Property Tax: Have the chickens come home to roost?

I chair a local citizen advocacy group called the Lebanon 9-12 Project.  We have always insisted on a stance based on issues and not individuals, policy and not party.

The Lebanon 9-12 Project became a leading voice for School Property Tax Elimination in Lebanon County.  That voice grew until we were taking the issue across the state participating in townhalls, holding our own townhalls and doing what we could to spread the word.  In all fairness, it didn’t take a genius to see the handwriting on the wall.

We’ve taken a lot of criticism for our stance from many who wish to see us focusing on more federal issues or following the beat of other special interests in the state.  Their desire to have us carrying their torches while homes across the state were burning to the ground because of the School property Tax  was never an option for us.

The Commonwealth has far too many advocates in the state who push for legislation that really isn’t going to solve the problems.  Maybe that’s a form of job security because if we actually solved the problems we wouldn’t need many of those advocates.

We also have advocates who only see the surface problems and seem to be unable to grasp the underlying factors in issues that create those surface problems. In previous blogs I’ve already addressed how Property Tax is the enabler making it the cause and not a symptom so I won’t go there in this posting.

In the 1960’s public education in Pennsylvania was radically changed from primarily local controlled schools to a state controlled school largely through the Department Of Education but enabled by powers granted to them by our legislators.

We went from 2,000 school districts to 500 because, we were told, consolidation would save us money and make our schools more efficient.  It didn’t work.  That’s partly why I’m so skeptical about the consolidation debate that is now resurfacing.  Consolidation gave more controls over education to the state already.

Then the public sector began to unionize, something even the most progressive leaders of the past like Franklin D. Roosevelt warned should never happen especially regarding collective bargaining issues.

While Roosevelt strongly supported unions when it came to collective bargaining for public sector unions Roosevelt said

All Government employees should realize that the process of collective bargaining, as usually understood, cannot be transplanted into the public service. It has its distinct and insurmountable limitations when applied to public personnel management. The very nature and purposes of Government make it impossible for administrative officials to represent fully or to bind the employer in mutual discussions with Government employee organizations. The employer is the whole people, who speak by means of laws enacted by their representatives in Congress. Accordingly, administrative officials and employees alike are governed and guided, and in many instances restricted, by laws which establish policies, procedures, or rules in personnel matters.

Our Government chose to ignore that.  It was enabled by our State legislators where it continues to hold a protected status in the regulatory unfunded mandates passed down to local homeowners through the egregious property tax.

The controls over the school district by the Department of Education began when we consolidated while shifting how we fund education through the local option and started empowering the school districts to levy taxes without the consent of the their local municipal governing bodies.

The taxing ability of the school districts was necessary for this take-over of our public schools.  What they wanted to do was going to be expensive and they needed a way to fund it.

As the schools unionized they brought policy to the table like collective bargaining that led to things like Prevailing Wage, using tax payers dollars to collect Union Dues and Seniority instead of merit based salaries all paid for through local taxation.  Please don’t interpret that as an indictment against teachers, its not.   It’s an indictment of bad policy that, as we will soon see, is going to threaten the jobs and security of teachers across the state.

As the business community was shifting away from defined contribution pension systems for their employees because they could see where it as heading, the PSEA and our legislators went a different direction.  They actually expanded the public sector pension problem ignoring what the business community saw coming.  That was because they didn’t have to rely of a consumer base like the business world.  The public sectors unions and the legislators had the local property tax.  No matter how much money was lost in bad investments, the homeowners of the Commonwealth were there to foot the bill.  That kept campaign coffers full even it was emptying the bank accounts of working families.

At every step of the way in the growth of power that has allowed the PSEA to become a powerful lobbying force in Harrisburg it was done so with the legislators and the Department of Educations blessing at the expense of the taxpayers. Now, however, it appears that they can also start to see the handwriting on the wall, even though its been there for decades.

Even though the issue of the Property Tax has been in a hot topic since the 1960’s, it took the Pennsylvania Association of School Administrators (PASA) and Pennsylvania Association of School Business Officials (PASBO) until 2010-11 to start conducting surveys of their members  on economic impact of schools.  They claim it was a way to document the effects of budget cuts.

