Earned Income Tax

Random Files: short news updates

Tredyffrin’s Special Election Results . . . Chester County Voter Services completed the hand count of the Duffy/Heaberg Special Election ballots from the May 17 primary a couple of weeks ago.  Originally, the count indicated Heaberg ahead by 3 votes but a provisional ballot for Duffy was found; 2 votes currently separate the candidates.  Due to many malfunctioning voting machines countywide, it is my understanding that voter services has been working overtime to certify the election results by the 30-day deadline on June 17.  Look for the results to be certified early this week; word has it that alignment issues with Republican ballots heads the list of possible reasons for the problem.  Does make you wonder about prior close elections . . .  here’s hoping that whatever the problem, it is thoroughly researched (and corrected) prior to November’s general election.

Genuardi’s in Chesterbrook Shopping Center . . . Empty for a year, we had heard that the Bottom Dollar Grocery chain was going to take the vacant space but that offer fell through. The next development in March of this year, Centro Properties sold 588 shopping centers (including Chesterbrook) to private equity giant, Blackstone Group for $9.4 billion. Although the lease sign remains on Genuardi’s, there has been recent movement in the last few days.  Paul Prestia, a local attorney with Ratner Prestia in Westlakes is floating an idea to the community to create a food co-op in the former Genuardi’s space.  Using a model similar to Swarthmore Co-op, www.swarthmore.coop/ it would specialize in locally sourced and organic food. This is an interesting redevelopment idea for the Chesterbrook Shopping Center and I will be curious to see if it develops further.

Brian O’Neill . . . the King of Prussia developer behind the Uptown Worthington project in Malvern is back in the news.  The O’Neill Properties vs. Citizens Bank trial is slated to begin in December and O’Neill has dramatically reduced his original $billion+ demands down to $297 million. Once the parties reach a settlement, construction is expected to get underway again at  Worthington.  O’Neill’s vision remains for Uptown Worthington – the ‘Center City of Great Valley’.  His vision will require more than the current two stores, Wegnman’s and Target, on the 100+ acres.

T/E School Budget . . . The TESD school board makes the final 2011-12 budget vote on Monday night, June 13, 7:30 PM, Conestoga High School.  Property tax increase is projected at 3.8%.  Click here for the agenda.

EIT Tax Study Group . . . Applications are still being accepted from Tredyffrin and Easttown residents for the TESD EIT Tax Study Group – deadline for applications is Wednesday, June 15.  The TESD Public Information meeting is Tuesday, June 14 and the selection process will be discussed. There are to be 9 committee members chosen and my understanding is that 100 applications have been received to date.  Click here for the application. The success of the tax study group depends on a non-political selection process and committee membership.

HARB no more . . . As of the May Board of Supervisors Meeting, the Tredyffrin’s Historic Architectural Review Board (HARB) was replaced by a Historic Commission.  With an expanding mission to protect historic properties in the township, I was pleased that supervisors showed their support of preserving the township’s historic resources with a unanimous vote.  I am expecting great things from our new commission, and am excited to be part of it.

Planning Commission – Where’s the Sidewalk Ordinance amendment on your agenda . . . I was very surprised to see that the sidewalk ordinance discussion is off this week’s Planning Commission agenda.  The proposed ordinance amendment establishes the criteria for the requirement to construct sidewalks and establish a fee in lieu of construction procedure and is scheduled for a public hearing on Monday, June 20.  Having attended the last Planning Commission meeting, it appeared commissioners had not reached a consensus on the ordinance, so why is it off the agenda for their meeting?

For those that may have forgotten, the St. Davids Golf Club sidewalk issue remains outstanding since December 2009. The land development agreement between the township and St. Davids requiring sidewalks is now 4 or 5 (?) years old and yet the clock continues to tick (and tick, and tick).  Whose responsibility is to enforce the sidewalks at St. Davids?  It is now eighteen months since the St. Davids sidewalk issue was ‘set aside’ by Tredyffrin’s supervisors and, to date there remains no resolution in the matter. 

Is the sidewalk issue going to be the 2011 supervisor campaign issue, as the 422 issue was to the  2010 State House race?  Adding a new twist to the continuing sidewalk saga, supervisor Paul Olson (R) is up for re-election from the eastern district. Having served as supervisor for 30 years, he is on record as opposing the St. Davids sidewalk; proclaiming it the ‘sidewalk to nowhere’.  Olson’s opponent in the supervisor race, Tory Snyder (D) is a Planning Commissioner and served as chair of the sidewalks subcommittee.  She supports the green routes network and the sidewalks component of the township’s comprehensive plan.  Olson and Snyder are scheduled to square off against each other in November’s general election.

