Abolish School Property Taxes in Pennsylvania by Increasing State Sales Tax to 7%?

Are you tired of paying school property taxes in Pennsylvania?

Would you support legislation that would abolish your school property tax bill by raising the state sales tax to 7 percent? If so, State Rep Jim Cox (R-Berks) has a solution that would replace school property tax funding with new state revenues — House Bill 1776, Property Tax Independence Act.

The proposed Property Tax Independence Act would still provide the same level of funding to the school districts but would eliminate school property taxes by using state revenues.  Cox proposes funding the new state revenues using three sources.  First, he suggests raising the state’s personal income tax to 4 percent (from the current 3.07 percent).  Secondly, Cox has specific sales tax loopholes that would close and finally, HB 1776 increase state sales tax from 6 percent to 7 percent.

Loopholes in the state’s sales tax include currently exempt personal services such as dry cleaning, funeral expenses, and amusement parks and professional services such as legal, architectural and accounting. HB 1776 would also close sales loopholes that exempt newspapers, magazines, flags, gum, candy plus clothing and footwear (items $50 and higher). I had no idea that newspapers and magazines were sales tax exempt – you pay sales tax on books, so I don’t see why there isn’t sales tax on newspapers and magazines!  Flags – exempt? Yes, US Flags and Commonwealth flags are exempt from sales tax.

The Pennsylvania Taxpayers Cyber Coalition, which states that they are ‘dedicated to equitable tax funding of Pennsylvania schools’ believes that “… Runaway property taxes are destroying Pennsylvania’s economy, driving away its residents, and are discouraging entrepreneurs from starting new businesses that would create jobs for Pennsylvanians.”  The group has created the following list of ten reasons why property tax should be eliminated in Pennsylvania:

  1. Achieve True Home Ownership
  2. Stabilize school funding
  3. Help prevent foreclosures
  4. Restore plummeting real estate values
  5. Boost the sagging housing market
  6. Attract business to Pennsylvania
  7. Generate jobs for Pennsylvanians
  8. Create a massive stimulus for Pennsylvania
  9. Increase personal wealth
  10. Stop costly reassessments

Looking over this list of reasons to get rid of property taxes, I’m struggling to see the downside to this proposed legislation?  Most of the items on the list would be very helpful to the school districts as they struggle to meet the demands of their budgets.  Wouldn’t we like to ‘stabilize school funding’ and not worry about ‘costly reassessments’ from commercial and residential homeowners affecting school district budgets?

Eliminating property tax escrow payment would certainly help all homeowners and I would think could encourage new home ownership.  Tredyffrin Easttown School District residents have been fortunate for the most part, as property values (although not increasing) have not declined as many other areas in Pennsylvania.  But realistically, how much longer will TESD residents enjoy that situation?  If TESD is forced to continue to make cuts to meet the demands of the budget, our property values may suffer as a result.

It looks to me like the proposed Property Tax Independence Act could be a win-win for school districts and taxpayers.  It would eliminate the need for school property taxes but on the other hand would stabilize funding for school districts through the use of a broader revenue system by utilizing sales and use tax. HB 1776 provides for a predictable revenue stream which would allow school districts to focus on education and the performance of their students instead of the continuing budget crisis.

If the Property Tax Independence Act were to make it through the legislative approval process, it would immediately freeze school property taxes at its current levels and begin reducing school property tax bill with the next tax bill. Clearly, I must be missing the real ‘negative’ in the school finance reform as proposed by HB 1776 because you know the saying, “if it looks too good to be true, it probably is”! Here’s hoping that someone gives me a reason why HB 1776 isn’t a good idea.

53 Comments

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  1. Pattye,

    One major downside to the state deciding how much revenue goes to each school district is how they will determine the amount. I live half year in Maine, which has the proposed system, and it becomes a political issue for how much a district receives. I know that our local school system does not receive a fair share of funding compared to what its residents are contributing in property taxes. We pay property taxes, but that is all we pay. No separate school tax or county tax or township tax. When our school district controls what is coming in, they know they can count on those funds.

    What if the proposed change takes place? Perhaps our legislators will decide to give the bulk of the funding to needy Philadelphia schools, and cut back on our funding. Everyone ought to think this through before they cede control of local funding.

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    kevin Grewell Reply:

    Quite so, Julie. The proposed system begs the question of just what (how much $, how many programs) constitutes a “free and appropriate public education.” Someone at the state level will decide that. Since T/E has a much richer and diverse program than most other school districts in the state, we can only lose in such an equation. Ultimately, we risk the state leveling the playing field. This is likley to be a lower playing field for us.

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    flyersfan Reply:

    Kevin hasnt the state already leveled the playing field or try to with its current mandates in place?

    [Reply]

    Kevin grewell Reply:

    Unfortunately, no. There are vast disparities in number of courses offered, number and quality of extracurricular activities, current textbooks and equipment, quality of facilities, access to mental health and guidance counseling. Many school districts have much larger class size, fewer aides and specialists, and overcrowded buildings in need of renovation or replacement with no adequate local revenue to get the job done.