Education budgets aren’t really cut at the state level.  They haven’t been for a very long time.  They get funding and each year and that funding increases.  What they aren’t seeing is the funding increasing as much as they are spending and it’s not all the school districts fault.  The state is sending down unfunded mandates as is the Department of Education through the Public School Code of 1949 and Title 22 of the Pennsylvania Code.  That, coupled with the salary increases, pension issues and rising healthcare costs has brought school districts to admit to a point of unsustainability.

Pennsylvania school districts spent $26.1 billion in 2013-14, an all-time high, according to the latest data from the Pennsylvania Department of Education. This represents a $600 million increase from 2012-13. In fact, total education funding steadily increased over the last five years, save for 2011-12 upon the expiration of temporary federal stimulus dollars.

$12.7 billion of that $26.1 billion came from the Property Tax.

The most recent survey by the PASA and PASBO isn’t good news but it is something we been saying was coming for 5 years.

According to Newsworks, which reported on June 6,  Seventy-one percent of Pennsylvania’s 500 school districts participated in the survey — at least one from every county. The student demographics of the participating districts mirror the state as a whole.

It paints a bleak picture.

“All districts’ projected increases in mandated expenses for pensions (100 percent), health care (84 percent), special education (88 percent), and charter schools (77 percent), higher in every category than in previous reports,” said the study.

This year, districts expect a staggering 24 percent increase in their pension payments.

The report estimates that on the whole the cost of mandated expenses will rise by more than $600 million in 2016-17, not including cost of living salary adjustments.

Forty-six percent of districts report they will cut staff before the 2016-17 school year. Thirty-four percent plan to increase class sizes. Fifty percent plan to cut academic programs and extracurriculars — with the state’s poorest districts affected most.

At the same time, more districts plan to raise property taxes this year than last year — jumping from 71 percent to 85 percent.  If enacted, PASA and PASBO say this will be the seventh consecutive year in which over 60 percent of school districts have raised property taxes.

Among districts planning tax increases, about 30 percent plan to tax above the Act 1 Index, which requires approval from the state or consensus through referendum.

The reliance, however, on the school property tax to garner this money is also indicated in the actions of the PASA and PASBO and that’s part of the problem.  In spite of the fact that local school districts have 14 other options as a result of Act 511 from 1965, the burden has always placed on working families  through the property tax.  For the school districts going down this path there is still handwriting they are unable to see.  The growing discontent with the practice of holding home owners hostage in their own homes through an archaic tax that can never be made fair has spread across the commonwealth causing many tax payers to pay closer attention to what is going on and they don’t like it..

It was the property tax that enabled this nightmare and until the way we fund education is changed we aren’t going to see the reforms that are actually necessary.

Last year’s pension reform bill was not a solution for short-term costs.  The more recent bill by Rep. Maloney isn’t much different.  We don’t need legislation that appears to be doing something about the problem that isn’t going to ease the pain home owners are feeling in the Commonwealth.

The alternate property tax proposals were the same thing.  Bills like 1189 and 504 protected the property tax not the property owners while adding new taxes that eventually would result in tax increases for working families.

There has only been one bill that actually gets to the root of the problem creating a gateway that forces legislators to address the other issues that have come into existence because of the property tax to be solved in ways that work in the interest of the whole commonwealth instead of on the backs of backs of property owners.  That bill is SB 76.

I’ve been in Harrisburg a lot in the past few moths.  It’s not because I like going to Harrisburg and in fact, the exposure has actually not improved my sense that the government really understands the plight of working families in this state.  I’ve seen very little to restore my confidence in the willingness of a lot of our legislators to do what is necessary.  That being said, in the past month we have seen a shift in the dialogue with our most vocal opponents to Property Tax Elimination.  I’m usually with Ron Boltz as we advocate for School property Tax Elimination and as we’ve talked, he’s noticed the same thing. Our warnings are coming home to roost and they are starting to give us their ear.

