An Open Letter To The Taxpayers of Pennsylvania

Posted on 2017/01/31 by jmrodkey

An Open Letter To The Taxpayers Of Pennsylvania:

I am writing to respond to the letters dated January 30, 2017 currently being sent out by a variety of school related organizations to legislators in opposition to HB/SB 76. I have chosen to include their text (in red) with a response (in italics) to this recent letter. I apologize for the length of this letter but I felt it was necessary to address these claims as written.

________________________________________

Their letter begins with this header. The first image is that of the PSEA. The PSEA and these other educational institutions are clearly in partnership leaving us all to ask the reasonable question:. Where, in this massive conglomeration, is the voice of the tax-payer?

The letter begins:

On behalf of our organization and the more than 200,000 Pennsylvanians we represent, we urge you to oppose a plan to eliminate school property taxes (commonly referred to as SB 76). While we recognize an over-reliance on property taxes for school funding exists, complete elimination has dangerous, unintended consequences, and simply goes too far. The proposal would destabilize our public education funding system, create greater inequities, and enhance the divide between state-determined winners and losers.

Response: It is made clear in their opening sentence that they do not, nor do they intend to, represent the taxpayers. Their representation is solely for their own interest; Not for the 12 million people of this commonwealth. Oddly enough the statement actually denies the inclusion of the student population. The letter is a reflection of their self-serving interest, not in the interest of the students, or the rest of the Commonwealth.

While speaking about dangerous unintended consequences we have been asked to ignore the consequences (both intended and unintended) of allowing this form of taxation to continue for as long as we have. It has destabilized our homes and our communities adding to the problems of blight and the decline in population as people leave this state for friendlier tax environments.

It has artificially driven up the cost of rent. Due to the cascade effect of the property tax it also artificially drives up the cost of everything we purchase.

They have created the very inequities that they now claim to oppose. If the school property tax is not eliminated those inequities will continue to grow at the sole discretion of those organizations fighting to protect the status quo.

The passage of HB/SB 76 will actually cap these inequities allowing the General Assembly to address the basic education funding formula using a more stable measure of revenues collected by the replacement revenue through a statewide PIT and SUT. Since the funding replacement is driven out as a dollar for dollar exchange of the existing property tax revenue collected, the state is not determining the winners and losers. That amount was predetermined by the school districts themselves. It is time for these organizations to stop deflecting their accountability to others while denying their own responsibility in creating many of the problems we face. It can’t always be everyone else’s fault! Deflecting the blame is not a solution!

We do believe that the Basic Education Funding Formula needs to be adjusted to better reflect cost per student, population and inflation but we also believe that we can never control the inequities until we cap local authority’s ability to raise taxes at will often outpacing inflationary rates. Our goal, however, was to address the unfairness of the school property tax. The other problems associated with education funding requires unique solutions and should not be tackled through one massive piece of legislation. It is irresponsible and unconstitutional in this Commonwealth to expect one piece of legislation to address all of the problems. These other problems must be tackled individually and we encourage these educational organizations to come up with solutions to the other areas that we can get behind and fight for.

Based on my past experiences I will not hold my breath for this to happen through the organizations listed in their letter. Instead we will probably see more citizen advocacy in seeking the solutions to those problems as we have seen with the advancement of HB/SB 76. You cannot claim to stabilize education funding by creating instability for those who must pay for the bill. The path we are on is insolvent leading to an unsustainability that these organizations continue to ignore in order to protect their ability to raise taxes at will. That attitude is simply irresponsible creating adverse effects that extend far beyond the impacts of the school property tax itself.

STABILITY

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 in response to short-term changes in the business cycle or economic recessions. According to the Independent Fiscal Office (IFO), during the Great Recession Pennsylvania’s income tax revenue dropped by 6.5 percent in FY 2008-09. This was compounded by lost sales tax revenue during the same period. The same IFO report indicates that sales tax revenue declined 4.2 percent in FY 2008-09. Over the same period, school property tax revenue grew more slowly but did not decrease. Reliance only upon state taxes would have reduced the amount of money available to public schools to pay for necessary programs during a critical time when many children were facing economic upheaval within their families as well.

Response: The property tax is only a stable and predictable source of funding for the schools. That stability is predicated on the instability it creates in the lives of those who must pay for it. Of course they aren’t even pretending to represent us so why should we think they would care.

In down economic times, jobs are lost through no fault of the individuals losing those jobs and, as the same report cited by the school groups you’ll note that spending increased during this recession even though people had less money to spend. The increased school property tax during this time period slowed down the recovery and had a negative impact on the sales tax. With less money to spend and more owed to the school property tax, tax-payers had less revenue to put back into the business community. This had an adverse impact on jobs making restoring jobs in the market place more difficult. By eliminating the school property tax that, by their own admission, increased during a recession, we could see easing in the loss of jobs and decline in sales tax providing for a more rapid recovery at critical times like economic recessions.

The private sector, in many cases, has seen their wages stagnate since the recession. They have seen their benefits cut, loss of retirement investments and more difficult times. This is unlike their public sector counterparts in the public educational system. It is ironic to me to see the PSEA and the PSBA partnering in their opposition to this important legislation. Rather than accept changes to the current pension system they are fighting to maintain their status quo and fighting for higher wages. This is with little regard to the consequences, unintended or otherwise, on those who actually have to pay these taxes to provide for these wants. At the same time, rather than allow for time for tax-payers to recover from the recession, many school districts went ahead with school building projects, replacing sport playing fields with astro-turf and other projects that could have been postponed, often against the wishes of the majority of the residents in their community.

While, in many cases, our county, municipal and other state governing bodies restrained from increasing the tax burden on the residents during the recession, this was not so with our school districts. Spending increased. Wages increased which added to the pension cost. How many of those increases were not mandated by the State?

They will bemoan that they can’t control the costs and then, as we will see later, complain because of the loss of local control. What they have refused to do is accept their own responsibility in the increased cost of local property taxes to protect the status quo placing more and more people at risk of losing their homes.

WINNERS/LOSERS

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 all of their current school property tax bill and all of their county and municipal property taxes. Additionally, 215 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 all of their current property tax levy to fund existing debt payments.

We 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.

Response: The last paragraph of this section summarizes the disconnect these organizations have with those who are struggling this unfair and egregious tax. This is not simply a threat to families or individuals on fixed incomes. It is a threat that prevents many young families just starting out from purchasing a home to invest in their own future. Those families must turn to renting. As the property tax continues to increase it continues to drive up the cost of rent making it harder and harder to move from renting to home ownership. At the same time, it is forcing others out of their homes.

In the last three years alone median rent has increased by 5.47% according to the Census ACS survey. The largest factor in the increase of this rent is the property tax. If those trends continue we would see a 27.4% increase in rent over the next 15 years. The Study tells us that the median rent today is $848 in Pennsylvania. If the trend continues in 15 years that median rent would rise to $1080.35. adding an additional increase of $2,248.2 to the average annual rent if we maintain and protect the status quo. This has the impact of pushing more families into seeking government assistance to help pay for the rent associated with increased as a result of rising property taxes. That increased the state’s need for revenue forcing cuts in other services or a need to raise taxes in other areas.

There will always be winners and losers but under this system of property taxations, the working families are always the losers to the benefit of those in the educational industry.

Nowhere in their opposition do these organizations address the inherent inequities that make the majority of homeowners losers under the current system.

Studies by the National Taxpayers Union have demonstrated that as many as 60% of assessed home values are actually higher than the price the home could be sold for in the open market. In the county that I live in a recent re-assessment was conducted on the 54,000 properties. 60% of 54,000 properties would be 32,400 properties. A higher assessment than actual selling price results in paying taxes on property we don’t actually own (something that cannot happen with a PIT or SUT, neither of which require constant and expensive reassessments). Following the reassessment, thousands of appeals went forward and, according to our County Commissioners the overwhelming majority of those appeals were ruled in favor of the homeowner proving the inherent flaw of assessments in leveling the playing field. I was one of them. Our home was assessed at $40,000 more than it was actually purchased at the year before the assessment. Our assessment was lowered but it was still much higher than the price we paid for it.

If the average home is only assessed at $5,000 more than it can be sold, it is generating revenue that is unjustly being levied. In my town that would mean an additional $136.00 a year in taxes for property value that I do not actually possess. I have been told by realtors in my area that home values in the area I live have actually declined since the reassessment.

If the study by the National Taxpayers Union is correct, it is generating more than $4 million dollars a year in taxes on property that the people in my district do not actually own. Even if that 60% number is too high; even if that number is only 10%: How can anyone justify that as a reasonable form of taxation?

Again, this is something that cannot happen through a PIT and SUT tax. Only elimination can rectify that unjust method of taxation.

LOCAL CONTROL

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. As a result, the state will own all cuts to school district programs, staff, and services that occur under this type of legislation.

Response: Making the claim that school district would have no ability to raise revenue or make financial decisions at the local level is simply not true. It is an irresponsible claim. HB/SB 76 has a built in mechanism that allows school districts to levy a local PIT or EIT tax with the consent of the voters for any special project the school board may be considering. HB/SB 76 also does not remove any of the current Act 511 options in local taxation providing them with other alternatives that our homes to generate income.