Valley View Shopping Center . . . If you haven’t driven down this section of 252 lately, you might be surprised at the level of activity.  The redevelopment of the old Bargain Bookstore is well underway; it appears that they are gutting both floors of the building for a new branch of Mealey’s Furniture. In the same shopping center, the old Charlie Brown Restaurant is undergoing much change for its transformation in to a new McKenzie Brew House.  Originally slated for completion in September, signs point that the microbrewery is on schedule.

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T/E School Board Meeting Tonight . . . Proposed Final 2011-12 Budget Vote

Reminder:
There is a T/E School Board meeting tonight —  May 9, 2011 at 7:30 pm at Conestoga High School. At this meeting, the School Board will vote on the proposed 2011-2012 final budget.  Click here  to review the proposed budget. Will the decision of the school board be to fund the deficit with the use of the fund balance?

I assume that we will also learn the outcome of out-sourcing of TESD custodial services.  My understanding is that the outsourcing quotes should have been received by the district and the board will have determined the cost-savings (if any) of out-sourcing. 

According to the agenda for tonight’s meeting, the board will present information on the school district’s plan to form an Earned Income Tax Study Group.

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Looking to T/E Teachers for ‘Shared Sacrifice’ – Pay Increase Waiver not Salary Freeze

School districts across the state are scrambling to plug projected budget gaps stemming from deep cuts in state funding and TESD is no different. The use of “shared sacrifice” has become a common and oft-repeated phrase in today’s political discourse. As school district budget deadlines loom, we are see that teachers (fairly or unfairly) are finding themselves of in the limelight on this topic.  In my view, we do need to boldly address our deficit crisis, but we need to do it in a way that is fair.

Last night’s TESD Finance Committee meeting had a very different tone than the last school board meeting. As the school board and administration discussed the few remaining available budget strategies, I had a sense that the school board was digging in its heels, expecting a ‘pay increase waiver’ versus a ‘salary freeze’, which the teachers union previously offered.  Although the T/E teachers union (TEEA) states the value of their salary freeze offer is $2.5 million, the school board counters that the freeze does nothing more than extend the teacher contract by a year and ultimately costs the district more money.  Encouraging the teachers union in the path of shared sacrifice, the school board prefers the teachers consider a pay increase waiver which, if I understand correctly, requires opening their current contract.

Credit needs to be extended to TEEA for their offer of a salary freeze to the school district. For some teachers, they believe that by offering a salary freeze, they are sharing the sacrifice. Let’s remember that Gov. Corbett suggested that teacher unions offer a salary freeze to their school districts to help with budget deficits. (I don’t recall his using the words, ‘pay increase waiver’.)  Yes, there is a budget crisis in school districts across the state; but I admit that I have difficulty with the breaking of a contract, which was negotiated in good faith by the teachers.  If contracts mean nothing then should we all go home and break our car purchase contract, our mortgage contract, and every other contract we signed in good faith where we expect both parties to be honorable.   What about ‘negotiating’ after the contract is fulfilled . . . ?

Looking at discussion from the other side, the school board is struggling with the remaining budget shortfall.  So . . . what do they do?  In their minds, they believe that the teachers should help with a ‘pay increase waiver’ (shared sacrifice) which according to their calculations could net $3 million.  At the meeting I had a sense that the school board is listening to the public and are interested in keeping the process transparent.  They offered that they have heard from TENIG, the non-instructional union, and are reviewing the offer.  Keeping the community ‘in the loop’ will prove a win-win for the school board, the teachers, and ultimately the taxpayers.

Setting aside the timeline debate of the April 14th TEEA teacher union offer letter of a salary freeze, and the rejection of the offer by the school board, last night the Finance Committee presented their side of the argument in favor of a pay increase waiver.  According to their analysis, the school district budget projection for 2011-12 is as follows:

  • Budget Projection as of May 2, 2011:      $3,170,509
  • Budget Projection (TEEA and TENIG Pay Increase Waiver:   $170,510
  • Budget Projection (TEEA Proposal Letter):         $946,122
  • Budget Projection (Custodial Outsourcing):        $2,370,438

Following the Finance Meeting, I asked Pete DePiano, president of the teachers union for his thoughts.  Here is his response,

“The 450+ members of the Tredyffrin/Easttown Education Association will stay true to their integrity in attempting to come up with a final cost savings offer for the district’s consideration.” 
 
