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No property taxes for education funding? Not so fast, says school board

By Dan Miller, danmiller@pressandjournal.com
Posted 3/7/17

Middletown Area School Board has come out strongly against proposed state legislation that seeks to relieve Pennsylvanians of the burden of property tax to fund schools.The board voted 9-0 during its …

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No property taxes for education funding? Not so fast, says school board

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Middletown Area School Board has come out strongly against proposed state legislation that seeks to relieve Pennsylvanians of the burden of property tax to fund schools.
The board voted 9-0 during its Feb. 27 meeting to pass a resolution opposing Senate Bill 76.
The resolution says that the name of the legislation — the Property Tax Independence Act — is misleading, because while it would eliminate most of the property tax imposed by school districts, Senate Bill 76 would leave untouched the property tax levied by municipalities and counties.
The school district contends that most residents would pay more in taxes if the legislation passes, because of increases in the personal income and sales tax levies being used to make up for the lost revenue from reducing the property tax.
“We estimate that the impact to the average taxpayer ranges from an increased tax burden of just under $100 to a benefit of less than $20,” Superintendent Lori Suski and district Chief Financial Officer David Franklin said in a letter that was sent to state Sen. Mike Folmer, who is a supporter of Senate Bill 76.
Folmer and other supporters could not get Senate Bill 76 passed in 2016. The bill’s prime sponsor, state Sen. David Argall, plans to re-introduce the bill sometime this session, a staff person with Argall’s office told the Press & Journal.
The legislation would reduce the amount of property tax school districts levy by increasing the state personal income tax from 3.07 percent to 4.95 percent.
The state sales tax would increase from 6 to 7 percent, and the list of items subject to the state sales tax would be expanded to include some food items, clothing items less than $50, personal hygiene products, diapers, textbooks, caskets, public transportation, theater admission, services for buildings and homes, veterinary services, day care, haircuts, non-tuition housing charges, and funeral home services.
School districts would retain 25 percent of the property tax millage that they now levy, in order to cover existing debt.

Folmer still supports it

Folmer on Friday, March 3 told the Press & Journal that the school board resolution and letter do not change his belief that most taxpayers would benefit because they would be paying less in taxes overall.
“Shifting from one tax to another results in different impacts on taxpayers,” Folmer wrote in a June 24, 2016 column on Senate Bill 76. “To calculate how the proposed SB 76 changes would impact you, compare what you now pay in school property taxes to what you would need to spend under an expanded sales tax and a higher (Personal Income Tax). Increasing the sales tax to 7 percent and expanding its base would mean you would need to spend $14,285.71 in newly taxable items for each $1,000 you now pay in school property taxes before you would be a net ‘loser.’”
The district’s letter to Folmer lists a host of other objections. The district contends that the biggest losers in Senate Bill 76 would be renters. In the borough of Middletown, close to 50 percent of all housing is occupied by renters.
“Renters will pay the increased personal income tax and the increased/expanded sales tax. However, renters will likely receive no benefit from reduced real estate taxes since landlords do not have a mandate to decrease rents,” the district said.
But SB 76 would give renters “more incentive” to buy a home because they wouldn’t have to worry about paying so much in property taxes, said Fred Sembach, Folmer’s chief of staff.
“Now you have a big outlay to pay (for) a home and then you have to pay the taxes. One big chunk that is no longer there is the school property taxes” which by far account for the biggest share of property taxes levied by local governments, Sembach said.
Folmer added that the assessment system that now determines how much a homeowner pays in property taxes is unfair. In his view, the assessment is a “guesstimate” that usually exceeds actual market value of a home.
Moreover, when large corporations succeed in getting a reduced assessment by going to court, this puts more pressure on all other property owners to make up the difference, Folmer said.
That the legislation allows districts to keep 25 percent of their property tax to cover existing debt is a concession that was made by advocates of SB 76. Folmer and Sembach both find it ironic that school districts are now using that concession to attack the legislation as “misleading.”

Other objections
Among the school district’s other objections, the district says that SB 76 will eliminate local control over when revenue comes in. That would place school districts fully at the mercy of a state government that often can’t get its own budget passed on time.
Furthermore, the legislation would force school districts to cut spending on education in order to maintain facilities, would freeze in place the current system of inequity when it comes to the distribution of state money to local school districts, and would result in large amounts of the money from the newly increased personal income tax and sales tax going to six counties in Pennsylvania — those including and surrounding Philadelphia and Pittsburgh.
These impacts of the legislation are “scary” to contemplate, board member Darnell Montgomery said after voting for the resolution.
But Folmer said school districts would have the option of increasing local revenue by imposing a local personal income tax or earned income tax. But district voters would have to approve that in referendum — the way it’s done in most other states, Folmer said.
Critics have labeled advocates of SB 76 as “anti-education” but “we are pro-taxpayer,” Sembach said. He contends that concerns over local control and cash flow are “technical issues” that can be worked out, if school districts are sincerely interested in dialogue.
He and Folmer both say advocates of SB 76 have been asking school districts and their supporting organizations to put in writing suggested changes to the legislation to address these issues.
They’re still waiting, said Folmer.
“They just don’t want it to happen,” Folmer said of opponents to SB 76. “I feel like I am in the movie ‘Groundhog Day’ because it’s the same issues year in and year out. We can talk about it all day long but at the end of the day the status quo is not working and eventually we are going to run out of other people’s money.”

Citizens speak up?

Proposals such as freezing property taxes for senior citizens aren’t the answer because they shrink the base and mean all other property owners have to make up the difference, Folmer said. “We’ve got to bring how we fund our schools into the 21st century.”
Copies of the board resolution are going to Folmer, state Sen. John DiSanto, and to state Rep. Tom Mehaffie, said Linda Mehaffie, president of Middletown Area School Board.
The school board is also urging district residents contact their legislators directly, regarding SB 76.
“This is really, really important,” Linda Mehaffie said.
“The legislators need to hear from individual citizens on this,” said fellow board member David John.