While we all agree that unfunded mandates are a problem, how many of these unfunded mandates were put in place at the insistence of the PSEA and the Department of Education? How many of these unfunded mandates are unique protections and benefits to Public Sector Unions that continue to drive up the cost of Education. You cannot continue to claim to be opposed to unfunded mandates while fighting against Pension Reform, Prevailing Wage, Paycheck Protection and changes to the current Healthcare system in the Public Sector to bring it more in align with the Private Sector.

In the crafting of HB/SB 76 we went to great lengths to allow school districts to make use of a local Income Tax for special purposes with the consent of the people in the district. we understood that special needs would arise and we included a section in this bill to allow for those circumstances. In exchange for that, these educational organizations have chosen to misrepresent that portion of the bill because it doesn’t give then sole authority for the increase. In other words, it doesn’t allow them to control the locals but, instead, requires local input in their decision making process which truly restores local control.

This bill does nothing to regulate how the school district spends the money they get through the replacement funding. It is disingenuous to claim otherwise. Either they are critiquing a bill they haven’t read or they know better and simply don’t care.

Again, it is the first sentence of their statement in this section that is so revealing. They admit that fear losing their authority over the locals rather than allow the citizens in their community to become a part of the decision making process.

The consideration of local taxing options, as some of these bodies have suggested will, only allow inequities to continue and to grow. Many of our 3^rd class urban city schools do not have the resources available to them to make use of local options in the funding of their schools making them more and more reliant on state funding. Their wealthier rural counterparts may be able to shift to this type of funding since they aren’t land-locked and have the room for business expansion. If we want to force existing businesses to option out of the 3^rd class cities to relocate into the wealthier rural communities, the local option would be the way to do it.

I would also like to contend that our school districts were granted an independent taxing authority by statutory law. While our school boards govern our local schools they are not an actual governing body. They have no authority to pass laws that regulate our communities and their authority is restricted to the local school only with that authority strictly regulated and controlled by the Department of Education and the General Assembly (Public School Code of 1949 and Title 22 of the Pennsylvania Code).

I question the granting of independent authority to control local taxation through the school board. In doing so I contend that, as a result of the rising cost of education funding, our municipal government have had to make cuts in necessary functions such as police, fire and safety protections making our communities less safe. This has led some rural municipalities to remove local police protection completely to become reliant on State Police protections adding to the cost of maintaining the state police force resulting in higher taxes elsewhere. The school property tax is putting our homes at risk in more ways than the direct financial burden of the tax itself. The School Property tax has also led to the implementation of other government supported programs that are paid for through other tax programs. Rent Subsidies are more necessary because there is a Property Tax, County Taxes are impacted by the need for reassessments, Property Tax relief programs like Clean and Green, KOZ, LERTA, Homestead and Farmstead exemptions and more have all become necessary because there is a property tax.

I would also like to remind these institutions who administer in the education of our children that our Commonwealth Constitution is still the rule of Law in Pennsylvania. Article 3, Section 14:

The General Assembly shall provide for the maintenance and support of a thorough and efficient system of public education to serve the needs of the Commonwealth.

If these organizations wish to change our Constitution, there is a process for that. Let’s not engage in an argument of continuing to undermine our Constitution through questionable means and put this before the people of the Commonwealth rather than continue to blatantly disregard the rule of law in the Commonwealth. While we worked very hard to make sure that HB/SB 76 is in full compliance to our Commonwealth Constitution, this is, apparently, not something our school boards want to consider. They have suggest taxing business property different from homes which would violate the constitution. They have suggested making isolated relief, usually focused on seniors, which may garner senior votes but is in violation of the Constitution.

It is long past time that we restore an accountability to the tax-payer for how our money is being spent. When it comes to education funding that requires a radical departure from the path we are currently pursuing.

I know of three opportunities that were granted by our legislators to allow opposing views to 76 to address their concerns and provide solutions to the problems of taxation. I participated in one of those round-table discussions. While they may agree that there are problems with the property tax they have not offered any substantive solutions to the problem. They choose, instead, to protect the status quo where they benefit only adding to the financial burdens of the rest of us.

In looking at the header of the letter I am referencing and then in looking at the rhetoric….who, in this conglomerate of educational organizations, is actually watching out for the tax-payers? One would think that would be the responsibility of the School Board but from their current advocacy against us I am forced to question that. I am instead reminded of a grievance in our Declaration of Independence which states “He has erected a multitude of New Offices, and sent hither swarms of Officers to harass our people and eat out their substance.”

In the past, letters written by other opposing groups have revealed that these groups have been working behind the scenes in ways that are counter-productive to the best interest of the working families of this Commonwealth. These organizations have now joined that rank and file. In the preservation of their own self-interest they are sacrificing the best interest of the entire state by exploiting us for their personal gain.

I say that with great pains. I take no pleasure in bringing this issues to the forefront. I also say that understanding that if we don’t confront these things honestly, it will only get worse.

In closing, I would ask the School Boards, Principals, Administrators, Business Officials, Unions, and others who have contributed to the rising cost of education to justify one simply chart:

After all, is it really all about the children or the community as it is made to appear in their rhetoric through misdirection or is it just about them and their ability to profit while continuing to abuse the home-owner in support of an unfair and inequitable system of property taxation?

Breaking Free From The Shackles of Property Taxation!

Posted on 2017/01/30 by jmrodkey

When America was establishing itself as a Nation, the institution of slavery was a black eye in contradiction to the very principles of Liberty which was supposed to be the foundation of our governing bodies. When some arose to discuss the deplorable nature of slavery the supporters of slavery always returned with the same deflection….they defended their right to hold others in slavery based on economy and benefit to the slave owner in total disregard of the fact that they were holding a people in chains.

Slavery was beneficial to the slave owner because it provided inexpensive and stable labor (income) for the slave-holder regardless of the loss of Liberty and person-hood in the life of the slave. The rights of a slave were to be ignored because they were viewed as the property of their masters. They belonged to someone else as property.

The elite class of the slave-owner was provided unique protections over their inferior class of slaves who were expected to lead meager lives to provide for the wealth and well-being of those who claimed the privilege of owning others.

An 1850 publication provided slaveholders with guidance on how to produce the “ideal slave”. This included things like:

Maintain an unconditional submission.
Create a sense of personal inferiority, so that slaves “know their place.”
Instill fear.
Teach servants to take interest in their master’s enterprise.
Steps were taken to ensure that slaves remain helpless and dependent.

Slaves were conditioned to submit to their owners granting the owner unconditional power over them. The slave owner was to be revered, elevated above the importance of the slave and a fear through a threat of personal violence was used on those who would not comply. Slaves were conditioned to believe that they were helpless in removing themselves from this abhorrent state of slavery. Slavery was, after all, the law of the land.

The slave was accountable to the slave holder but there was little accountability to the slave.

The inhumane and immoral treatment of slaves was justified solely on the economic advantage of the slaveholder. The ability to hold on to others as their possession could be framed around the slave owner’s ability to provide goods to the greater community regardless of the cost to the slave.

A war ended slavery but the notion of some having absolute power over the lives of others with disregard to the consequences of the power over those being oppressed never really died. It would take a social revolution before women were recognized as equal partners in society. It would take another social revolution to recognize the civil rights of persons once viewed as slaves.

The one institution, however, that has survived though these social upheavals restoring individual rights has been the preservation of the notion of using property (real estate) as a method for taxation.

As a student of history I am troubled by the rhetoric that I’m hearing from those in place to oversee the educational institutions in Pennsylvania because, frankly, I’m hearing arguments similar to the justification of slavery while ignoring the moral implications.

We hear that property taxes are stable sources of revenue. So was slavery; Stable, however, only for the Slave holder. Stability was never looked at through the instability it caused in the life of the slave.

The stability argument of the property tax supporters is only within the context of the stability for the tax collector. It is an economic argument that ignores the adverse impact on the economic abilities of those forced to pay the tax. It is an economic debate devoid of the moral implications. When the argument is framed in this way the justification for the abuse many suffer because of the property tax is solely through the eyes of the economic gain of the oppressor.

The property tax has become the vessel which has allowed wages, pensions and healthcare (the three major causes of increases in property taxes) in a large portion of the public sector to far outpace the rate of inflation for other in the private sector. It is allowing for those who benefit from property tax to prosper while denying those same “entitlements” to many in the private sector. As the private sector has moved away from defined benefit plans, the property tax allows this sector of public employees to remain in such a system regardless of the economic peril it causes to those who actually pay the bills.

To maintain the status quo, the public sector needs to increase the burden on property owners often denying many in the private sector the ability to invest in their own retirement or healthcare. The needs of those who pay the property are then ignored through a justification that, in order to have what those in the public sector want, others must make the sacrifices. When it comes to the property tax, that sacrifice may include your home!

Those sacrifices are being made. As we’ve gone around the state we’ve talked to people who are making choices between food and healthcare in order to hold on to their homes. We’ve met others who have lost their homes, either through tax seizures or by being forced into bankruptcy and foreclosure because the tax has exceeded their ability to pay.