Pete DePiano
President, TEEA

DePiano’s response tells us that the teachers are continuing to work on possible solutions to help with the budget crisis. Open and honest communication between the teachers union and the school board will aid greatly in the ongoing budget discussions. I want to believe that both sides can work together for the sake of the kids and the community.

Ray Clarke kindly offers his comments on the Finance Committee meeting below:

  • The TEEA proposal is judged to be worse on a 5-year time horizon than the status quo, because the projected $2.05 million of savings in 2011/12 is offset by salaries in the following years that are $0.5 million higher than they would otherwise be, due to two years of step movement rather than one. The higher salaries also trigger proportionate benefit cost increases, but there appear to be no fundamental differences between benefit programs, premium contributions, etc. in either scenario.
  • The salary “waiver” has the greatest impact on the district because the saving occurs every year. Although the model was presented without tax increases, it looks to me that, under this scenario, very modest increases in taxes (property or EIT) and gradual use of the “PSERS stabilization” fund balance could allow the district to fund the retirement fund beyond the five-year time horizon.
  • The Board did appeal again to the community to make their voice heard with legislators regarding the PSERS problem, and our frequent academic economist commenter also reminded us once again of the fundamentally bankrupt public pension plans. A couple of data points: the recent “fix” assumes an 8% investment return, and provides retiring career teachers with my estimate of an equivalent $1.25 million annuity. Just to keep this simple, here are the options:

 1. Reduce the liability by undoing the multiplier increase for all, not just new hires (the decrease needs a change in the state constitution, unlike the increase…)

2. Increase taxes:
a) statewide  (Marcellus gas, personal income, corporate income, etc.), or
b) locally (property, income)

3. Redirect spending from somewhere else. Like where? Pick your poison! What would Dinniman and Kampf propose?

  • There was a very unsatisfying discussion of a possible Activity Fee, punting it along to next week’s board meeting. Needless complications about different bases for charging. The bottom line: salaries and transportation for (non-mandated) extra-curricular activities cost the district $1.14 million a year. 80-85% of students participate in at least one. Nobody is making any argument that these activities are not totally worthwhile. A universal charge could be simply administered. So the issue is straightforward: do these continue to be funded by all taxpayers, or do families with high school and maybe middle school students bear a little more of the cost? Hopefully the full Board can have a discussion along these lines next week.
  • The timeline for an EIT study seems very compressed. The Board is considering appointing a study group; they need to get on that right away. If an EIT makes enough sense to put to a referendum, there’s a November 16th deadline for notifying the townships of that intent.
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TESD Finance Committee Meeting . . . Raise School Taxes vs Eliminating School Buses or Support for Athletics? Notes from Ray Clarke

In the midst of packing to leave for a family holiday, Ray Clarke was still able to attend last night’s School Board’s Finance Committee meeting.  We are all grateful that Ray attends the meetings and then kindly supplies his notes.  Thank you my friend and happy travel! Below are Ray’s notes and I think you find them interesting!  With the looming deficit, we are not surprised at the direction of our school taxes . . . but tax increase vs.  elimination of school buses or support for athletics?  Don’t think those options are likely to be approved.

There was a well-attended meeting of the TESD Finance Committee on Monday night.  There was much material to cover, though, and not much time for input from the 30 or so community members present.  Since the size of the problem and contentiousness-level (sorry!) of some of the ideas is off the charts, all the Finance Committee could really do was kick the can down the road.

No surprise, the Committee voted to recommend that the full board vote on January 3rd to apply to the state for Exceptions to be able to increase property taxes by 2.8% on top of the Act 1 increase of 1.4% – total 4.2% increase.  This would also involve publishing a preliminary budget at that time that shows a budget deficit (after the tax increases) of somewhere in the $4-5 million range (depending on whether any expense reductions are included).