  2. As a general rule, income taxes are LESS predictable and stable than property taxes. Income taxes are more likely to decline during economic downturns than property taxes, threatening school funding. Sales taxes may also be subject to the same economic volatility as income taxes. True, property taxes do fluctuate with the economy, as in loss of transfer tax (slower real estate sales volume) and re-assessments (declining economy = slower property sales = declining property values = lower assessments = less property tax revenue). HOWEVER, the effect takes much longer to become significant with property taxes than with income and sales taxes. Property taxes are less volatile and can ride out economic bad periods – at least until they become prolonged.

    On the other hand, public sentiment is turning against property taxes due to increases in the past decade or so. Alternatives deserve careful study – but the issues are complex and people should marshall all the facts before deciding to scrap a working (albeit imperfectly working) system in favor of another model.

    One other downside – and this is HUGE in my opinion – is that the revenue would be collected statewide and distributed by the state. That equals less local control and accountability. Many complain that the local school boards are not responsive but at least you can easily collect like minded neighbors and go to the school board meetings and talk directly to the decision makers, who are accountable only to the local community. Also, you can have influence – many recent examples of people running for the board and winning seats proves that if local citizens get motivated, they can from time to time wins seats on the board and have a real impact. All of this becomes more difficult and attenuated when the locus is moved to the state level.

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  3. Patty,

    Until looking at cost containment and mandate relief for things such as prevailing wage, furloughs, special ed funding and pensions, funding for public education will rise. My concern with this bill is what the state will apportion to each district. Presently there is a large disparity on per pupil spending in Chester County let alone throughout the state. I disagree with some of the ten reasons PTCC gives for eliminating property taxes. Look where the economy is right now, I think that is a bigger impact on the real estate market than property taxes just a few years ago real estate was booming.

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  4. “It looks to me like the proposed Property Tax Independence Act could be a win-win for school districts and taxpayers.” Really? This Act would replace local control of our School District’s destiny, with the attendant challenge of actually paying, through local taxes, for what we buy in educational services for our community’s youngsters.

    And would simply shift the tax burden from property owners to those that work and spend. How will that “attract business, generate jobs, create a massive stimulus and increase personal wealth” in Pennsylvania?

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  5. I think it’s important to know that there is no HB 1776. When legislation is introduced in the PA legislature, a copy is available on the state web site. There is no HB 1776 on the web site. In addition, I receive emails from the state detailing action on all House and Senate bills. There is no mention of HB 1776 on March 31, April 2 or April 3. I think we have a concept in search of support.
    .
    Particularly interesting to me was the guarantee that, “All schools will initially be fully funded at their current levels”. That means that we’ll have the state sending Upper Darby schools $12,000 per student while sending Lower Merion $26,000 per student and TE $17,000 per student. Would Upper Darby residents be comfortable sending their money to LM? And with the mention of “initially”, we have to guess what happens in the long term. Does that mean that Lower Merion and TE will have to cut programs in the long term? Which set of state bureaucrats decide what is best for the local schools?
    .
    Until there is a real bill with actual language the PTCC can paint a pretty picture while hiding the downside.

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    Version Reply:

    Keith, is that not part of the problem. Why should Upper Darby spend only $12,000 per student and Lower Merion $26,000 per student. The whole thing is just so out of balance. Every student should get a good education, no matter where they live!!

    [Reply]

    Keith Knauss Reply:

    I think we almost agree. I would phrase it a bit differently. Every student should get a good basic education, no matter where they live – an education that allows each student to become a productive member of society. Some districts like Oxford or Avon grove may need state aid to deliver that basic education; others like TE, GV, WC and UCF may not. That’s what Basic Education Funding tries to accomplish with the wealth metric of MV/PI Aid Ratio. However, it does a lousy job and needs revision.
    .
    But that doesn’t mean an equal education nor does it mean equal spending. Some communities may choose to provide smaller class sizes, more electives, a bevy of extracurricular activities, and lavish facilities. That’s OK with me as long as that community pays for those extra services with increased taxation. Conversely, another community may choose to just provide a basic education and enjoy lower taxes.
    .
    The difficult task is to define “basic education” and the cost necessary to achieve it. The PA Costing Out Study tried to do that, but was flawed.

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    Kevin grewell Reply:

    I agree with you and version that all kids deserve a good basic education. I agree with you, Keith, that this does not mean equal, as in exactly the same. As you pointed out, this is a very difficult problem, beginning with the question of what exactly constitutes a good basic education, or to put it in constitutional terms, “free and appropriate public education” . My concern is that we will not get a thoughtful and comprehensive definition and statute, we will get another piecemeal political hatchet job like act 1 of 2006. Such as “let’s get rid of property taxes” without preserving the ability of those districts which want more than the basic and can afford to pay for it to continue providing the program that locally controlled boards have chosen.