Listening to the opposition to school property tax elimination it is almost as though those being crushed by the property tax are viewed simply as the collateral damage and that somehow it is all justifiable simply because the property tax is a stable source of revenue for the tax collector.

It’s an attitude that embraces a notion that people who lose their homes do not matter. They are expendable because it’s more important to protect the status quo than it is to do the morally right thing.

Consider the statement made at a public hearing by Michael Wood of the Pennsylvania Budget and Policy Center on the matter of abolishing the property tax. He stated that 10,000 people losing their homes to the property tax each year is not a significant enough number to do something about it.

That’s an expendability mentality where the homeowner, as long as they are healthy and able, are welcome but once the tax exceeds the ability of the homeowner to pay, the homeowner is insignificant and must be ignored. They are to be tossed aside with no regard.

It is the same rational the defenders of the slave industry welcomed.

It may seem harsh to some to compare property taxation to slavery but, in my opinion, that is a disconnect to the many who are struggling under this form of unfair taxation. Their lives do matter and no arbitrary tax should have the ability to take your home away from you. After all, if they have such power, who really owns your home.

Imagine yourself in a situation where you purchased a home 20 years ago with 10 more years to go until that home is paid for. Now an unforeseen event, a loss of a job or health issue that will temporarily set you back. You can still meet your mortgage obligation but your property tax is now outside your ability to pay. Eventually you will lose that home. You may lose your 20 years of investment in that home in the process because the priority is only to recoup taxes and pay off the bank loan.

Imagine a senior who actually completely owns their home being forced into a situation, perhaps through the death of a spouse or other health related issue, who will have their home stripped from them, pillaged of their investment in that home and stripped of a lifetime of memories stored in that home simply because they couldn’t afford to keep up with the demands of those benefiting from the property tax.

If they can strip you from your home and then sell that home on an auction with no regard for your investment in that home; if they can sell that home for pennies on the dollar seeking only to pay the back taxes and settle the remaining balance, if any, of the bank; who really owns your home?

Taxes are a necessary part of life but that does not mean that all taxes are justifiable. There must be an accountability, a justification, for taxation in the funding of the necessary functions of government. The methods of taxation should reflect a person’s ability to pay. Taxation should never be based on some arbitrary justification that actually makes the tax-payers a slave to system with little accountability to the taxpayer.

I believe that education is a necessary part of government funding. I believe that it is our responsibility to help in providing for the future education of our children. I also believe that using property is the most unfair method of taxation in the funding of a public education. It makes the homeowner subservient to the demands of an institution whose highest priority should be the education of our children.

Property tax is derived from an artificial measure of property worth that, especially during down economic times, does not reflect actual home value. When home values drop, assessments do not adjust to reflect the decline in property worth. Individuals must go through a lengthy and often costly system of appeals to have their assessments lowered. This will also involve time off work. For many lower income families this is not an option for them.

In county-wide reassessment we continually see large numbers of appeals made. The majority of those appeals are successful meaning that the assessed value of the property was wrong. When the assessed value of your property is higher than your properties worth, you are paying property taxes on property you do not actually own. While assessors use the terminology of fair-market value, such terminology is a misdirection. Fair-Market Value is a price agreed upon by a willing seller and willing buyer. In the assessment process there is neither. Your home will be valued for the purpose of taxation based on an arbitrary decision that has nothing to do with a buyer or seller.

The assessed value is accepted by the tax collector as fact. It becomes the burden of the property owner to prove that this is wrong regardless of how costly it is to the homeowner. For those who cannot afford to do so: Too bad! The defenders of the property taxation will tell us this is justifiable.

How does this arbitrary means impact you?

Let’s say that the taxes you pay on your property is only $10,000 more than your actual property worth in the open market. Multiply your current millage rate by 10 (adjusted by your area’s common level ratio) and you’ll see how much more you pay it takes as a result of inflated assessment. It may not seem like a lot but you’ll be paying that inflated rate for as long as you own that property. If there are 1,000 homes in your district paying taxes on an additional $10,000 of property worth we begin to see the devastating impact of the assessment process.

My millage rate is 27.1735. If my property is assessed at $10,000 more than I can sell my home in the open market, I’m paying $271.735 more annually in taxes than my property is actually worth. If only 1,000 other properties in my district are doing the same, $271,735 in taxes are being collected that cannot be justified through actual fair market prices.

This only happens with the property tax and its part of the built in mechanism of the so-called “stability” of the property tax for the tax collector.

It cannot happen with your Income tax. Your income tax is based on an actually and accurate number that is a one-time tax in new income earned.

It cannot happen with the sales tax because it involves the willing exchange between the buyer and seller based on an actual price, never on some governmentally established estimated value of the item purchased.

If the assessed value of my home is inflated, I will pay an annual inflated tax on that property for as long as I own that property. So will the other 60% of the homeowners according to the National Tax Payers Union.

Are we to ignore these studies simply because the tax is stable for the tax collector regardless of the instability it creates for those who must pay it?

Those who opposed shifting from property tax to Income and Sales tax say that this will hurt renters. The argument is framed as though the supporters of maintaining the property tax actually care about renters.

That’s not some hypothetical increase. That is trends. This is what will happen if we continue down this path. Obviously, in protecting the status quo, they don’t care about the 27.4% increase in rent over the next 15 years. Nor do they care that by shifting to a PIT and SUT tax we can greatly reduce the burden on renters in future years because the property tax will no longer be there to drive up the cost of rent.

Looking at those numbers median annual rent would go from $10,716 annually to $12,964.2 for an increase of $2,248.2 if we maintain and protect the status quo.

The most alarming part of the supporters of the status quo; the part that seriously undermines my respect for those making these arguments is the contention that my home is theirs to tax as the will as though my property is their property to do with as they please. In using the same defense that were made to justify slavery while misrepresenting the inequities and the inherent flaws of using property taxes to fund education they are doing our communities and Commonwealth a great disservice.

In all these arguments against property tax elimination through HB/SB 76, not a single argument has been made that spending more has produced dramatic results in the quality of the education our students are currently receiving. The arguments can be boiled down to the same rhetoric.

They want to spend even more to protect the benefits of those in that group regardless of the damage it does to everyone else. If you can’t afford to provide for you own retirement so you can pay for theirs, so be it. If you can’t afford healthcare so you can pay for theirs, so be it. If your employer can’t give you a raise because the economy isn’t recovering and jobs are leaving the state because of the negative tax environment, to bad…that doesn’t mean they won’t give themselves raise making your tax burden even more difficult.

No we aren’t in physical chains and they can’t beat us into submission with whips but it’s still slavery to a system that insists on rewarding itself to the peril of many who must pay the bills. It is slavery to a system that gives itself rewards that are far out of the reach of those who must pay the bills.

Oddly enough, in reading those points listed from the 1850 publication on how to create “ideal slaves”, I find the current rhetoric of property taxation supporters ironically similar as I do the same stability debates that ignored the cost of that instability to the slave in order to promote the benefits and stability to the slave-owner.

Until we free ourselves from the shackles of property taxation we will continue to be slaves to a system that is easily manipulated predicated on creating instability for those who must pay the bills with little to no accountability for how that money is actually being spent or concern for the injustice of using an arbitrarily determined home value that taxes you on property you don’t actually own.

Eliminating the property tax frees us from those shackles opening doors of opportunity to make our own decisions rather than having our decisions made through the enforcement of an unfair system of taxation. It will allow us more Liberty in deciding what to buy and when rather than forcing thousands to determine that for them because the property tax bill is due.

HB/SB 76 also allows schools districts to go to their community and make a request for special funding for local projects. It brings the community into the decision making process to determine factors of new school construction, stadium construction and expansion, or any other project. It restores a level of local control putting the control into the hands of the community, not the arbitrary decision of an administrator and the 5 school board directors who want to make that happen. Rather than controlling the locals we will see a restoration of real local control in the decision making process. Maybe, that’s what they fear the most-accountability to the people they serve!

They are fighting back. They are encouraging their members, those who benefit, to keep the shackles of property tax securely wrapped around our ankles. Now, more than ever, we need to to take a stand.

Contact your legislators and thank them for their support of School Property Tax Elimination through HB/SB 76. We need to flood their offices with letters, emails and phone calls.

For all you have done, thank you…..for all you will do, thank you again!

The Inherent Inequity of Property Taxation to Fund Education

Posted on 2017/01/28 by jmrodkey

The following information is specific to Lebanon County but it can be applied in most areas of the Commonwealth of Pennsylvania. The data is intended to show the current inequities inherent in using property taxation to fund education.

Note: Median Income and house value taken from city-data.org. The median income and house value data corresponds to the U.S. census data.

Lebanon City:

Estimated median household income in 2013: $33,485
Estimated median house or condo value in 2013: $87,620
19.3 mills go to school property tax ($19.30 for every $1,000 in assessed home worth)

The current school property tax millage for the median house value of $87,620 is $1,690.68 or 5% of the median household income. The school property tax represents 71% of the total property tax bill in the city. The total property tax on a home valued at the city average of $87,620 would be $2,380.94. This represents 7.1% of the median household income.

To further demonstrate the regressive nature of the tax. A city household at the median income for the county would be $55,973 according to city-data.com. Their school property tax on a home valued at $87,620 would be $1,690.68 or 3.02% of the $55,973 county average for household income.