Important to note: this recommendation keeps options open.  On the revenue front, the Board could 1) still ask for a higher tax increase through a voter referendum (but could not now ask for an EIT), 2) ask voters to approve any tax increase beyond 1.4% (and not apply for Exceptions), 3) hold the increase to zero or 1.4%.  On expenses, there seem to be $1-2 million of “Level 1” and other strategies that could reasonably be implemented for 2011/12.  The gap between revenues and expenses that results from the final choices on the above dimensions would be met from the fund balance.  Kevin Mahoney and Debbie Bookstaber seemed to be favoring revenue option (2).

A few numbers that caught my eye:

1.  This year’s operating statement is being strongly fortified by delinquent tax collections and by reduced PSERS contributions that are each projected to be ~$750,000 favorable to budget, resulting (with other puts and takes) in a reduction of the expected contribution from the fund balance from $1.5 to $2 million.

2.  The district is finally publishing and using figures that reflect TEEA increases closer to the effect of the actual salary matrix.  The aggregate salary increase for 2011/12 is projected to be 7.33%, and may go higher with more movement across the matrix.

3.  The projections use historical rates of increase for medical and prescription costs (10-15% per year); it seems possible that current experience will turn out to be more favorable.

4. The “base case” used for starting points includes the Act 1 tax increase of 1.4%.  This is different from other years when the base case is the current tax rate.  With no tax increase and no additional expense reductions, next year’s gap would be $8.8 million.  This includes $470,000 add back of “one-time” strategies used last year.

5.  Options to close the close the gap with no tax increase include things like: elimination of school buses ($2 million) and of support for athletics ($1.5 million), outsourcing custodial services ($0.95 million), further reducing aides ($0.8 million).  There was no indication that the Board would seriously consider these, although there was commentary about transportation inefficiencies observed by some Board members.  Interesting that the option to hold administration salaries flat (impact $150,000) was included with these “Level 2” strategies.  There is also a set of strategies to eliminate teaching positions that if approved by the Education Committee/Board and if staff attrition occurs would eventually save $3 million/year ($525,000 of this will be up for approval at the 1/32011 Board meeting).

6.  Going forward, the problem compounds – even with a model that includes no TEEA compensation increases (none!).  The issues are flat assessed values, healthcare costs, and PSERS (no, Harrisburg didn’t fix it!).  One audience member cited research that predicts that property values and employment don’t reset and resume growth until 2016.  That ~$5 million in earned income taxes paid to other jurisdictions seems pretty important, as do healthcare benefit cost-sharing programs and index-linked compensation in future union contracts.  Maybe we will continue to look to the state for PSERS help, but there is clearly a lot that can be done at the local level.

There was much talk of the educational value delivered by the T/E program.  Dan Waters compared Lower Merion expenditures and Kevin Buraks asked for comparisons of tax rates of neighboring districts (but this blog knows we need to look at rate times assessed value too).

Finally, there was an interesting aside that the Great Valley School district has asked for support for a County-wide property reassessment.  Not sure what that means, except at the least a correction of imbalances that have built up over the years.

Hopefully, there were other CM readers at the meeting who can amplify and raise things I’ve missed here.

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Ray Clarke Pens Letter to the Editor in Favor of a TESD Earned Income Tax Consideration

Ray Clarke attended the T/E School District’s Earned Income Tax presentation this week and wrote the following Letter to the Editor.  On Monday, October 25 the School Board will decide whether to move forward with a May referendum on the EIT. As Ray explains, the school district will not be able to move forward with an EIT unless it receives the vote of the residents.  I hope that the School Board members will vote on Monday to continue the process . . . it’s important that residents have the opportunity to participate with their vote in May.

Pro-TESD EIT

To the Editor:

Next Monday, Oct. 25, the Tredyffrin/Easttown School Board will take a vote that is critical to the financial prospects of the district and its residents: should it go forward with consideration of an Earned Income Tax (EIT) as one tool to fill the looming budget gap? Last night (Oct. 18) the board held an excellent, well-attended information session explaining the tax and its implementation, and I encourage all residents to watch the broadcast (times on the TESD Web site, www.tesd.k12.pa.us) and then make their views known to the board.

School-district expenses are continuing their inexorable rise, fueled by compensation costs: contracted salary increases, health-care costs and pension costs. The official projection for 2011-12 is for a $7-million gap with extremely favorable assumptions for investment income and transfer taxes risking another $2 million. Last year T/E cut some $6 million in expenses, drew down its Fund Balance reserves and contained its property-tax increase to the Act 1 limit of 2.9 percent. This year the options are more limited. Salaries can only be reduced through attrition, even if programs are cut. Supplies expenses are already back to 2008-9 levels. Real-estate assessments are being appealed at record rates. The state cap on property-tax increases is worth only $1.2 million.