    Keith Knauss Reply:

    Kevin,
    We’ll agree to disagree on the merits of Act 1. I think it’s a masterful piece of legislation even though it’s causing some pain at TE while the board gets teacher compensation under control. Many people forget about the well thought out tax shifting option (PIT or EIT to replace up to 50% of RE taxes) given to local residents that was rejected by most districts. My take was that most voters were not trustful that a new method of taxing would be better than the old method. Regardless of the merits (or lack there of) in HB 1776, I think most residents will not be supportive of change.

    Kevin Grewell Reply:

    Keith – I think it is beyond reasonable dispute that Act 1 is a dismal failure. If it truly had provided meaningful property tax relief, we would not now be having this discussion. Apart from that, I agee with you.

    Keith Knauss Reply:

    Kevin,
    If I were a member of the state legislature I’d be pulling my hair out now. There have been several attempts to broaden the tax base which have had varied success.
    .
    1) Act 511 of 1965 taxation is not a popular option in TE (a 1% earned income tax). I don’t need to say anymore.
    .
    2) Act 50 of 2009 taxation (1%, 1.25% or 1.5% earned income tax) was only adopted by 4 school districts.
    .
    3) Citizens say they want property tax relief. But when presented with a clear, fair path to property tax reduction with local control while keeping the overall tax burden constant via Act 1, they overwhelmingly vote no.
    .
    4) Let’s remember that HB1776 is not new. It’s a slightly modified version of HB1275 of 2009 that never made it out of the House Finance Committee. My guess is that HB1776 will meet the same fate.
    .
    My interpretation of voter sentiment is that they value education, but want someone else to pay for it. Hence, there is always a strong, vocal opposition to any change in the current funding mechanism.

  6. There are several issues with this proposal that, in my mind, make it “too good to be true.”

    First among them, and it has been mentioned here, is the total lack of local control. At least now, when I write a check for property taxes I know they stay in our community; if that money goes to Harrisburg, it is up to the ever-changing whims of the legislature on how/where it goes. While we never know, I can say this: our area has NEVER received back what it sends to Harrisburg and this won’t be any different.

    If you think TESD faces fiscal challenges now, wait until we get even less money b/c the Harrisburg politicians chose to once again take money from our community and send it elsewhere.

    Second, imagine what happens to how that money is spent as control of the Legislature changes from election year to election year. Money will (at least partially) be allocated to pay back special interests who helped put one party or another into control.

    Think of what is happening today with Rep. Kampf’s proposed legislation to let school districts opt-out of prevailing wage. On a simple opt-out bill (meaning optional) we have seen union protests and school boards come out in support. Now imagine ALL education funding being up for grabs.

    Third, are the perils of the economy. When the economy is down, people buy less which means less revenue in sales taxes. What happens then? Do they raise the sales tax rate again?

    Finally, there are the “figures.” This legislation assumes that people will continue to shop in PA at the same rate as they do now. We all know that’s not true. Her in Southeast PA, many people will switch to crossing the border into Delaware to purchase their goods. That will mean less revenue than projected and, again, higher rates?

    The key to the property tax problem isn’t revenue, but that’s all people talk about. It is controlling costs. School districts need to do better – and have fewer mandates placed on them. The PSEA needs to be de-clawed so that taxpayers have a fighting chance. Common sense things like prevailing wage reform need to occur. And the pension system needs serious addressing — at the very least start a 401k NOW for all new hires.

    We can’t act like money will never run out…there is no money tree. We need to start controlling costs.

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  7. Keith Knauss, when you attack the PTCC’s “pretty picture” and “hiding the downside” you attack me as I am the administrator of that website. The legislation as described on the website is absolutely accurate, including the funding formula for the out years that you so conveniently ignored. I get particularly irritated when the preson who is doing the attacking is abviously clueless or has a personal agenda to push.

    Keep checking the legislative website; there IS an HB 1776/SB1400 that will be posted within the next few days. The House version has in excess of 55 co-sponsors, a third of the Democrats. The Senate version currently has twelve, with five Democrats.

    Just one more thing: Every detail of this legislation was crafted full partnership with the 71 grassroots taxpayer advocacy groups that comprise the Pennsylvania Coalition of Taxpayer Associations – the organization that is working for its enactment – a process unprecedented in Harrisburg lawmaking. But I suppose that all of the members and leaders of these groups who have worked so hard to bring this legislation to fruition and fully support it are simply dumb hicks that lack your obviously extensive knowledge and keen powers of observation.

    [Reply]

    Anonymous Reply:

    David –
    Would the proposed legislation remove Earned Income Tax (in addition to the school property taxes)? If I understand it correctly, the plan would take away the taxing ability of local school boards.

    As evidenced by some of the comments, in T/E the plan might be a harder sell but I would guess that many parts of the states would jump at such an option (Philadelphia and Chester Upland!).

    In your opinion, do you think that there is sufficient support to move this bill forward for House approval?

    [Reply]

    David Baldinger Reply:

    To anonymous at 7:08 AM: No, the legislation does not eliminate the local EIT but does cap it at its current level upon enactment. If you’ve read the details of the legislation you know that the option for an additional local EIT or PIT is available to the districts but only by a no-exception referendum that must clearly state the reason for the additional tax as well as a sunset date for the tax.