The same priced home for a household at the median household income level for the city of $33,485 pays 1.08% more of their income towards the school property tax. A family earning below the median income level, say at $30,000 median household income, would pay 5.6% of their household income to the school property tax or 0.6% more of their income towards the school property tax than a household at the median household income level for the city.

This is the truly regressive and inequitable nature of the property tax. This is compounded by the inequities that exist in the methods of re-assessment or the application of the Common Level Ratio, both of which do little to rectify the inequity problems inherent in those systems. That, however, is a discussion for a different day.

Even though everyone pays the same millage rate for county property taxes it reflects a higher impact in Lebanon City. The millage rate for County property taxes would total $288.49 for a home valued at $87,640 which would be 0.86% of median household income. The same tax levied in nearby Cornwall on the same priced home would still be $288.49 but that represents 0.33% of median household income.

How does this impact the cost of rental properties?

The Property Tax, by necessity, will inflate the cost of rent as landlords must pass that expense on to the renter. Median gross rent in the city is $656 according to city-data.org. Median gross rent is $620 for the county or $36 more in the city. This translates into a cost of $432 more in the city annually where median incomes are lower. This means, on average, that city residents who rent will pay an additional months rent every 15 months rent compared to elsewhere in the county.

Let’s look at three neighboring areas in the same county.

Cornwall:

Estimated median household income in 2013: $85,736
Estimated median house or condo value in 2013: $216,927
3512 mills go to school property tax ($14.35 for every $1,000 in assessed home worth)

Total school property tax on median value home: $3,113.16 or 3.6% of median household income for Cornwall.

A home in Cornwall that is assessed at $87,620 (Lebanon City Median Value) would pay $1,257.45 in school property taxes. That would be $433.23 less than in the city even though the median household income is $52,251 more in the Cornwall area.

Annville:

Estimated median household income in 2013: $54,054
Estimated median house or condo value in 2013: $144,223
13.5094 mills go to school property tax ($13.51 for every $1,000 in assessed home worth)

Total school property tax on median value home: $1,948.37 or 3.6% of median household income

A home in Annville that is assessed at $87,620 (Lebanon City Median Value) would pay $1,183.69 in school property taxes. That would be $506.99 less than in the city.

Palmyra:

Estimated median household income in 2013: $54,471
Estimated median house or condo value in 2013: $144,223
13.52 mills go to school property tax ($13.52 for every $1,000 in assessed home worth)

Total school property tax on median value home: $1,949.89 or 3.6% of median household income.

A home in Palmyra assessed at $87,620 would pay $1,184.62 in school property taxes. That would be $506.06 less than in the city.

Taking these three areas compared to the city, Lebanon City households would be paying an average of $482.09 more in taxes annually than their neighboring areas for a home assessed at at the same price of $87,620 (Lebanon City’s average home value). In just three years this amounts to $1,446.68 more in school property taxes in the city where the median household income is much lower or enough to pay an additional year of school property taxes in the other three neighboring areas.

The average median household income in the three neighboring areas is $64,753.67 or $31,268.67 more than the city median household income of $33,485. As I stated above, this data deals specifically with Lebanon County but the same research can applied in most places of the commonwealth. It took several hours to compile this data and to do so in every county would take much more time and, more importantly, space than this blog would allow for.

It was necessary to show you the number data in order to make the following summary statements.

This demonstrates the inherent flaw of using estimated property values to fund education. The inequity in levels of income creates an inequity in ability to fund education that places a higher burden on working families in lower income areas resulting in a greater percentage of their income going to fund that education. Using property taxes to fund education often results in higher millage rates paid on homes of lesser values translating into a higher tax per thousand dollars of home worth.

This is an inherent flaw that can only be corrected with the complete elimination of the property tax by shifting to a more equitable method of funding education. Until this is accomplished the inequities will continue to grow forcing more school districts into an unstable and unsustainable future.

Many homeowners have already realized this unsustainability as the property tax has led to sheriff sales, while contributing greatly to foreclosure and bankruptcy.

With the school property tax at 70% or more of the current total property tax, Municipalities have had to face serious cuts in services that includes police, fire and safety protections which makes our communities less safe.

As the school property taxes have increased home-ownership has declined. Rental properties in Lebanon City is above the state average. To fail to make the correlation in decline of home-ownership and the increase in property taxation is economically foolish. The U.S. Census tells us that the owner-occupied housing unit rate, 2011-2015, for the city of Lebanon is 42.4%. That’s down 7.8% from 50.2% in 2000. For the County that rate is currently 70.4%.

As rents increase as a result of property taxation the need for subsidized housing also increases placing greater financial burdens on working families through other forms of taxation.

The choice is clear. We either continue down this unsustainable path that grows the tax burdens on working families leading to more property seizures, bankruptcies and foreclosures growing the number of rental properties while losing more owner-occupied homes or we change the future.

We have the ability of opening doors of opportunity by transferring to an alternate form of funding for education. We can open the doors making home-ownership more accessible to more people or we can protect the status quo and close more doors to more people. We can open doors of opportunity for small family owned businesses as well creating more job opportunities for everyone.

Educational institutions in this state want to keep those doors closed in order to protect the status quo. They insist on doing so in spite of the fact that all evidence shows that the path we are on is unsustainable.

We are watching as the state institutions of higher learning are now finally considering reviewing their policies after a six-year decline in student population at those 14 state funded institutions. Administrators claim, even after the state has increased funding to these schools by 2.5%, there is a $60 million dollar shortfall in funding for these schools. What they don’t’ want to remind you is that in December of 2016 the State System of Higher Education approved $77 million in employee pay raises. Those raises will also place a higher burden for pension compensation on the rest of us.

We have the same problems in our local schools. The 2016-17 enacted state budget included $5,895,079,000 for the 2016-2017 Basic Education Funding appropriation. This amount is a $200,000,000 increase (3.51 percent) over the 2015-2016 appropriation. School Administrators and School Boards claim this is a funding shortfall because it doesn’t meet revenue wants even though it is a substantial increase. Even with the increase, local property taxes continued to rise.

Salary increases, pensions and healthcare that far outpace anything in the private sector are a major factor in driving up local school costs. While this may open doors for those employed in those institutions, it does so by closing doors of opportunity for the rest of the working families in this commonwealth. It makes it more difficult for them to provide for their own retirement and, in some cases, it robs them of their very home.

If we protect the status quo we go further down an already unsustainable path for working families in this Commonwealth. It’s time for a change, albeit a radical change.

For more information on what that change is visit www.ptcc.us and become a part of the movement that will open doors of opportunity for hard working families across this state. Or you can listen to the rhetoric of others who want to keep spending at the current rate to maintain their wants at your peril. The choice is yours!

PSBA REBUTTAL #4: Chicken Little Comes Home to Roost!

Posted on 2017/01/26 by jmrodkey

Most of us are aware of the children’s story of Chicken Little. You know, the story of the little chicken who warned everyone that the sky was falling because he was persuaded by the Big Bad Wolf (Foxy Loxy) to fool the other chickens and assorted fowl into a panic to be exploited by the wolf in order to have them over for dinner…his own dinner, not as guests at the banquet.

chicken-little-1

There is a striking parallel between the flood of PSBA and PASBO (Pennsylvania School Board Association and Pennsylvania Association of School Business Officials) op-eds and this classic children’s story.

Using mostly fear and falsehoods, talking points have been developed in an attempt to defeat HB/SB 76, the School Property Tax Elimination bills. Those talking points reveal a very clear lack of understanding concerning this legislation or, perhaps more to the point, a failure to actually read the bill before critiquing it.

Normally this sort of thing is to be expected by I am particularly concerned here because talking points that require falsehoods to reinforce is a bad enough action of civil discourse but when this tactic is being used by those who are directly involved in the education of children it should raise some very serious concerns.

These talking points claim that passing HB/SB 76 will exacerbate inequities in school funding.

Actually the opposite is true.

The truth is that the current system of the school property tax created these gross inequities. If the school property tax is not eliminated those inequities will only continue to grow since poorer, low income school districts can not continue to increase their school property taxes at the same rate as the wealthier school districts.

HB/SB 76 will cap this growth of inequities in school funding allowing for a stable funding measure to be put in place that will allow the state to adjust the Basic Education funding formula to reign in the inequities. This is something they can’t do now because there is no real predictability to the increases in the school property tax. We only really know that they’ll go up. Chapters 11-13 of the bill clearly explains the funding of this legislation.

It is disingenuous to point to the inequities that exists because there is a property tax and demand that the status quo be maintained if they really are concerned about those inequities.

In 2012, Pennsylvania spent $26.5 billion on K-12 education. Only five other states — California, New York, Texas, Illinois, and New Jersey— spent more. In 2012, Pennsylvania spent $13,653 per student compared to a national average of $11,735. Pennsylvania’s K-12 education system is funded through a combination of local (53 percent), state (36 percent), and federal (11 percent) sources. In 2012, Pennsylvania ranked 44th in the percentage share of education costs covered by the state. Its 36 percent contribution rate falls below the national average of 45 percent. (1)

The state average of $11,735 is just that, an average. Under the system of school property taxes we can see the inequities that have come into being because there is a school property tax.