An EIT would be one way to limit the pain for taxpayers, 40 percent of whom already pay such a tax to the municipality in which they work. This money (perhaps as much as $6 million) would come back to benefit the district. The tax is low-cost to collect, diversifies the tax base away from dependence on the property market and would not, by definition, impact those who have lost their jobs. Ninety-five percent of jurisdictions in the state have an EIT: those that do not are mostly clustered around Philadelphia. This is a legacy of the days when taxes paid in the city would not benefit the taxing locality; now there is the potential for gaming revenues to fill that gap and directly offset property taxes if there is a local EIT.

The school district cannot implement an EIT without approval from residents voting in the primary next May. The process to put the question on the ballot requires a – non-binding – notice to the townships of the intent to put the question on the ballot. This is the reason for next week’s board vote.

Many unknowns remain. In particular, would the townships jump on the coattails and claim the 50/50 split of the revenue to which they are entitled? How much can expenses be cut? What is the best-case budget gap? How large would the property-tax increase have to be absent an EIT, and would that increase have to be put to voter referendum? What would the EIT rate be and how much money would it raise? What would be the likely property-tax offset, if any?

It’s important that the school board vote to continue to explore these questions, and allow the voters to make their voice heard next May.

Raymond F. Clarke, Malvern

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T/E School Board Holds Public Informational Meeting Tonight on Earned Income Tax (EIT)

As the T/E School District begins the budget development process for 2011-2012, a budget balancing strategy from last year was to determine the effect an earned income tax (EIT) would have on the school district and its residents. Tonight (7:30 – 9:00 PM, Conestoga High School auditorium) is an informational presentation from a representative from the  Pennsylvania Economy League. 

The School Board will not make a decision tonight; in regards to an EIT; the session is strictly informational.  Again, I applaud the efforts of the School Board in their willingness to disseminate the EIT information in a transparent, public manner. This public meeting tonight is a good first step — educating the School Board and the community on EIT so an informed decision can be made at a later date.

On the subject of the School Board, the following letter came across my desk today from the president-CEO of the nonprofit research and educational group, Commonwealth Foundation.  There are some harsh words for the teacher unions. With many of the local teacher contracts up for negotiations, it is going to be interesting to see how wide-spread the negativity towards teacher unions is and how it will affect the process.

Dear Commonwealth Foundation Friends:

Support for school choice is becoming more and more bipartisan, as both sides of the ideological aisle begin to realize that maybe—just maybe—the teachers unions have their own agenda, and that ensuring the best possible education for our kids may not be their first priority.

In last Monday’s update, I mentioned that I was scheduled to testify that Wednesday before a Senate Education Committee hearing on the future of school choice and opportunity scholarships. It was quite an experience: an all-day free-for-all that included a remarkable exchange between Senator Andrew Dinniman, the Democratic Chairman of the committee, and a Pennsylvania State Education Association (PSEA) representative, whom Sen. Dinniman sharply criticized for frustrating committee efforts to meet to discuss reform measures. Sen. Dinniman event went so as to wonder alond whether PSEA’s commitment to students is just “window dressing.”

We’ve known all along that teacher union bosses care first and foremost about one thing: preserving their own taxpayer-funded perks and cushy pensions, while at the same time making sure that they are never made to justify any of it. Meanwhile, the poorest and most vulnerable of our kids are being warehoused in failing schools, while these well-paid union reps stand at the schoolhouse door, blocking any reform that might make a real difference in the lives and futures of these kids. It’s outrageous.

We know that whoever wins next month’s gubernatorial campaign, our next governor will be sympathetic to the issue of choice in education. Though we may be getting a friendlier and more receptive set of ears in the Governor’s Mansion come January, this debate is by no means over. Any measures to reform our schools will be seen as a threat to the teachers unions and to the entrenched bureaucrats whose very careers and livelihoods depend on maintaining the status quo. We’re going to keep up the good fight. Together, we will work to ensure that every child in the Commonwealth has access to a safe, top-notch education, regardless of his or her family income, or the zip code in which he or she happens to live!