    With 59 co-sponsors from both parties at introduction and the efforts of 71 taxpayer groups that are united in supporting the legislation, I am more hopeful now than at any time since I began working for prior versions of this legislation in 2004. With grassroots support I feel it is achievable during this legislative session.

    On Tuesday following the HB 1776 Harrisburg press conference the Reading Eagle ran a fairly extensive piece about the legislation that included an on-line poll. You can check the results here: http://polldaddy.com/poll/6102343/?msg=commentAdd#comment1385572. A replay of the press conference is here: http://www.ptcc.us/1776-1400intro.htm

    In the interest of full disclosure, I think that it’s important to tell you of my involvement in this issue. Since my retirement in 2004 I have been a full-time grassroots volunteer taxpayer advocate who is working for the passage of this legislation. All expenses, including travel, the website, office supplies, and other incidentals are borne by me personally. I do not solicit or accept donations. I am not affiliated with any lobbying group except for the Pennsylvania Coalition of Taxpayer Associations, a coalition which I helped found and of which I am one of the leaders. I am not affiliated with any politician or political campaign except for the work I have done with Representative Cox on crafting HB 1776/SB 1400.

    Thank you for your question. Please post again if I can be of any further help or email me at pataxpayers@gmail.com.

    [Reply]

    Keith Knauss Reply:

    Mr. Baldinger,

    I may have missed something on your web site. Where is the “funding formula for the out years”?

    Please respond to the questions:
    1) Would Upper Darby residents be comfortable sending their money to LM?
    2) And with the mention of “initially”, we have to guess what happens in the long term. Does that mean that Lower Merion and TE will have to cut programs in the long term? 3) Which set of state bureaucrats decide what is best for the local schools?

    [Reply]

    Keith Knauss Reply:

    Mr. Baldinger,

    You are correct in pointing out my inappropriate use of the word “hiding”. A better term might be “painting a pretty picture while not addressing the downside”.
    .
    As the web site acknowledges, there is no free lunch. If the law is enacted there will be winners and losers. Someone will pay more; someone less. The winners (homeowners) are clearly identified. The losers are not addressed. I’m curious as to who the losers are. Who is paying more?

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  8. This is only current through 2002, but I think it makes the point….
    The states in the US that have the most state control are often the purveyors of the poorest programs. Property taxes may drive people crazy when they outgrow the system (and therefore have no dog in the fight…their kids are not depending on the local schools for their education) but regardless of complaints about local control, your property’s value is largely determined by the school district and its reputation. So property tax rates that were limited by the state artificially constrained nothing real, but put financial pressures on programs where they had poor credit or less savvy boards. TE did a $15M bond issue two years ago (3?) and built nothing. Their comfortable fund balance is somewhat artificial. TE’s problem now is that they do not want to apply for exceptions for PSERS (which is appropriate since they have claimed the fund balance for that purpose…and still complain that tax increases are a state problem).
    There is a downside to any funding method because anything involving labor in the US that is not outsourced tends to be very expensive. TE lost the right to “outsource” through a grievance against on-line learning. We can all talk tough about negotiations, but status quo continues the rising health care costs without any options for control.
    Local control is directly reflective of local expectations. It’s when the demographics of a district have more and more residents that do not have a TRUE interest in the quality of what happens in the schools. At the cost of TE per pupil spending, in the average home there are figures that show that it takes upwards of 18 years of paying taxes per child to cover your “tuition” at TESD. So perhaps the foundering economy has put pressure on prices and incomes, but it has not changed the reality that public education in TE is a bargain. Check the costs of surrounding independent schools — and you’ll see why people move into TE. And if you cannot afford your school taxes, tap that equity in your home which exists largely because of the school demand.

    [Reply]

  9. Keith, I’m going to start with an apology. I have written so much about the funding methodology and have given the HB 1776 presentation so many times that I didn’t realize the entire funding plan wasn’t published on the PTCC website. I’m sorry.

    HB 1776’s funding system is a two step formula-driven process that’s really pretty simple and is immune to legislative and executive branch meddling, unlike the current Basic Education Subsidy (BES).

    In the first year all schools have their eliminated taxes replaced dollar-for-dollar. That replacement revenue is divided by each school district’s average daily membership to find a per-pupil cost that will be recalculated in subsequent years. In the second year and beyond, if a school district loses student population it will receive less funding that year based on the change in population and their per-pupil cost. Conversely, if a district gains student population it will receive an appropriate increase based on the same metrics. This is in contrast to the 1991 funding formula for the BES, which holds all school districts harmless in perpetuity. There is nothing in the HB 1776 methodology to account for special education, socioeconomic factors, or other metrics that are a part of the BES – it is a property tax replacement mechanism only. Any district-to-district funding adjustments will continue to be addressed through the BES.