According to openPAgov.org the 2014-15 spending per student in our school districts ranges from $7,648 per student to $41,858 per student. That inequity exists, in large part, because there is a school property tax. That inequity will continue to grow as long as we keep the school property tax in place.

Albert Einstein is attributed for the following…Insanity: doing the same thing over and over again and expecting different results.

The letters from PSBA and PASBO members insist that if we keep doing the same thing over and over again we’ll get different results. That’s ridiculous. Their failure to actually recognize the the gross inequities that exist because of the property tax in inexcusable. That failure is exacerbated when they blame a bill that will stop this growth of inequity for doing the very thing that our schools boards have done…grown those inequities.

Another objection states that sending the money to Harrisburg would somehow remove the school districts ability to determine how that money is spent locally.

This is simply untrue. HB/SB 76 puts that money in a special designated fund in the Treasury Department that is separate from regular budget appropriations. State legislators will have no say in reapportioning the distribution of those funds. Each school district will receive exactly what they are currently receiving. That amount will be adjusted annually based solely on economic growth factors. Recently the Independent Fiscal office (IFO) stated that schools would see annual increases between 2.5% and 4%.

Let’s be clear. Each school district would receive the same percentage increase but the variance between 2.5% and 4% will be based on economic factors.

There is ABSOLUTELY NOTHING in HB/SB 76 that changes how the school district spends that money. There are no restrictions placed on any School Board except in their ability to levy taxes above and beyond inflationary rates.

The implication here is that we lose local control, as though such a thing currently exists.

School Boards complain about cost drivers like pensions, healthcare and Special Education costs claiming these things are out of their control. They are right. Those things are out of their control. To then turn around and complain that HB/SB 76 removes a local control that isn’t there and cry about a loss of local control is again disingenuous.

There is a problem with unfunded mandates in this state. On that we all agree, except for the PSBA, PASBO and PSEA when they agree with the special privileges these unfunded mandates give to their public sector employees. Not all unfunded mandates actually originate with legislators.

The two primary regulatory documents that include many of the unfunded mandates are the Public School Code of 1949 and Title 22 of the Pennsylvania Code. The larger of the two documents is Title 22 of the Pennsylvania Code which comes out of the Department of Education.

Those regulations do need to be reigned in. As long as the property tax to fund education exists, that is not likely to happen, because it doesn’t have to. They will just continue to pass the cost of the mandates down to local citizens through the property tax. Passing HB/SB 76 will force us to address these unfunded mandates which is something the PSEA doesn’t really want. In a recent webinar from the PSBA they acknowledge the PSEA as their sister organization.

So do they want these unfunded mandates reigned in or is that just rhetoric that they use as an excuse while they continue to raise local taxes?

Take a look at these two chart from openpagov.com:

Now look at this chart from the IFO showing the rise of school property taxes.

Looking at the IFO chart from 2000 to 2012 we can see that the growth in spending correlates to the property tax growth. It is the result of the reliance on school property taxes in funding education.

Now one would think that with all this additional spending as total school population declines we would actually produce better results in the classroom. You’ve seen this in this blog before but we need to roll this out once again.

This, I’m sad to say, is the shocking reality. All that additional spending has not translated into improved performance of our students in the actual classroom.

The real threat to the PSBA and PASBO is in limiting their ability to raise taxes at will while passing the blame on to everyone but themselves. The real threat is an accountability to the taxpayers in expecting results that improves the performance of the student in the classroom which should be the priority of a quality education.

Yes, HB/SB 76 allows for other taxes to be implemented through a local income tax but those increase would be controlled by the constituents in that school district. 5 people on a school board would no longer have the privilege of raising taxes because they want to pay for some project the community doesn’t really want. It will restore the control to the local citizenry. It will not allow 5 members of the school board to control the locals….even to the point of taxing you out of your home.

The worst false claim of all is that HB/SB 76 does not eliminate the school property tax. It’s an outright falsehood that, to anyone who has taken to time to actually read the bill, can easily refute. Maintaining the status quo doesn’t eliminate the school tax, it only allows it to get worse. Reduction schemes do not eliminate. The temporary reduction is offset by new taxes that will remain in place as the school property taxes climbs back to it’s current levels.

How long did it take for your school property tax to exceed the Casino revenue relief?

While they tell us that passing HB/SB 76 is cause for panic; as they scream that the sky is falling; they don’t want you to actually look at what is happening to us all because there is a property tax.

chicken-little-2

We all know the end of the story of Chicken Little.

That is the ending that the PSBA is defending: their ability to, as Thomas Jefferson put it in our Declaration of Independence, “send hither swarms of Officers to harass our people and eat out their substance.”

_________________________________________

(1) http://thenotebook.org/articles/2015/04/22/how-much-does-pa-spend-on-public-schools-and-how-are-costs-shared

Public Education: Measuring Success in the Classroom in Pennsylvania

Posted on 2017/01/19 by jmrodkey

This is part three of a series of articles addressing the recent charges being levied against School Property Tax Elimination. The charges are attempts at misinformation about the actual legislation (HB/SB 76) and deliberate misdirection away from discussing the actual results of the excessive spending.
A series of hit pieces has begun to pour out from School Board and Administrators in opposition to HB/SB 76. These articles are basically a series of pieces intended to generate misdirection and in doing so often contain gross misrepresentation of the actual bill they are fighting against.

Stripped of their rhetoric, these articles defend the current system of education funding based solely on their ability to increase the revenue wants. Not a single one of these articles actually produce any substantive evidence that spending more has achieved actual results where it matters….with the student in the classroom.

I’ve shared this chart in the blog before but it needs to be shared again:

If success is to be measured only by the ability to spend more than our schools are successful but is this really the sole purpose of education?

Shouldn’t the real measure of success be found in being able to prove that the increase of spending has produced substantive results in the classroom?

The attacks against HB/SB 76 point only to the PSBA, PASBO and Administrators limiting their ability to spend more money at their sole discretion. Not a single argument has been made that actually shows all their spending wants have actually produced results when it comes to the child in the classroom.

There is good reason for that. All the evidence is to the contrary.

The majority of our students are graduating from high school ill-prepared for college. They will require remedial training in one or more in the most primary purposes of our educational system: reading, math and science.

The National Assessment of Educational Progress (NAEP) tells us that compared to the first assessment in 1971 for reading and in 1973 for mathematics, scores were not significantly different for 17-year-olds in 2012. That can be seen in the following chart (source: https://nationsreportcard.gov/)

report-card

These results clearly tell us that the majority of our students graduate from High School without being proficient in the very subjects that should be the primary purpose of a public education. In fact the study reveals that the longer the child is in the public education system, the lower the results of proficiency. Why is Grade 4 8% more proficient in History than Grade 12? Why is Grade 4 15% more proficient in Mathematics than Grade 12?

The real test of success of “education” should be the results produced in the classroom, not in the ability to spend more and more.

The only “success” of spending more has been to create the want to spend even more.

In all the hit pieces coming out of those agencies responsible for educating our children all they cite is a defense of wanting to spend more. There is no substantive evidence that this spending has actually done anything to improve the quality of education in the classroom. From their rhetoric, that is apparently not their goal!

The Pennsylvania Association of School Business Official (PASBO) sent out a report about the retained debt listing, school district by school district, the debt that will be retained by the schools once HB/SB 76 is passed. This portion of funding will remain until that debt is paid in full.

They cite this ability to accumulate debt as a reason to oppose school property tax elimination but show no correlative data to prove that accumulating this debt actually translated into increased performance in education standards within the classroom.

Some of our opponents tell us that it isn’t the property tax that is the problem. They tell us that we need to cut spending and that will solve the property tax problem.

I fail to grasp how you can reach the conclusion that the very thing (property tax) that allows the spending problem to grow isn’t the reason that spending has grown. Any attempt to reign in spending now can be quickly undone in future years as long as they have open access and ease in increasing spending through something like a property tax.

To me this is like trying to cure cancer by treating the symptom and not destroying the cancer cells. If your goal is to create a false sense of security by treating the surface symptom without curing the root of the problem; if you want to have to go to the doctor in perpetuity because the doctor treats the symptoms and not the root cause; then fighting to reign in spending and try keep it under control for eternity is the path to follow.

If you get at the root of the spending, or the ease at increasing the spending, then you actually create a scenario where future increases become much more difficult. That’s what HB/SB 76 does. It caps all future spending to the rate of inflation with regards to revenue currently seen through the property tax by eliminating the property tax and replacing it with a far more equitable system of taxation.

I am very disturbed by the talking points used by those School Board officials writing op-eds in newspapers that defend spending more for the sake of spending more while not demanding better results for our children in the classroom. Of course, statistically, they can’t defend both.

I am equally disturbed by the depths of misrepresentation that these “officials’ are going to in demonizing this legislation.

Here are some examples from a recent article:

Opposition Talking Point #1: “They would divvy out based on cost per student and whatever ratio they come up with,” Thomas McMurray, school board president, said about the state’s role under a new funding system.”