In all honesty, I am more hopeful for the passage of 76 now than I was at the beginning of this year but isn’t it a shame that we have to find ourselves into the crisis before our government begins to realize something the constituents have been telling them for decades.

Isn’t it also a shame that even with the handwriting on the wall staring them right  in their faces we still have legislators who push the reduction plans telling us at least it’s something rather than put their full energy behind getting SB76 across the finish line.  They are right, it is something!  It’s a temporary reduction that will very quickly turn into a tax increase that will do nothing to the plight of homeowners in this Commonwealth except make it worse.

I still remember those chilling words uttered by Rep. Eli Evankovich when he rose up to speak out against  76 when it was considered in the house.  He said “How will we pay for the pensions if we eliminate the property tax.”

That’s part of the problem.  They aren’t paying for the pension…the homeowners in the state and the teachers are paying for that pension and the unwillingness of the legislators to do something responsible about a problem that has been snow-balling for a very long time now stands to collapse because they kept choosing to kick the can down the road.  They could do so because they were dependent on the Property Tax to rise to meet the obligation that was created by bad legislation.  Our opponents refused to admit that and I’m sorry but I’ve reached the conclusion that is because they are more interested in protecting the status quo than they are with protecting the rights of property owners in this Commonwealth.

Both teachers and home owners were exploited as their Public Sector Unions and our State legislators made promises they couldn’t deliver.  Instead of facing the dire problem through accepting responsibility all we hear is the rhetoric of partisan bickering and blame games protecting the status quo at the expense of everyone else.

Every time our legislators kick the can further down the road on any of the states economic problems that kicked can hits the taxpayers squarely in the back of the head and the taxpayers have had enough.

The state reliance on the local property tax to fund education over the last 50 years has allowed a problem to grow into a cancer.  According to Commonwealth Foundation state funding per student ranks 24th in the country yet Pennsylvania ranks 6th in local revenue per student.  Our opposition likes to call that local control when in reality it’s just a way to control the locals through a heavy system of local taxation that is turning home owners into tax slaves if they want to keep their homes.

That reliance is based on a system of taxation that is notably unfair; requires and expensive reassessment to level the playing field but always fails in doing so; requires lengthy appeals processes that follow the assessments all coming at the expense of the local property owners; yet the property tax still remains the preferred way for many to extract tax dollars from constituents when it comes to education funding.

The instability the school districts are now facing has come following the years of instability that have been pushed on to working families when it came to their own household budgets watching their local tax burden force them to make difficult choices.  The cuts these schools districts are now making has come after years of households making cuts in their home budgets to meet the property tax obligation.  Preserving the status quo of the pensions has come at the expense of retired seniors in the private sector coming out of retirement just to keep up with the taxes.  The status quo has resulted in an exodus of working families in leaving the state coupled with a failure in attracting new business without some form of property tax abatement programs that are paid for through higher taxes on working families.   None of that ever seemed to really matter….until now!

It’s time to stop spinning things to make them look appealing when the reality is that working families in the Commonwealth are hurting.  That translates into an inability to support local business because they don’t have the revenue needed to do so.  That translates into an inability to do some of the necessary repairs to a home contributing to the blight problem.  It also contributes to the fact that more families are stuck in rental servitude unable to purchase a home, not because they can’t afford the mortgage but because they can’t afford the exorbitant taxes.

While opponents like to point to the fact that the School property Tax Elimination Bill (SB 76) is a tax shift they are ignoring that what SB 76 really does is correct 50 years of shifting the tax burden on to working families in the Commonwealth because we have real jobs and families to support, we can’t afford to spend every day in Harrisburg and lobby for the perks that our opponents benefit from.  There’s a reason that the lobbying profession if growing and it isn’t because, as some legislators tell us, they have no undue influence.

Please stop insulting us.  We read the papers and we’ve seen what’s happening.  The recent FBI sting that involved the creation of a fake business and getting legislation passed to benefit that business through lobbying firms is a symptom of a problem in this state.  A problem that has stood in the way of protecting homes and working families for far too long!