Fighting for Your Freedom,

Matthew J. Brouillette
President & CEO

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Tredyffrin-Easttown School District’s Finance Committee . . . Notes from Ray Clarke

Last night’s TESD Finance Committee Meeting was important.  We learned through the following notes of Ray Clarke that the district is facing as much as an $8.5 million funding gap for 2011-12.  Much discussion on how to prepare for this looming budget gap . . . imposing an Earned Income Tax, increase in property taxes, educational program and staffing cuts?  The meeting last night was the precursor to next week’s independent, public discussion of Earned Income Tax, what is it, how would it work, who will it affect – there is much misinformation on the subject of EIT and looking forward to the presentation of October 18.

I agree with Ray, wouldn’t we all like to know how our state house candidates would suggest funding the school district’s looming muli-million dollar funding gap?  My guess is that Paul Drucker and Warren Kampf will remain mum on the subject . . . viewing that any ‘discussion’ of imposing an Earned Income Tax, an increase property taxes or cutting of programs would be the kiss of death 3 weeks before Election Day!

Here are Ray’s notes from last night – thank you Ray!

Update from last night’s TESD Finance Committee Meeting:

My own selection of highlights.

Next year’s $7 million gap looms large (this year seems under control). Expenses are pretty much locked in: contracted salary increases and no option to save costs through program changes unless through staff attrition. Administration is revisiting the strategies from last year, of course. On the Revenue side, there are a couple of built-in threats:

  • $1 million of investment earnings based on a 2% return when the current investments are earning less than 0.5%. Gap at least $0.5 million
  • $2.7 million of transfer taxes based on the rolling average formula, but the estimate for this year is $1 million less than that.

So, how to fill a gap that may be as high as $8.5 million? The Act 1 property tax increase is set at 1.4% ($1.2 million), and exceptions if approved would be roughly $1.6 million – a total property tax increase (unless a higher one was approved by voters) of 3.2%. Still $4 million short of today’s base projected expenses.

Key questions:

  • How much of the gap can be closed through another round of expense reductions? The administration believes that the well is running dry. A young teacher corps (no built in halving of salaries or program changes as older teachers retire), and items like supplies already cut back to 2008/9 levels.
  • Is an EIT an alternative on the revenue side? Bring back to T/E the $4 million (my guess) being paid to other townships? Maybe link that with a cap on property taxes?

There are many questions about the EIT, of course. Hopefully next Monday’s meeting (at Conestoga HS) will help answer them. The Finance Committee (rightly in my opinion) is designing this as an information session – with presentations about the tax, the financial impacts and the process – NOT an advocacy session. The place for that will be the Board Meeting the following week when the decision is made on whether to give non-binding notice to the Townships of the intention to put an EIT on next year’s ballot. Hopefully the process at the meeting will allow for questions of data clarification, but not opinions.

So if the EIT does get all the way to the ballot, the choices would get complicated. (That is hopefully what the session will explain). For example, voters may have to approve/reject a property tax increase of say 8%, approve/reject an EIT of say 1%, or if neither then we’ll get a property tax increase of 3.2% and withdrawal from the Fund Balance. As I have stated here before, I’m an advocate of the EIT solution (after rigorous examination of expense options), for many reasons.

For those who believe that these choices represent too little say on what is actually spent to educate our children, it was suggested that our state representatives have an important role to play.

  • Should a local district be able to adjust expenses to levels it can afford? How many state mandates are appropriate?
  • How can the pension problem be resolved?
  • Wouldn’t it be nice if Drucker and Kampf could debate these issues?
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Important Tredyffrin-Easttown School District Meetings . . . Includes Earned Income Tax (EIT) Discussion

For many residents, the upcoming election on November 2nd has captured your attention but there is interesting news from the T/E School Board that should not be missed.  A couple of important School Board meetings — tomorrow’s Finance Committee Meeting at 7:30 PM at the high school and the following Monday, October 18, an EIT Information session.

Topics included on the agenda for the Finance Committee Meeting:

  • Projection Model
  • Capital Sources and Uses
  • 2011-2012 Budget Calendar
  • Earned Income Tax
  • Print Shop and Printing Costs
  • Fund Balance Designation – information about the $6M accrual for untaken sick/vacation entitlement

The Finance Committee will be setting the stage for the following week’s special presentation on the EIT. 

I applaud those School Board members responsible for the October 18th public Earned Income Tax presentation.  The School Board is bringing in a third-party, a representative from the Pennsylvania Economy League to provide information about the implementation and effect of an EIT. 