FACT: Under HB-SB 76 there is no cost-per student adjustment. Each school districts revenue currently collected through the property tax would be replaced at a dollar-for-dollar level and they would get annual increases on that revenue based on the rate of inflation.

Opposition Talking Point #2 “We are going to be at the beck and call of a state government who is going to choose how much money we get.”

FACT: Under HB/SB 76 the distribution of the funding is found in Chapter 13. The funding is through the Treasury Department and is allocated to the schools totally exclusive and independent from the budget appropriations process in Harrisburg.

Opposition Talking Point #3 “If the state pulls one of these stunts where they don’t pass a budget and we don’t get our revenue, we would be in a major world of hurt compared with where we are today, because of the heavy emphasis we have on property taxes,”

FACT: As stated above, budget negotiations will have no impact on the replacement revenue. It is a separate account for the designated purpose of replacing the revenue through the Educational Stabilization Fund.

Opposition talking point #4: “And if we want to do a special program and they’re not going to give us money, we can’t do the special program.”

FACT: Under HB/SB 76 any special program the school board wants to accomplish can happen merely by making their case to the voters through a no-exemption voter referendum. HB/SB 76 restores the actual concept of Local Control in that it restores control to the constituents in the school district.

As Thomas Jefferson said “I know of no safe depository of the ultimate powers of the society but the people themselves; and if we think them not enlightened enough to exercise their control with a wholesome discretion, the remedy is not to take it from them but to inform their discretion.”

As you see in these 4 talking points, once again we are not talking about defending the spending increases based on tested and improved results in the classroom. Spending for spending’s sake remains their only defense.

We are doing our children a great disservice. If the people responsible for the education of our children are not doing what is necessary to defend their positions honestly, how can we trust them to impart practical knowledge in the classroom that isn’t of a biased nature?

Increased spending in education has produced only one proven thing. Increased Spending. The school property tax has become the great enabler. It has allowed the public to be deluded into believing they retain local control when this is no longer the case. In many ways our General Assembly has surrender their responsibilities with regards to education to the state’s Department of Education which is largely controlled by the PSEA.

The books shown above consist of more than 3,000 pages of regulations pushed down on our school districts inflating the cost of education with no provable results except in increasing the cost of education. These regulations are mostly unfunded mandates, many of which offer unique protective requirements of the Public Sector Unions.

Rather than direct their anger at the failures of the Department of Education, School Boards have simply surrendered to the concept of taking more money from the people by making unjust claims to a right over our homes that was never intended when the property tax originated. By defending their right to extort our property with no tangible results in the classroom they, by their words and actions, support the current system as it stand while opposing the rights rights of the individuals and families in their homes. They deny that Article 1, Section 1 of our State Constitution applies.

We can not expect the PSBA, PASBO, Department of Education or the PSEA to support reigning in costs since they benefit from the ability to increase those costs through arbitrary means that work against the working families of this Commonwealth. They will protect those self-interests even if such actions are detrimental to the economic well-being of this state.

The massive regulations being passed on to the local school districts happen because there is a property tax. The Department of Education has no power of taxation, they are reliant on the local property tax to implement the myriad of regulations and requirements at the local level to defend and support the state’s Teacher’s Union. This is NOT an indictment of individual teachers. Many teachers are frustrated with what they see happening in their classrooms.

Success in the classroom is not to be measured by how much is spent or by how much a program costs to implement. Success should be measured by the results in the classroom in improving the individual students performance and success. By that standard, the increasing cost of a public education has been an abject failure.

When it comes to public education, the status quo is broken. It calls for a radical departure away from tradition for tradition’s sake into bold new areas. It’s time to stop defending the indefensible. It is time to seek new common-sense paths in education.

HB/SB 76 restores a portion of economic liberty by placing it in the hands of the people to reinvest in their communities and the business environment. It makes Pennsylvania more attractive to businesses by eliminating the egregious and regressive property tax which will generate more jobs, more income and more revenue for supporting the things that are important to us. It will help to curb the growing problem of out-migration.

Most importantly HB/SB 76 removes the isolation of property ownership in the funding of education restoring the rightful ownership of that property to the individual where it can no longer be pillaged by the school district to meet their unwarranted demands at their discretion. It destroys the most unfair and regressive form of taxation in the funding of education that exists.

In closing, Albert Einstein is broadly credited with exclaiming “The definition of insanity is doing the same thing over and over again, but expecting different results”. That certainly applies to those who continue to defend the indefensible-the property tax!

PSBA (Part 2) – Exacerbating The Inequities!

Posted on 2017/01/17 by jmrodkey

This was intended to be a two-part series in response to the recent opposition piece by the PSBA (Pennsylvania School Board Association). It will take me longer than that to accomplish this goal due to the number of gross misrepresentations and misdirection in the PSBA letter. You can read part 1 here.

The PSBA letter is rife with contradictions. While condemning HB/SB 76, much of the criticism is an attempt to deflect since the criticism of HB/SB 76 made by the PSBA can and should be levied at the existing property tax.

The PSBA makes the claim that “the school funding inequities will be exacerbated.”

There is no doubt that the current system is filled with inequities. There is also no doubt that the school property tax allows these inequities to continue to grow.

The PSBA goes on to say that this plan will undo the work recently completed to enact a new basic education funding formula. The claim is made that school districts will be placed in a system that lacks equity and predictability.

George Orwell, in his classic novel 1984, referred to this type of rhetoric as doublespeak (language that deliberately obscures, disguises, distorts, or reverses the meaning of words).

There is nothing equitable under the current funding system through the property tax.

The PSBA then brings the Basic Education Funding Formula into the debate which is a separate and seriously flawed method of distributing state collected taxes back to school districts.

It is true that the Basic Education Funding Formula (BEF) was recently updated but it is also still seriously flawed. Part of the reason is because of the unpredictability of the school property tax.

Many School Districts in areas where we find lower household income are forced to do their budget planning before the distribution of the BEF allowing them to operate on a Zero Budget concept claiming they don’t know how much funding they’ll get from the state. They then find an exemption under Act 1 that allows them to exceed the caps that Act 1 is supposed to contain. The Department of Education then rubber stands the approval of that exemption. With the budget approved, the local taxes increase and then the funding through the BEF comes in from the state generating more revenue for the school district. It then becomes the school district’s OPTION, not requirement, to adjust their funding through the local tax increase.

None of this is by accident. It is designed to work this way. The school districts and the PSBA have done nothing to change that.

When you look at cost per student, which is where the inequity argument is coming from, you find that it varies greatly from school district to school district. The difference can amount to $10,000 or more per student. All that happened under the school property tax because the school districts can….and do!

It is disingenuous to make such a claim about the inequity through HB/SB 76 when it is the existing school property tax that has allowed these inequities to become what they are. Obviously if we maintain the status quo, those inequities are going to continue to grow just as the historical records proves.

Passing HB/SB 76 will actually create a stable and predictable revenue stream for each of the 500 school districts. It will allow the BEF to be reformulated based on the predictable revenue generated by the change to a different funding mechanism. Each school district receives what they are currently receiving adjusted annually by the rate of inflation.

It will create a path to undo the inequity that came into being because there is a property tax.

When HB/SB 76 was formulated it was designed as a mechanism solely to replace the property tax. We were fully aware of the problems with the BEF and have always encouraged our legislators to do what is necessary to correct those problems. It is, however, a different issue. It is separate from the BEF.

The PSBA article goes on to say “School Boards need to be able to use a mix of local taxes and the development of available funding bases that are suitable to each school district’s unique economic capabilities and conditions.”

HB/SB 76 doesn’t touch any of the current Act 511 taxes currently available to school districts as alternative revenue streams. HB/SB 76 includes an allowance for school districts to make an appeal to the residents in the community for an alternate tax to be used for special projects. The only requirement is that it must go before the voters in a no-exemption ballot initiative and that the property tax can not be used to fund it. A local income tax for the project would be levied that has a sunset date. When the funding for that project is paid for, the tax goes away.

That simply common-sense.

When you strip away all of the rhetoric in this recent mailing it still comes down to this: The opposition from the School Boards and the PSEA is an opposition to restoring property ownership to homeowners. It strips the PSBA/PSEA of their ability to tax at will requiring them to conform to the control of their local communities to determine future projects within the school district.

If you truly want to exacerbate the inequities in school funding then you will fight to maintain the Status Quo…the current system of school property taxation.

If you truly want to create a path to leveling the field and putting an ending to the inequities….HB/SB 76 is a step in the right direction.

Nowhere in this PSBA letter does the PSBA address the current inequities of homeowners through the property tax where properties of equal value are taxed at different tax rates through the millage. Two homes on opposite sides of the street may find heavy differences in their property taxes simply because those homes are in different school districts.

Nowhere in the PSBA article do they address the inequities of the current system of assessments to determine property worth. In every county-wide reassessment, the appeals follow. Those appeals are largely in favor of the homeowner revealing how flawed the assessment process is. It allows for larger corporations to bring in their legal teams and fight their assumed assessed value and when they win those cases, as they often do, the lost revenue is thrown back to the rest of the property owners in the district.

It is a seriously flawed system for funding one of the most essential assets in our Commonwealth: the education of our children.

