An Open Letter To The Taxpayers of Pennsylvania

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.

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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 3rd 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 3rd 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:

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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?

  

 

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One thought on “An Open Letter To The Taxpayers of Pennsylvania

  1. Great read and rebuttal Jim. The original letter from the education community was nothing more than “A well funded barrage of lies, hysteria and hyperbole”.

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