The Pennsylvania Coalition of Taxpayer Associations is putting more pressure on House Democratic leadership to keep its promise to introduce the School Property Tax Elimination Act of 2007. The bill, which would eliminate school taxes for all Pennsylvania homeowners over the next four years, is in the hands of Democratic Majority Leader Bill DeWeese and Majority Whip Keith McCall. They are the gate-keepers for all legislation in the House. Read the letter below and put pressure on your state lawmakers to get behind the School Property Tax Elimination Act of 2007.
Here's the letter:
October 18, 2007
Dear Rep. McCall:
The undersigned represent the 25 taxpayer groups that belong to the Pennsylvania Coalition of Taxpayer Associations. The purpose of our letter is to encourage you to move forward as quickly as possible with the introduction and passage of the School Property Tax Elimination Act of 2007 (SPTEA).
As you know, for more than 30 years, the General Assembly has failed to deliver on the promise of true property tax reform for all Pennsylvanians. The most obvious symptom of distress is the huge number of citizens for whom property tax is their number one financial concern. These include: seniors living on fixed incomes, working families who haven't seen wage increases above the inflation rate for years, and young families who can’t qualify for mortgages and pay several hundred dollars or more a month in property taxes.
Rather than whittle the field of 8 or 9 competing bills down to a "menu" of 3 to pass on to the Senate, we request that you and your colleagues in the House debate the issue and make a firm recommendation in the form of a single bill. We urge you to look beyond the political rewards of the many narrowly-defined bills and craft legislation that (1) addresses the structural issues that got us where we and (2) enhances Pennsylvania's economic competitiveness throughout the Mid-Atlantic.
If we confine the discussion to school property taxes, it is critical to identify and correct the underlying structural causes of runaway taxes rather than to simply create another tax-shift or tax-squeeze program in the mold of Acts 50, 72, and 1 (all resoundingly rejected by taxpayers).
We also urge you not to concentrate benefits on one segment of the population at the expense of others vis a vis HB1600 which finances a property tax shift by squeezing PIT increases and the remaining property taxes on a smaller number of taxpayers.
How We Got Where We Are
The most significant contributors to Pennsylvania’s school tax crisis are: the outdated funding formula, overdependence on local property tax, residential growth, a shrinking commercial/industrial base, and unrestrained spending by school boards.
The school funding formula has its roots in the 1990-91 school year. Combined with a school code that holds districts "harmless" if they have declining enrollments, situations like the following are virtually unavoidable. In Berwick, there are 900 fewer students today than there were in 1997. However, the number of teachers has increased by 44, the average class size has shrunk to 11, and the cost per student is nearly $13,000 per year.
In York County, because of the distortions in the funding formula, the York Suburban School District, with an annual budget of $13,800 per student, receives approximately $500 per student from the state while the adjacent district (York City) receives in excess of $6,000 per student to cover their $11,000 cost per year.
The overdependence on local property taxes to finance an obligation of the State produces countless districts like those in York County where 15 of the 16 school districts derive 65% or more of their total budgets from local property tax. It also magnifies the impact of a real estate assessment "system" that produces gross inequities throughout the Commonwealth.
There is no better example than the 27-room mansion in Philadelphia owned by Sen. Vincent Fumo, currently on the market for $7,000,000. Based on the City's current real estate tax structure, this home should generate approximately $185,000 in real estate taxes every year. However, its current assessment is $250,000 (which hasn't changed in 5 years despite the run-up in real estate values in the City), which produces approximately $6,600 per year. Interestingly, Sen. Fumo's mansion does not face an assessment increase this year despite the fact that more than 400,000 other Philadelphians will see an increase.
Residential growth (and a shrinking commercial/industrial base) combined with the factors above is the straw that breaks the camel’s back. Many "average" districts derive 2/3 of their budgets from school property taxes. Here’s what results from a new development of 300 homes costing $250,000 each. Even if each home generates $4,000 of school tax per year, the expected new student load would be approximately 300, adding at least $3,000,000 to the district's annual budget, of which $2,000,000 has to come from property tax. The homes generate a total of $1,200,000 per year, leaving a deficit of $800,000 that has to be covered by an increase in the tax rates for all property owners in the district.
The Appendix provides some insight into the evolution and severity of the problem for the Coatesville Area School District. You will see that even with school directors who tried diligently to exercise restraint, since the 2000-2001 school year, spending is up almost 70% (more than 3 times the rate of inflation in the same period) even though the student population has decreased. Using conservative projections, by the 2014-2015 school year, the cost per pupil in Coatesville will exceed $25,000.
Unfortunately, the vast majority of school boards simply will not exercise fiscal restraint. How can a school district spend several million dollars on artificial turf or a "natatorium" when only 50% of its 11th graders score "proficient" on their PSSAs? There has to be a line drawn between programs that deserve public support and those that don't. Is it out of the question to ask parents of athletes, in particular, to pay for these programs?
How to Deliver on the Promise
To our knowledge, SPTEA is the only plan designed to attack the school tax problem at its core. Unfortunately, the name hides the real value of this plan, which is to contain and control school budgets, reestablish equity for all of Pennsylvania's public school students, and to eliminate residential property taxes in the process.
It is also the only plan that begins to lift the tax burden from businesses throughout the Commonwealth. Pennsylvania's tax system is ranked 27th among the 50 states in terms of being friendly to business in the Washington-based Tax Foundation annual State Business Tax Climate Index. That was down two spots from a 25th place ranking in the annual survey last year. Rankings are compiled from a composite of several different tax categories. For this year, Pennsylvania is ranked poorly – 47th and 42nd – for its property tax and corporate net income tax, respectively. Its best ranking is 11th for its individual income tax. We simply must do better if we expect to improve the competitive position of Pennsylvania. Reducing the property tax burden by 50% would be one of the most significant signals to corporations everywhere that Pennsylvania has become a Keystone Opportunity Zone for everyone.
SPTEA has been under continuous development for nearly 4 years, the process has been open and transparent, and it has been vetted numerous times by Economy.com and Fishkind and Associates.
We understand that it might be expedient to propose and pass a half-way measure as a "first step." The problem is that for most Pennsylvanians, a partial solution is not enough. While HB1600 may temporarily provide benefits to owners of homes assessed at or below half of the median in their districts, it does nothing to control the spiraling costs of education, overhaul the funding formula, or fix the inequitable (unconstitutional) assessment system. All of these factors will conspire to put us right back where we are now in a few short years.
Rep. McCall, you and your colleagues have another chance to get it right this time. We sincerely hope you will withdraw your sponsorship of HB1600, openly debate the issue when it comes to the floor later this month, adopt the SPTEA and urge your colleagues in the Senate to do the same thing.
Sincerely,
James Broussard, PhD
President Citizens Against Higher Taxes
Joe Gable
Consultant ATM Banking
Joel Sears
President Fleet Technologies, Inc.
President York County Taxpayers Council
Rebecca Heller
Director, Berwick Area School District
Richard Ritter
Executive VP Cumberland Insurance Group
School Director, Coatesville Area School District
David Baldinger
Manager of Corporate Television, Retired
AT&T/Lucent Technologies
CC: William DeWeese
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