PSBA: Defending the Indefensible (Part 1)

Posted on 2017/01/14 by jmrodkey

(This is part one of a two part series in response to a recent article published by the Pennsylvania School Board Association (PSBA). Rather than separate connecting themes to create confusion as…

Source: PSBA: Defending the Indefensible (Part 1)

SB 76: The Myth of the Shortfall

Posted on 2017/01/12 by jmrodkey

SB 76: The Myth of the Shortfall

Or,

The Art Of Misdirection

Opponents of HB/Sb 76 like to point to the fact that 10 years down the road we’ll be creating a shortfall in education funding. The implication is that we’ll be cutting the education budget by billions of dollars.

The source for this information comes from the Independent Fiscal office.

This type of debate is sometimes called misdirection.

Under HB/SB 76 the replacement revenue distributed to schools is a dollar for dollar replacement of the revenue currently collected through the property tax. Each school district will receive exactly what they are receiving now through the property tax. That amount will be adjusted each year by the inflationary indexes currently in place which means that school districts will continue to get increases every year set to the rate of inflation. There are no cuts in education budgets. School Districts budget will still be able to increase with the rate of inflation.

In fact, school districts that have been frugal and fought against increasing property taxes in the past would have actually seen increases in funding under HB/SB 76 had this bill been passed when introduced.

Let’s look at this by extending the above chart 10 years out focusing on three factors. Maintaining the current increases in property taxes, The Average Weekly Wage, and the regional Consumer Price Index.

On the chart the difference between the Average Weekly Wage and the property tax is about .60 in cumulative growth in 2012-13. By 2012-13, that difference will be 1.2 or doubling the increase in property tax revenue compared to the Average Weekly Wage. Will you be able to afford that kind of increase?

Comparing property taxes to the to the rate of inflation, the difference is slightly greater.

What happens when we move the rate of inflation growth up to the existing school property tax line?

image10a

School funding continues to increase but it does so at a much lower rate. It also begins to close the gap between the Average Weekly wage and School funding through HB/SB 76. In 2012 the gap is 0.60 and in 2022 that gap will be about 0.50.

Something that is not reflected in these charts is the decline in population due to out-migration. We lost almost 8,000 people last year. That translates into less people paying more towards the rising costs and disparities of the property tax.

Lets assume for a moment that this trend continues. In ten years we’ll have lost about 80,000 people. The Census Bureau tells us that the average household is 2.64 people. A loss of 80,000 people translates into a loss of 30,303 households. That’s 33,303 households not paying the school property taxes in 10 years that currently would be. That simply means that with less people funding education through the current system the remaining households will have to pay a higher share of the property tax revenue as the total cost of the property tax continue to increase.

If we continue on the same course of action maintaining the status quo we find certain instability in the future for the majority of working families in the state.

When our opposition talks about the increase to the PIT/SUT on the working families of the Commonwealth they intentionally choose to ignore that current system and future it will bring to those same people. They are often seeking to protect their own interest even if doing so means hurting the people they claim to be defending.

After all, that’s what’s been happening while those same naysayers (and others who have followed in their footsteps) have prevented School Property Tax from advancing in the past.

This process is a process of misdirection. School Administrators and advocates for the PSEA come out of the woodwork and talk abut the impact on the poor and because they don’t want you to look at things like this:

The runaway cost of funding education is not reflected in population growth nor can it be justified with higher test score results. Rather than irresponsibly increasing the cost of education, allowing for Ghost teachers that are paid as school teachers but doing the work of the Public sector unions; Rather than protecting the unique provisions to these unions that aren’t actually translating into a better quality education for our children; they fight to keep increasing the financial burdens on their communities.

Many of our 3rd class cities are struggling. The increasing school district taxes have hit the municipalities where we find cuts in services like road repairs, police protections and cuts to health and safety departments. Home ownership declines to be replaced by rental properties where the rent just keeps rising. This contributes to transient populations which becomes a contributing factor to rising costs in education.

While they talk about the negative impact of Eliminating School Property Tax through HB/SB 76 on renters, they are misdirecting us away from this:

A comparative study to the increase in rents correlates perfectly to the increase in property taxes. This is just common sense. When you increase the taxes on a rental property the owner of the property must increase the rent or they’ll lose the property. To pretend that the existing system of property tax has no impact on renters is simply delusional.

If we don’t put an end to the status quo rent will continue to increase to the same rate as property taxes. Eliminate the property tax and you stop that growth limiting it to the rate of inflation. In other words, maintaining the status quo will have a hugely negative impact of the cost of rent in the future. To the opposition, we are just supposed to ignore this.

Had we done this 20 years ago, imagine how much renters would have saved? If we had done this 20 years ago how many renters would now be home owners?

After all, we are trying to open doors of opportunity through HB/SB 76. The current system closes those doors and keeps that door securely locked.

When our opposition talks about centralized funding and the loss of local control they want you to ignore this:

12772049_10206413518436647_2139325532425971387_o

These books represent some of the regulations and unfunded mandates that drive up the cost of local property taxes implemented at the state level. Each of these books are full and printed double-sided. It’s thousands of pages of control over our local school board’s much of it granting special and unique privileges in favor of the PSEA.

When our opposition talks about 17% increase in the sales tax they use the percentage as a distraction. It means that if you buy a $1,000 big screen TV for your family room you currently pay $60.00 in Sales Tax. Under SB76 you’ll pay $70.00 and in exchange for that you get your school property taxes eliminated.

When our opposition talks about this being a tax break for the wealthy they will never tell you that the wealthy are making out considerably better when we look at percentage of income in relation to the school property tax under the current system. We have wealthy districts where the percentage in income is less than 2% of of the average income going to the property tax and in poorer districts where it’s as high as 15%. I have never once heard the opposition who is supposedly so concerned abut the plight of the poor ever once condemn the most regressive tax in the entire Commonwealth, the school property tax.

When they talk about the tax breaks to Walmart by eliminating their property tax in compliance to the Pennsylvania Constitution they don’t tell you that Walmart makes up a small part of the landscape when it comes to employees. What they don’t talk about is the fact that businesses with under 20 employees still make up the largest majority of workers in the commonwealth. Those businesses would also see their property taxes disappear allowing them more income to invest back into their business to become stronger competitors against the corporate chains. That investment may include higher wages for their current employees. That investment could mean hiring more staff to meet consumer needs. That investment could mean lower competitive pricing. All of that is good for Pennsylvania. Walmart is just the distraction to hide the benefits of HB/SB 76 to small mom and pop businesses across the Commonwealth.

When our opposition talks about the stability of the tax they never put that stability in context. As the chart above indicates, it’s is stable in its increases. It is stable for the tax collectors and the tax leviers because many people will do without healthcare and food before they lose their homes. The stability for the tax leviers and collectors is predicated on the instability it causes for the working families who have to pay it. So much so that more than 10,000 people a year face losing their homes because the tax has exceeded their ability to pay.

Another tool of misdirection is to completely ignore the intent and purpose of the bill. HB/SB 76 is a bill to eliminate the School Property Tax by finding the replacement revenue necessary to return to each school district, dollar for dollar, what they currently receive. We recognize that there are other problems. The Basic Education Funding Formula is seriously flawed. That needs to be fixed but that isn’t what this bill is about. The Public Sector Pension Plan is a debacle. That isn’t what this bill addresses. We need separate bills to deal with these other problems in responsible and equitable ways.

When opposing legislators do this it’s particularly troubling. Using this bill to point out that it doesn’t address those problems when those legislators have not introduced bills to deal with those problems is disingenuous. It may help them maintain the status quo but at what cost to the taxpayers of this state?

When our opposition says this bill needs to be vetted more they don’t tell you that this been has already been vetted more than any other bill. It has gone through three IFO (Independent Fiscal Office) studies as well as other outside groups. It’s all about misdirection. When that misdirection comes and those misdirecting know the truth but intentionally keep the truth from the public, that misdirection is a form of dishonesty.

Much of our opposition comes from Administrators, CPA’s, those strongly connected to the PSEA and other educated professionals where I find it incredibly hard to believe they do not realize what it means to protect the status quo of school property taxation and the negative impact this has on homeowners, small business and our communities and yes, even the negative impact it has on the children in our schools.

So much of their opposition is easily exposed. In fact, since they went public with their opposition their talking points have been addressed and exposed.

In response, they never address the facts….they simply just keep repeating the same old tired and worn out excuses.

Most of our opposition is based on misdirection and misrepresentation and some of that is covered elsewhere in this blog. I encourage those who are unfamiliar with this blog to spend some time here: Read the other postings.

I also encourage you to go to www.ptcc.us and get the facts behind SB/Hb 76, School Property Tax Elimination.

Keystone Opportunity Zones

Posted on 2017/01/09 by jmrodkey

Facing serious budget issues, Pennsylvania is now pulling back on one of its signature economic development programs. The administration of Democratic Gov. Tom Wolf has sent rejection letters to Philadelphia, Coatesville and other municipalities that submitted applications to the Keystone Opportunity Zone program. The rationale is that the state simply can’t afford it.