This is an important meeting because the School Board will make a decision at its October 25th meeting about whether to advise the Townships of its intent to place an EIT on next May’s ballot as a voter referendum.  This notice is non-binding, and would allow the Board, the Townships and community time to fully consider the matter.

We understand that the School Board represents us, the residents.  If you do not want the School Board members to make decisions in a vacuum, than I think more of the community needs to be engaged.  There are hard decisions facing the school district in the 2011-12 school year. How do you want the Board to fund the ever-increasing deficit and the ballooning pension situation . . . increase your property taxes, cut educational programs in the district, impose an EIT?   Leaving the situation as a ‘status quo’ is not an option.  I am 100% supportive of exploring all options and democratically deciding on the best option.  Before anyone jumps in and says no one wants an EIT — and that previously the public was overwhelmingly opposed to it, we need to recognize that our options are becoming increasingly more limited.  Would you prefer a large property tax increase?  If you take an EIT and property tax increase off the table, . . . what’s left?  Educational program and staffing cuts?  Is this the answer?

We may be seeing the tip of the iceberg as more and more of the school districts are facing similar economic challenges.  Methacton School District is set to go on strike Friday, October 15.  Teachers in that Montgomery County school district have been working without a contract for over a year (contract expired June 2009).  Although wages is the main issue, other contract differences include medical premiums, the length of the work year, and the payment of postretirement medical benefits. Methacton’s School Board accepted the findings of a nonbinding fact-finder’s report this fall; but the Methacton Education Association, the teachers union, rejected it. 

I think that the TESD teachers contract is up in 2012. (Please correct me if I’m wrong).  It is going to be interesting to see if the teacher contract negotiations of Lower Merion, Radnor and Great Valley will influence our district.  The current TESD teachers contract allows for a 5% yearly increase in wages, correct?  With several School Board members terms up in 2011, it is going to be interesting to see who will decide to stay and seek re-election.  With teacher contract negotiations and the pension situation, could be a challenging 2012 for School Board members.

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Tredyffrin’s Financial Workshop . . . How to Close 2011 Budget Gaps

This Saturday, September 18, 8:30 AM at the township building, there will be a public Board of Supervisors financial workshop.  The agenda includes:

  • 2010 Review
  • 2010 year-to-date revenue/expense review and end-of-year projection – Tim Klarich, Finance Director
  •  Budget Advisory Working Group implementation update – Mimi Gleason, Township Manager
  • Five-Year Capital Plan (2011 – 2015) – Mimi Gleason, Township Manager
  • Public input about priorities for 2011 budget

We know from the TESD finance committee that the school board is planning a public meeting to discuss an EIT in October.  How does the township intend to address what could be a looming 2011 financial deficit in the township budget?  Hold the line on a tax increase because it’s election year?  Or, as the supervisors did last year, will the decision be to continue to cut jobs and services.

Is it possible that the same supervisors who cut the fire funding in the 2010 budget will restore the fire funding in the 2011 budget?  Can the township function with further cuts?  Is it possible that the band-aid solutions of 2010 will continue to work in 2011?  Perhaps the new finance director will offer some creative approaches to cost reduction. At least one of the newly elected supervisors ran on the platform not to raise taxes . . . the 2011 budget will be her first to review.  I look forward to her budget analysis and recommendations.

Devon resident Bill Bellew offered the following letter to the supervisors that appears in this week’s Main Line Suburban newspaper:

Message for Tredyffrin board

To the Editor:

The following letter was delivered to the Tredyffrin Township Board of Supervisors.

Ladies and Gentlemen:

On Sept. 18 you are conducting an open meeting for financial planning as you put together the 2011 budget for Tredyffrin Township. I do not envy you the task at hand as more potential cuts appear to be coming.

The stepping-off point for 2011 is the removal from the Sewer Budget of anything to do with streetlights and signage. Before I go another word: this has a tax-increase impact, and some politicians do not like to say they raise taxes. Well, for a number of years this has worked and we who pay into the sewer fund have borne the brunt of “no tax increases.” Once you get the streetlights/signage line item out for all to see, then you can do real budget preparation.

I have paid into the sewer fund each year since it was first established. The fee hardly ever changed since the ’80s until recently because it was well planned up front. That changed “x” number of years ago, about the time the board decided to put streetlights and signage in the sewer-fund budget. It has gone up and down a few times this decade.