    The second part is the annual increase to all districts. The increase will be based on either the increase in the CPI or the increase in available revenue, whichever is less, and will be distributed on a percentage basis. For example, if revenue increases by 3% in a given year, all districts will receive a 3% increase in their funding. This is the cost control mechanism built into HB 1776. The advantage to this is that funding is directly tied, and limited, to economic activity and no increase in the tax rates should ever be necessary. The plan is structured in such a way that at least level funding will occur, even during poor economic times – no school district will ever see a decrease in funding except for changes in enrollment as explained in the first paragraph.

    And although there are those who would like to see equalized per-pupil funding statewide, no attempt has been made to address this in the legislation.

    I believe that this answers both of the questions that you asked in you 7:31 AM post.

    RE: The 7:58 AM post, there is very little downside to the plan and that is why nothing is stated. What the plan does is spread the burden for roughly 65% of K-12 education funding from 3.2 million homeowners to 12.7 million residents plus visitors. It’s simple economy of scale and produces very few “losers.” The only downside would possibly be for renters, who may or may not see a reduction in rents commensurate with the elimination of property taxes. However, we have had conversations with landlords from various areas of the state about this and the majority has told us that they would be willing to reduce rents for two reasons. First, it’s the right thing to do. Second, there is currently a glut of rental housing and the ability to reduce rents would make the rental market more competitive. And at the very least we can expect stabilization of rents because the elimination of the property tax removes the most common excuse used by landlords for annual rent increases: that property taxes have increased.

    There’s one other likely intangible benefit to renters. There are those, obviously, who prefer to live in rent. But many, if not most, renters are young people who consider rentals temporary shelter while waiting for the opportunity to purchase a home. For these folks the elimination of the greatest portion of the monthly property tax escrow, an amount that can in some areas equal the mortgage payment, will make home ownership more affordable and allow them to purchase a home sooner.

    If you haven’t done so, please take the Property Tax Independence Act Excel tax calculator on the PTCC website for a test drive to see how this legislation will affect your finances. (http://www.ptcc.us/pfpfcalc.htm) You might also want to experiment with other amounts and sources of income to determine how it might affect other people and to see if you can find very many “losers.” This calculator was independently developed by a member of our Coatesville taxpayer group and is as accurate as the underlying data allows.

    BTW, HB 1776 was formally introduced late this (Thursday) afternoon with 59 co-sponsors; the Senate version, SB 1400, will follow shortly. Because of the Good Friday holiday it may not appear on the legislative website until Monday or Tuesday, so keep checking for its appearance.

    [Reply]

    Keith Knauss Reply:

    David,
    Somewhere on the PTCC website there was mention of a calculation done to make sure that a 1% increase in the sales tax rate on a broadened base would be sufficient to fund schools at the current level. Could you provide that calculation to us?
    .
    It will be interesting to see different organizations weigh in on the merits of HB1776 like the PSEA, PSBA, PASBO, Keystone Foundation, Alegheney Institute and Commonwealth Foundation.

    [Reply]

    David Baldinger Reply:

    Keith,

    PA Independent published a piece on March 19 that includes a chart with the entire breakdown of the HB 1776 funding. Please check this and let me know if you have any questions:

    http://paindependent.com/2012/03/pa-seeks-to-swap-property-taxes-with-hikes-in-sales-income-taxes/

    [Reply]

  10. The only distribution ‘scheme’ that would leave Districts with relatively the same amount of money as they have now with property tax would be one that would allocate funds based on total assessed property values in the Districts. I guarantee that you won’t get that with this bill, as the legislators are dealing with real lack of money issues in Pittsburgh and Philadelphia, and they need to get it somewhere. They don’t want to raise taxes and lose their cushy state-paid jobs. They are currently robbing ‘wealthy’ districts, who often get less than 20% of their funding from the state, to send the money to ‘poor’ districts, that often get as much as 80% of their money from the state. The state had a costing out study that told the legislature how much it needed to pay to adequately educate a student in PA – guess what study results were removed from legal consideration in last year’s budget? If the state provided what was ‘necessary’ to every District in the state, and local taxpayers could decide if they wanted more, like Advanced Placement Classes, et. al., taxpayers would be a lot happier. A lot of legislators would lose their jobs because they would have to raise sales or income taxes to do that, so it is not likely to happen.

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  11. Interesting that the commentary here is predominantly through the lenses worn by those for whom the current economic system works just fine.

    Do we believe in the principle that every child deserves the same basic level of education? If education is indeed a common good, what is the best way to fund it? Where is it written that school taxes should be based solely on the value of the district’s property – whatever mix of commercial, residential, industrial there happens to be?

    Even today, property taxes are clearly not up to the job – our state sales and income taxes already provide a large portion of the funding for many school districts.

    There seems to be a lot of concern about problems of redistributing funding between school districts. This might not be as big of an issue as is presented here. Lower Merion may have a high expenditure per pupil, but its income is high, too. Income tax can be tied directly to school districts. There are probably good models for relating sales tax to income and wealth, too.

    We have to remember, too, that local control comes with overhead. I wonder if anyone has ever calculated the full annualized statewide compensation cost, including wages, healthcare, pensions, cars, secretaries, computers, office space, cell phones, conference rooms, etc., etc. – of all the district superintendents?