The Keystone Opportunity Zone (KOZ) program, which provides deep tax breaks in hopes of revitalizing abandoned, blighted, or underused properties, has long been touted by state and local officials as a success story. They say it has helped create nearly 10,000 jobs and pumped $1.5 billion in private development capital into communities, often in distressed areas.

While the KOZ appears, on the surface, to be a needed asset is revitalizing communities, one of the principle reasons for the KOZ coming into being is the heavy burden of property taxation.

There are many negative aspects of the KOZ. While they attract business to communities they do so by shifting that tax burden on the rest of the people. We invest in those businesses through higher taxes, especially through higher property taxes. For every successful KOZ there are dozens that tell a very different story.

Once the tax abatement program ends those businesses seek some other place to locate and all that investment from the local taxpayers is for naught.

Another problem with the KOZ is that it creates an unfair tax advantage to one business which negatively impacts the existing competing business that have already contributed to the state and community.

Bad tax policy like the runaway property taxes in this state becomes an excuse for government programs like this where we talk about things like the 10,000 jobs and $1.5 billion in private development capitol. What we don’t talk about is the actual cost of these programs.

The Keystone Opportunity Zones is a part of Pennsylvania’s Department of Community and Economic Development . It divides the state into 12 regions each with it’s own office.

Pennsylvania’s Department of Community and Economic Development (DCED) employs 365 people. 77 of those are paid hourly. Hourly wages range from $17.15 to $74.06 an hour. 63 of those 77 employees make $45/hour or more.

The total cost for the remaining salaried employees comes to just under $20 million each year ($19,993.321). Granted not all of this is specifically related to KOZ but it does demonstrate the economic cost to taxpayers in just maintaining these bureaucracies. The DCED is also home to the The State Tax Equalization Board (STEB). STEB was established by the General Assembly in Act 447 PL 1046, 1947, to compensate for the lack of assessment uniformity statewide in distributing school subsidies. As a result of Act 2 of 2013, STEB staff became a part of the Department of Community and Economic Development (DCED). STEB is often referred to as the Tax Equalization Division (TED) within DCED.

STEB is only necessary because their is a property tax. It’s another cost to taxpayers that would be unnecessary if we eliminated the property tax and went to a more equity system of taxation.

The DCED is just one of the State’s 33 Agencies. We also have 14 state offices and 27 Offices and Commissions. Each of these operate under the Executive Branch (The Governor) where little oversight is available to the Legislative (General Assembly). Pennsylvania has nearly 80,000 state government employees work for Pennsylvania in just about every field imaginable. From auditors to auto mechanics, cosmetologists to computer programmers, scientists to security officers. Each of them a member of public sectors unions and eligible for the state lucrative Pensions and healthcare benefits paid for by the working families of this state.

When we think of Keystone Opportunity Zones we generally think of Manufacturing jobs but that’s simply not the reality. Manufacturing jobs make up less than 10% of the KOZ landscape. Financial Services make up the largest percentage as the chart from the DCED below reveals.

Keystone Opportunity Zones (KOZ) and Keystone Opportunity Expansion Zones (KOEZ) are geographic areas that can provide specific state and local tax benefits but those benefits as transferred to the remaining taxpayers.

In a KOZ, the business property owners pay the same reduced amount of taxes for a decade no matter how much they improve their property, or how much its value increases. They will only pay at the full rate after the KOZ expires.

Spokespeople for the Pa. Department of Community and Economic Development (DCED) said they do not currently keep electronic records on the number and location of KOZs.

In 2009, the state’s Legislative Budget and Finance Committee analyzed the program. Its report was scathing. It found that KOZ program records are “poorly organized and incomplete,” and that DCED doesn’t monitor the type of business activities or number of jobs companies generate. The committee also found that many companies weren’t creating jobs or luring new investment capital, and the program didn’t require them to.

The problem here is that we still don’t really know the effectiveness of the KOZ. While supporters and the DCED are quick to point to the successes there is too little discussion of the failures which far outnumbers the successes.

In our opinion this betrays a trust in Pennsylvania Government as to how our tax dollars are being spent.

In 2014 Philadelphia City Controller Alan Butkovitz is sitting, the Keystone Opportunity Zone program in Philadelphia is a major disappointment.

Butkovitz released a report saying that the program, which waives nearly all business and property taxes for 12 years, has presented an exceptional burden to taxpayers for a meager return. The KOZ program has cost the city and school district more than $380 million in abated business and property taxes since it began in 1998, according to the Controller’s report. In return, it’s netted $132 million in wage taxes from the 617 businesses that have benefited from the program. What’s worse, more than 70 percent of the wage-tax revenue came from businesses that were already paying taxes in the city before participating in the program.

It’s created just 3,700 new jobs since enacted. For each new job, the Controller said, the city has waived more than $100,000 in taxes. At an average salary of $50,000 per job, it would take more than 50 years of wage taxes for those new jobs to pay for themselves.

And after all that, more than half the land within Keystone Opportunity Zones is still vacant.

“These findings are consistent with the literature in urban economics, which holds that diffuse tax incentive programs such as the KOZ are an ineffective tool for enhancing economic growth,” the Butkovitz report concluded.

In some cases, developers have enjoyed tax relief without actually building anything.

In Brewerytown, developer John Westrum owns an empty block across from a townhome community he built a few years back known as Brewerytown Square. The owners of those townhomes now enjoy the standard ten-year tax abatement for new construction, but Westrum has also paid no property taxes on the adjacent vacant lot for the past ten years, since it was part of a Keystone Opportunity Zone.

On Columbus Boulevard, the property owned by Waterfront Renaissance Associates that was once slated to become the Philadelphia World Trade Center, has also enjoyed KOZ benefits, even though it’s been empty for decades. Development plans at the site were caught up in a morass of legislation and litigation that led to the demise of both the Old City Civic Association and the River’s Edge Civic Association. But year after year, the KOZ was renewed, because the program has no participation requirements.

DCED has changed the KOZ program since then. Now, a company that relocates to a KOZ must increase its full-time employment by 20 percent within the first full year of operation or invest 10 percent of the prior year’s gross revenues in the property. There’s no rule saying employees have to live in Pennsylvania. The Department also now monitors the number of jobs a company has created and retained.

Programs like the Keystone Opportunity Zones are among the most common economic development programs in the country. But Good Jobs First considers it an “old, unfocused, and outmoded” approach to economic development. Good Jobs First, a national organization that studies development subsidy programs, gives the KOZ program a score of 0/100 for disclosure, and a 23/100 in terms of monitoring and enforcement.

In concept, the KOZ is a good program built on sound economic principle. In application, or should we say through government control and interference, a good concept can turn into a bad idea. That certainly seems to be the case with the KOZ program.

A KOZ is a government program that allows the government to pick the winners and losers. Regardless of the spin, when there are losers it will be taxpayers because the system is built on funding from an archaic system of property taxation. By the time the state realizes they can’t afford it the program, taxpayers have already lost. When it comes to losing, when it drove up their property taxes that loss may have included the very home in which they have lived and raised their families.

By shifting away from the property tax and moving to a PIT/SUT based tax for school property taxes we could eliminate much of the need for the government bureaucracies while offering school property tax free zones across the entire commonwealth driven by local government incentives to bring new business to their community that doesn’t rely on shifting that burden to the remaining property owners. This maintains the intention and concept of the KOZ without relying on government funding to do it.

It’s a radical concept that supporters of the Status Quo choose to reject even though it’s clear that the Status quo isn’t working and it’s time for something different. It’s not very hard to figure out why the Public Sector opposes such an effort….it’s called job security. Even though reducing the need for government state workers is beneficial for the state in saving millions of dollars in tax revenue, much if which would go back into the economy and business community, it also means eliminating jobs within government and those dues are the public sectors bread and butter.

The passage of HB/SB 76 would allow local and state revenue to be targeted to more specific needs rather supporting a questionable program when it comes to reducing the tax burden on Pennsylvania working families.

The are distinct benefits of eliminating the school property taxes in order to attract new business to that state but KOZ are limited and completely controlled at the state level through the DCED. While the KOZ is good in its concept, it’s application and government controls have failed to deliver on their promise to Pennsylvanians. At the same time it caused for a expansion of the bureaucratic affairs at both the local and state levels. It shifts the tax burden to others while punishing established competing businesses in the community.

HB/SB 76 is a step in the right direction of maintaining the concept of KOZ without the need for government Bureaucracies and interference as well as without shifting burdens to others. In short, it undoes the tax shift that the KOZ creates while still maintaining the concept and purpose of the KOZ.

On the Edge of the Precipice

Random thoughts on the edge of the precipice

Monthly Archives: January 2017

An Open Letter To The Taxpayers of Pennsylvania

An Open Letter To The Taxpayers Of Pennsylvania:

Breaking Free From The Shackles of Property Taxation!

The Inherent Inequity of Property Taxation to Fund Education

PSBA REBUTTAL #4: Chicken Little Comes Home to Roost!

Public Education: Measuring Success in the Classroom in Pennsylvania

PSBA (Part 2) – Exacerbating The Inequities!

PSBA: Defending the Indefensible (Part 1)

SB 76: The Myth of the Shortfall

SB 76: The Myth of the Shortfall

Or,

The Art Of Misdirection

Keystone Opportunity Zones