The change in the sewer budget is needed for two reasons: first, lights and street signs have absolutely nothing to do with sewers; and second, only those hooked up to the sewers are paying for lights and signs for every household in the township. For sure, everyone north of the turnpike is not hooked up and that is not of the residents’ doing but rather the BOS.

Our sewer fund stipulates that any dollars collected for the fund can’t be transferred to another budget item. The fund is meant to provide the reserves necessary to keep the sewer infrastructure strong year after year. This year’s Board of Supervisors needs to make a resolution to return the fund to its original state of sewer-related items only.

Start with this, and then deal with the consequences of a tax increase. Try this on: return the sewer fees to the original amount and offset it with a tax increase if necessary. You did the opposite last year, so why not make it right this year?

Sincerely

William F. Bellew, Devon

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As We Enter 3rd Quarter of 2010 . . . Where Does the Township Stand Financially? Have 2011 Budget Discussions Started?

Back on December 13th, I wrote of the need for residents to fully understand Earned Income Tax (EIT).  We are now in the 3rd quarter of 2010, and there is evidence that the 2011 township budget is going to face even greater challenges than this year’s budget.  I went back and found the post; below is an excerpt.  Nearly seven months later, I think it is important to re-visit the discussion. 

Although some Community Matters readers may disagree, I continue to believe that an open, honest discussion with the public of all revenue sources needs to be an integral part of our local government. We can not afford to wait until November to begin the 2011 budget discussions.

At times misunderstood when campaigning, I often suggested that the township needed to explore Earned Income Tax (EIT) as a possible revenue source.  There was (and continues to be) a lot of inaccurate information circulating about Earned Income Tax.  An example of misinformation occurred at the last Board of Supervisor Meeting, when Supervisor Chair Warren Kampf indicated that those individuals who lost their jobs would pay Earned Income Tax (if Tredyffrin were to have an EIT).  I hope that Mr. Kampf did not intentionally try to confuse the public with his words;  the fact is that individuals receiving unemployment benefits would not pay Earned Income Tax; unemployment benefits are not subject to EIT.

I thought it might be useful to list examples of income which are not subject to Earned Income Tax:

  • Retirement Pensions
  • Disability Payments
  • Active Military Pay
  • Unemployment Compensation
  • Insurance Proceeds (non-business)
  • Workmen’s Compensation  
  • Bequests
  • Stock Dividends (non-business)
  • Gifts/Lottery Winnings
  • Social Security
  • Interest (non-business)
  • Military Bonuses

Earned Income Tax is based on gross wages, salaries, commissions and other earned compensation. As stated numerous times, approximately $3 million is being paid to other municipalities by Tredyffrin residents.  If an EIT were in place, this revenue would return to the township.  Dave Brill, Township Finance Director, has offered that the potential township revenue could be as high as $8 million (should Earned Income Tax be instituted). 

Assuming that we get through the township budget discussion on December 21 with the proposed draft budget more or less intact, I still contend that the 2010 budget is nothing more than a Band-Aid solution to a far greater financial problem.  I believe that the township will limp along through 2010 with the budget in place.  However, without financial foresight, this time next year the township will be faced with a far greater problem than the reinstatement of $20K to the Fire Department.  The 3 new supervisors all campaigned (and were elected) on the ‘no new taxes’ mantra and they will probably take office on January 4 with that promise intact.  However,  it doesn’t take my London School of Economics education to believe that their promise will be short-lived.  Financially the township is in a very precarious financial situation and we are going to witness firsthand the result of shortsighted financial planning.

I know that this posting of Earned Income Tax discussion will bring opposing comments, and I actually encourage the dialogue.  Tredyffrin’s 2006 Tax Study Commission and voter referendum overwhelmingly were against imposing an EIT.  Warding off that particular argument, clearly 2010 can not possibly be compared economically to 2006; it is a vastly different financial climate facing this township.  I may have been one of the voters in 2006 who opposed an EIT; believing that the township at that point did not have severe financial needs to warrant that taxation approach.  However, if in 2009 this township’s annual budget of $37 million can not fund $20K to our firefighters, something is dramatically different in this current picture.  Each and every taxpayer needs to take a careful look at the proposed 2010 township budget — I believe the future is going to require more than simply tightening our belts as has been suggested by some of our township leaders, as a response to our economic problems!

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