    [And as for tapping the value in your home that purportedly exists just because of the schools – you already borrowed that when you bought into the district].

    All part of an interesting debate about the role of government at its various levels. Not to hijack this thread, but I’d be delighted if the mandate to give insurance companies more money to oversee my healthcare was declared unconstitutional. Where’s the evidence that having insurance companies skim 30% promotes either better outcomes or lower costs? And what about the crazy distortion caused by corporate tax deductions for employee healthcare? There has to be a better way.

    We just need a citizenry open to a debate about change.

    [Reply]

    From The West Reply:

    Ray —

    Great post. As others have said here, the core question on education comes down to what the “basic level of education” means. This argument may be too hard to overcome for too many. It shouldn’t be, but I fear the highly partisan nature of our current governments (state and federal) as well as the interests of so many varying groups will interfere.

    [Reply]

    flyersfan Reply:

    Ray, excellent point about corporate tax breaks for giving health care insurance to employees. How about giving the same exact tax break to individuals? Sure that would worsen the problem of tax revenue to government but doesn’t it seem fair? That alone is the incentive to provide insurance to employees. lets face it, it is a failed model, and it has helped to distort the market for health care insurance.

    As for your overhead comment, sure there is overhead, but it exists no matter where the “control” comes from. And I want the control, for revenue and expenses to be local no matter how imperfect. There is more accountability no matter how imperfect than to have the state maximally control our district. There is enough of that already. Good post thought provoking.

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    Township Reader Reply:

    There is no question that school districts should consolidate! Other states have done this. 501 school districts doesn’t just generate lots of overhead — it raises the demand for superintendents with a very limited supply of eligible candidates–thus raising the price.

    But here’s the comedy — Tredyffrin AND Easttown. Why do we have two townships? We’re lucky we only have one school district. Who decides which communities merge — and who is top dog? There is no market making this decision — no stock price to value the decision. I’m wondering?

    [Reply]

    Keith Knauss Reply:

    Consolidation seems like it should result in savings, but it doesn’t.
    .
    If one constructs a graph of the 501 districts in PA it would show districts ranging in size from 200 to 250,000. You will find that the small districts run just as efficiently (cost per student) as the large districts.
    .
    Why? Regardless of district size there is still 1 teacher for every 15 or so students, there is still 1 principal with attendant support staff for every building, the same number of miles are still driven for transportation and the administrative staff scales with the number of students.
    .
    The small districts (there are 75 districts with enrollment below 1,000) gain efficiency by purchasing services from the Intermediate Unit, having one employee hold multiple responsibilities and by sending high school students to nearby districts.

    Township Reader Reply:

    “Property taxes may drive people crazy when they outgrow the system (and therefore have no dog in the fight…their kids are not depending on the local schools for their education) but regardless of complaints about local control, your property’s value is largely determined by the school district and its reputation. ”

    What kind of change do you think people would like to debate? The only change anyone can abide is typically one with a payback. It’s parents who are fighting to maintain the program. It’s non-parents who are complaining that the program has too many bells and whistles. It’s people paying the EIT elsewhere that wants everyone else (who are not paying it) to pony up so that their travelling dollars stay put.

    We can talk about change — but the reality is that if you live in TE, you choose to. You decided where to live and how much to invest in a home. The school tax has historically hovered near 1% of your property’s value — and I would imagine most people agree that maybe 20% of that value is based on the school district.

    So as FTW says — the core question about the basic level of education remains — and people who want more buy into communities with like-minded people who can afford it. There are plenty of families who are still in independent schools because they want “more” than TE or LM or Rad or UCF provide. Buying property IS voting with your wallet. And if you moved here and sent your children through school already, that’s where the “equity” is likely to be in the house — iin the time you have lived here. Unless you bought at the top, only those who over-extended are likely to have to give up their house to stay…

    The state should pay more — much more — but won’t unless we give up control. That’s what the link I included above was about — the history of how california has evolved (or dissolved).

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    dave Reply:

    Township Reader – this was one the best most reasoned points of view presented. Too often I read the anti-teacher union whose only goal is to bust the union without understand all the implications on how our school district impacts our overall home values.

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  12. One concern not mentioned by others: isn’t there a good possibility that the increase in state sales taxes might motivate people who live in the south eastern counties to travel to sales tax free Delaware to purchase all large ticket items thus impacting the local economy?

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  13. KK
    http://nepc.colorado.edu/publication/consolidation-schools-districts

    Interesting variables to consider. . Study published on Consolidation in 2011 by National Education Policy Center. I think the issue in this part of PA especially is that districts almost overlap geographically .When you look at the influence all the local districts have on the salaries of teachers and administrators in neighboring districts, with very little demographic differences, the theoretical cost savings are not phantom. That being said, Great Valley (for example) was spun off from TESD. Coming from a time when a district was built around a high school…clearly larger local districts with multiple high schools are more influenced in their cost structure by what other schools are paying….that’s where regional consolidation works IF it is not mandated but instead is reached through mutual advantage. But this is PA — no one thinks anyone can do it as well as “us” (whoever us is).

