January 18, 2017

PASBO: Property Tax Elimination Bill Won’t Eliminate The Tax In 488 Of 500 School Districts

Only 2 percent-- 12-- of the state’s 500 school districts will be able to completely eliminate school property taxes under proposed legislation to replace the property tax with an increase in the state’s Income and Sales taxes, according to an analysis prepared by the PA Association of School Business Officials.
Some school property taxes will remain in 488 districts due to the requirement in the property tax elimination proposal that existing school district debt be paid off with property tax revenue, according to data from 2014-15.
While a portion of school property taxes will remain in place until the debt is paid off, school district bonds are typically paid back over 20 years. When the debt is paid off, the authority to levy the property tax is removed.
As a result, 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.
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.
“While the school property tax elimination bill promises a lot, it fails to deliver true property tax elimination for many taxpayers” said Jay Himes, PASBO Executive Director. “While this massive shift of more than $12 billion statewide will create winners, it will also create many losers who will send more tax dollars to Harrisburg and continue to pay school property taxes” Himes added.
School districts such as Reading School District, the 5th largest school district in the state with 18,000 students and the third lowest in the state in median household income, will maintain virtually all of their current property taxes to cover existing debt while taxpayers pay increases in personal income and sales taxes.
Sen. David Argall (R-Schuylkill) told The PLS Reporter Tuesday the property tax is one of the most egregious and hated taxes in history.
“I think [PASBO] is on the wrong side of public opinion on this one, and I think they know it,” said Sen. Argall, pointing the vigorous effort being put behind the effort to kill the bill by PASBO.
Sen. Argall said PASBO is correct in noting that the tax will not be immediately eliminated.
He went on to say he thought most school districts will see an 80 to 90 percent reduction in their property taxes and the legislation will put Pennsylvania on the road to complete elimination.
With what is known about Sen. Argall’s plan, after the property tax is eliminated in June 30, 2017, school districts would get a quarterly allotment from the Pennsylvania Treasury to make up the sum of their funding. The amount would also be subject to an annual cost of living adjustment.
Sen. Argall added that if the COLA is not enough for school districts to keep up with costs, they would then be able to go to their voters to ask them to approve via referendum a local increase in the personal income or earned income tax.
“It’s unfair, it’s archaic, this literally goes back to the 1830s,” he said. “We have to find a better way to fund the public schools than the current system, which most people think is just rotten at the core.”
A similar proposal failed to make it out of the Senate last session, with Lt. Gov. Mike Stack casting the tie-breaking vote against the proposal.
Sen. Argall also told PLS Reporter Tuesday the process is already going better than last session, with the bill likely to have more than half the Senate co-sponsoring the legislation.
Particularly, he noted newly-elected Sen. John DiSanto (R-Dauphin) has signed on to support the bill. His predecessor Sen. Rob Teplitz (D-Dauphin) was staunchly opposed to the legislation.
Sen. Argall added that in discussions with the Senate Majority Leader’s office, he is hopeful the bill will start making its way through the legislative process sooner rather than later.
The House of Representatives in the spring of 2015 passed a bipartisan property tax reduction bill that failed to gain traction in the Senate.
“Everyone has told me, if this passes the Senate for the first time in history, that completely changes the dynamic in the House where [House Majority Leader] Reed is a cosponsor of the House version of Senate Bill 76,” said Sen. Argall.
(Based in part on reporting from The PLS Reporter.)