costs, with a median increase of six percent.

Special Eduction Funding: Ninety-one percent of respondent districts reported increased special education costs at least once since 2010-2011. And while the state’s 2014-2015 education budget included an additional $20 million for special education (the first increase in special education funding from the state in six years), these resources were not enough to offset rising mandated costs at the district level. Seventy-eight percent of respondent districts reported increased special education expenditures in 2014-2015, with a median increase of seven percent over 2013-2014.

This report explains that since 2008-2009 the School Property Tax has increased  an statewide average of 16%. Ninety-one percent of respondent districts have raised taxes at least once over this span, and in every fiscal year, more than 60 percent of respondent districts raised property taxes. Notably, there has been a steady, three-year uptick in the frequency of tax increases since 2012-2013.

The summary of this report includes this alarming statement: A recent quantitative analysis presented at the University of Pittsburgh’s Institute of Politics and Temple University’s Center for Regional Politics showed that basic assumptions around revenues and expenditures would find 50 percent of Pennsylvania districts without the funds needed to meet mandatory costs by fiscal year 2017-2018.

The reduction scheme, as we see it, is little more than an excuse to raise the PIT and SUT taxes to provide a temporary reduction, that will be short-lived as school districts will be forced to continue their dramatic increases in the School property taxes as a result of the Pension burden, Heath care Costs and Special Education funding needs..  Within 3 to 5 years we’ll be paying more in school property taxes than we are now with additional increases in our PIT and Sales Tax.

It should also be noted that almost 180 (more than 1/3) of the school districts did not respond to this survey.  In 4 counties, none of the school districts responded.

We can’t allow this to happen.  While the Constitution requires that the Governor proposes a budget, the funding for that budget is through the General Assembly.  Our legislators must stop using the local property tax to force tax increases on us through these unfunded mandates in our school districts and the only way that’s going to happen is to eliminate the tax through a shift to other taxes that includes caps to that funding so that when more mandates come, the Legislators must be accountable for where that money is going to come from.

Again, don’t let them fool you.  The reduction scheme isn’t going to work.  If your legislator tries to talk you into supporting this, you need to point out the facts to them to demonstrate to that legislator that you see what’s really behind their proposal: using the false illusion of reduction in order to implement higher taxes on all of us.



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