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  14. I always like to see where an institute’s funding comes from and the NEPC is supported by the NEA. The evidence from another source, the conservative CATO institute, also points to no savings by consolidation.
    http://www.cato.org/publications/commentary/school-consolidation-fails-save
    .
    I agree that a district’s contract is influenced by the contract received by neighboring districts. Prior to the cap imposed by Act 1 it was a spiral upward. Post Act 1, I see a gradual return to market rate increases – because Act 1 forces school boards to keep salaries within the cap which is representative of the market. The UCF contract probably will influence the contracts which are being negotiated now – TE, Avon Grove, Kennett and WC to name a few. The results of those contracts will influence next year’s contracts at GV and UCF. Let’s see what happens.

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  15. The reason that Upper Darby Taxes are so extremely high is because there are many people here that DO NOT pay taxes rather live on Welfare. We are paying double to make up for those that DO NOT pay. I for one am getting sick and tired of my property taxes sky rocketing while some sit home.
    Another very important fact- Since property values have plummeted in our community it is making the area even less desirable. I just had a banker the other day tell me that she would never invest money in Real Estate in Delaware county because the taxes are so high. There are 5 empty homes on my street will they wait for there to be 25 or 30 empty homes sitting with no one wanting to buy them before lowering taxes? It’s a shame, so many good people have lost their homes because they can no longer carry the tax burden, something must be done and NOW!

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  16. Monroe County, PA is planning to close *six* schools.
    many people have left because of these property high taxes & foreclosures .

    The school taxes are outrageous! in Monroe County.
    Of the entire tax total one pays for property taxes the majority of the money ( no exageration) goes to school taxes.
    If you pay a total of $5,000 in property taxes, $4,000 go to the school taxes!
    What the heck on earth is this?!?! OUTRAGEOUS!
    ‘Legal’ highway robbery is what it is!
    The Monroe County residents are being literally taxed out of their homes.They are leaving.Hence, the low school enrollments which is resulting in many schools closings.
    More & more people are renting rather than buying homes. Who can blame them?

    Pray tell, who would want to buy a home in this county with such expensive taxes? (question is not meant for the wealthy).This is not Beverly Hills with its very wealthy residents.
    Education is an asset to any country but let us face it what is coming out of our schools is not exactly ‘Oxford’ material.

    Here is my question for anyone that knows:
    When those schools close will the school property taxes be lowered? or will they stay ‘frozen’ to whatever amount was being paid before the schools closed?
    Thanks in advanced for any replies.

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    From The West Reply:

    Monroe County is a victim of outside influence.

    NJ and NY residents started moving there b/c of the affordable property taxes…then fought for it to be more like where they came from. Between their demands and the influx of families, massive stress was put on schools and infrastructure that was never meant to handle that many people. The result: schools and local governments had to spend – and drive up the very property taxes these people moved there for.

    It gets worse though: so many of those who moved in took the great-looking ARM loans without thinking to the future. Once their mortgages rose, along with property taxes, they couldn’t afford what they bought. Add the housing bubble bursting and they were underwater — so they left.

    Basically, the people who caused the problem have come and gone – and left long-time residents to foot the bill.

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    Paulite Reply:

    I agree. My question is, now that they left & 6 schools are closing….

    When those schools finally close will the school property taxes be lowered? or will they stay ‘frozen’ to whatever amount was being paid before the schools closed.

    Only fair the taxes go down if what was driving them up (so many schools) will no longer be there.

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  17. A local politician said it would take 3-4 years to inact such legislation. With my property taxes now over $10,000 and subject to a 5.6% increase this year I seriously doubt I can hold on for that long before I just give it back to the bank & walk away. I’m retired and have never had children in this school district or state and yet I realized a property tax increase of 143% from 2006 – 2007 and yet it’s a modest house of under 2500 sq ft and on land less than a 1/2 acre.
    This is Monroe County in East Stroudsburg school district. I sincerely hope & pray that help is coming sooner than later.

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    Keith Knauss Reply:

    I took a quick look at the East Stroudsburg teacher’s contract signed in 2007. http://www.publicschoolspending.com/wp-content/uploads/2011/04/STROUDSBURG-AREA-SD-2007-13.pdf
    .
    Here are the negotiated pay raises:
    2008-09 6.9%
    2009-10 7.1%
    2010-11 7.9%
    2011-12 9.5%
    2012-13 9.5%
    .
    Medical Insurance is a Blue Cross premium plan with the teachers paying only $32 per month. (3% for a family plan) Plus, any retiree with 30 years of service gets coverage until 65.
    .
    I’d be at the school board meetings asking very tough questions. The school board in 2007 gave away the store. This contract, by far, is the worst I’ve seen and an example of fiscal irresponsibility on the part of the 2007 school directors. How did they ever think they could pay for those raises with the cap imposed by Act 1 of 2006?
    .
    (I hope there is some mitigating factor I’m overlooking, but I don’t think so)

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    From The West Reply:

    WOW! Those are amazing — and totally unaffordable — figures.

    I don’t know why everyone wants to blame Harrisburg OR why they always just look at “more funding.” Controlling costs is half the equation, too.

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  18. The stories from taxpayers in other districts (Upper Darby, Monroe County) are appalling and tragic, but they do tend to put our problems in T/E into perspective. In T/E, adjusting dollars for inflation, our school taxes are not much different from what they were in 1970, hovering around 1% of property value (I have provided the numbers elsewhere on this blog and do not have them in front of me as I write this, but the facts are a matter of public record and can easily be provided and verified). T/E consistently ranks about 470-480 out of 501 school districts in the state in terms of having among the lowest school property taxes.

    Having said that, I add that I do not in any way want to diminish the serious nature of our problems, and indeed, as some of the writers above have testified, it is clear that school funding is a huge state wide problem. Many communities are feeling the effects sooner and more severely than we are, but we are not immune and are beginning to feel the pain too. As much as local action is needed, there is also an urgent need for the state legislature to address this issue.

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    Township Reader Reply:

    Kevin — the state is unlikely to address this issue ever. The state has similar problems.
    But now I see how this lamenting over it is exacerbating the problem. In talking to realtors recently, people are backing off the demand for TESD because of all the publicity about our “$16M gap in funding” — as if any other district is in much better shape? So houses in TESD may well see a reduction in the traditional demand, which will prompt more property assessment appeals, and reduce the tax base lower. Additionally, lack of sales drops the transfer tax.
    SO — for me — the school board needs to stop pondering this problem and just deal with it. Stop asking the state to help TE when it is clear that other districts have far deeper holes and far fewer resources to deal with them. For the last few years, TE has followed the Act 1 guidelines and ty pically stayed under the cap, all the while raising expenditures at an increasing rate. They spent $5M to redo the football stadium. They did a $10-$15M bond issue two years ago and did not build anything (money was cheap). And now they are talking tough about negotiations and not bothering to sit at the table to negotiate.
    Courage takes brains, not just noise.

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    kevin Grewell Reply:

    Certainly it remains to be seen what the state will do. I am skeptical myself. The problem is – for me – I am not at all sure the problem can be entirely solved at the local level. Among other things, I think you yourself have pointed out the difficulties created by state law with respect to teacher contract negotiations, and the inherent problems with a strike. In order to weather a strike the board would need a huge amount of support – and even now I am not sure that would be forthcoming.

    Having said that, the board should do everything possible to address the issue, and I am confident that things can be improved to a great degree. But there will remain issues that can only be truly addressed by the state. The pension crisis is one.

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    Township Reader Reply:

    The state cannot fix the problem with PSERS to solve any issues here — except kick the can further down the road. They can try to change it for new hires, but that doesn’t reduce the upcoming obligations.
    The negotiation thing is different, but the community supporting a strike is meaningless as you know well that “status quo” with the existing contractual health obligations. The threat of “work to the contract” for rising juniors and seniors (recommendations) is NOT something this community could support, and even if it did, would not likely result in any meaningful changes to the contract and would likely continue status quo after each work stoppage.

    Sad to say that our hope lies on the PSEA, not the legislature. WHen the PSEA last year suggested wage freezes as a show of good faith, it helped …. for whatever reason motivated them (lunch with legislators?). Until/unless the PSEA recognizes that a defined contribution health care plan across the state is a way out of this “no benefit negotiations” (i.e. a state plan that is NOT first dollar health care and has meaningful deductibles and co-pays rather than every district negotiatng each detail), we are all at the mercy of what each of the 500 or so districts do every 3-4 years…..and bidding against themselves is still the only way it works.

    Kevin grewell Reply:

    To township reader (below) – we are saying the same thing, that there are limits to what any local board can do given the current situation and laws. My point is this requires changing the rules of the game. Only the legislature can do that. I hope you are wrong about the legislature, but I fear you may be right. As I said, I am not particularly hopeful myself.

  19. The key to funding education no matter what the revenue source is to limit teachers and especially administrators salaries and pensions. We all want quality education and should demand it but the gravy train is reaching the end of the line.

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  20. HB 1776 should be closely examined before such a radical – and irreversible step – is taken. The odds that an elimination of the property tax are slim. Yet resorting to higher taxes, and giving the state more and more power to tax are arguably not the way to go. The higher rates that proponents say would replace the local property tax seem too low.

    This is a situation that needs a scalpel, not an atom bomb. In the few genuine cases where people don’t have the funds to pay their property tax (and I don’t mean sheriff’s sales for foreclosures), a bold leader in Harrisburg would pass a law that permits total property tax deferral for a stressed homeowner.

    There are other threats that a property tax elimination – instead of reform – Pennsylvania would have to face. The issues are discussed here: http://www.urbantoolsconsult.org/blog/2012/04/20/Eliminating-the-property-tax-It-must-not-happen-but-well-see-what-happens.aspx?alt_id=QNKNX-HA983-2N4&ts=634725888258803751.

    [Reply]

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