Video: Don’t Let Property Tax Plan Derail PA Schools

By Chris Lilienthal, Third and State

The future of Pennsylvania schools – and the quality of education every child receives – is at stake in a property tax proposal in Harrisburg.

The plan to swap property taxes for higher state levies will drain billions from Pennsylvania classrooms within a few years. Over time, it increases funding inequities across districts and makes it harder for future graduates to compete in a 21st century job market.

There is a better way. Watch our new whiteboard video to see how we can strengthen our schools, make funding more equitable, and address property tax concerns. Then share the video with your friends on Facebook and Twitter.

Video: Don't Let Property Tax Plan Derail PA Schools

Good schools are vital to every community and its economy. Yet the real problem, as our video explains, is that Pennsylvania trails most other states when it comes to state funding for public schools. By investing more state dollars in education, Pennsylvania can improve its schools and ease the pressure on property taxes.

In other words, we can have good schools AND help people having trouble paying their property taxes.

What’s At Stake for PA Schools in Property Tax Debate?

Michael Wood, Third and State

The latest proposal to eliminate property taxes in Pennsylvania would leave school districts with $2.6 billion less in overall funding within five years, according to an analysis from the Pennsylvania Independent Fiscal Office. Matthew Knittel of the IFO presented the findings during a Pennsylvania Senate Finance Committee hearing Tuesday.

The plan – proposed in both HB 76 and SB 76 – would swap school property taxes for higher state income and sales taxes, largely on individuals. The IFO, which did not take a position on the bill, compared what could be expected from the new mix of state funding to projected property tax revenue over time and tallied the fiscal impact on school districts and state government.

Much like with previous versions of this property tax plan, the numbers don’t add up. The IFO projects school districts would receive $112 million less in funding than they would have received from property taxes in 2014-15, which grows to $2.6 billion by 2018-19

The reason is fairly simple. The bills place an artificial limit (the lower of sales tax growth or rate of inflation) on how much in new income and sales tax dollars go to school districts to replace lost property taxes in future years. This is true even if those state tax collections exceed the caps, as they likely would in most years. The bill does not address how schools are to pay for increasing pension obligations, let alone costs for health care, supplies, or utilities that may increase in price faster than inflation.

Like all tax swaps, this one picks winners and losers – with Pennsylvania’s school students and the state’s future among the biggest losers.

Corporations, which pay about 30% of all property taxes and are among the largest taxpayers in many districts, would come out as big winners. Their school property taxes would be eliminated, but unlike individuals or small businesses, corporations would pay no more in state taxes. Instead, their share of school funding would be shifted to individuals and small business owners who pay income taxes and consumers who pay sales tax. (Many goods and services purchased by businesses would remain exempt from the state sales tax under this plan).

Renters, including many seniors, would see higher sales tax and income tax bills, but little “relief” in the form of lower rent payments. For low-income families, this plan is Robin Hood in reverse, with poor renters paying higher taxes to subsidize tax cuts for wealthy property owners.

For non-elderly homeowners, it’s a mixed bag. Homeowners would see their local property taxes decline, but their state income taxes would rise. Many homeowners would also see their federal taxes increase, as they would lose a deduction for paying property taxes.

Many school districts have already adopted earned income taxes to reduce dependence on property taxes. Taxpayers in those districts would pay increased state taxes to subsidize property tax cuts in other parts of the state.

The change could make houses in Pennsylvania less affordable in the future. When California adopted property tax limits, it saw housing prices skyrocket. 

Many seniors and people with medical conditions would have to pay sales tax on an array of health care goods and services.

Finally, schools would receive much less than they need to help students succeed. Good schools are the lifeblood of a community and its economy. If we shortchange our schools, how will Pennsylvania ever prepare better workers for tomorrow’s economy or attract and retain businesses that need skilled workers?

Paying property taxes are a real problem for some homeowners and in some specific areas of the state. We should address those concerns with targeted reforms rather than a one-size-fits-all approach that has been adopted nowhere else in the nation. Some of the reform efforts, like Act 1 of 2006, have helped moderate property tax growth – and the IFO report reflects that. Many districts have adopted earned income taxes to lessen reliance on property taxes.

The most effective way to ease Pennsylvania’s over-reliance on local sources for school funding is to increase the state’s support of education. Pennsylvania trails most states in state funding for schools, creating tremendous inequities across districts. A good education should not depend on where a child lives. The state needs to make – and keep – a commitment to provide a larger share of school funding. That is the key to a healthier economy and a better Pennsylvania.

Must Reads: State of The Union, Stimulus and Austerity Economics PA Style

A blog post by Mark Price, originally published at Third and State.

Tonight President Obama will deliver his State of the Union Address to Congress. We are expecting the President to recommend an extension through the end of 2012 of extended unemployment insurance benefits and the payroll tax credit. It looks as though a major theme in the address – besides the catch phrase “built to last” – will be conventional policies aimed at reducing inequality, such as increased spending/tax credits for education and training.

Education and training are important and fruitful means of reducing inequality, but they fall well short of what’s needed to reduce the degree of inequality we now face.  A more forceful step in the direction of reducing inequality would include raising the minimum wage and making it easier for workers to form and join unions. We don’t expect to hear the President call for either of those changes.

The President will propose paying for his new initiatives with higher taxes on wealthy households. As with education and training, restoring some sense of fairness to the tax code is a laudable goal but longer-lasting reductions in inequality will only come from policies that allow the pre-tax wages of more Americans to rise as the size and wealth of our economy grows.

Manufacturing, energy, job training and middle-class growth will be the cornerstones of President Barack Obama’s speech tonight as he takes to the nation’s grandest political stage for the annual address on the state of the union, according to senior advisers.

We are slowly getting details of a settlement of allegations of fraud by banks during the housing bubble. Dean Baker notes this morning that the deal is said to include immunity from prosecution for banking executives in exchange for mortgage relief paid for by investors (not the banks). It’s good to be a banker.

The Philadelphia Inquirer reports this morning that the association that represents construction contractors who mainly compete for work in the non-residential construction sector is expecting essentially no change in the number of workers they will employ in 2012. Non-residential construction makes up roughly two-thirds of all construction employment in Pennsylvania. Also of note in the article: 62% of Pennsylvania contractors surveyed reported relying on some stimulus-related work. Remember that factoid next time you hear someone claim stimulus spending had no effect on the economy.

Construction employment will go up – very slightly – in 2012, contractors predicted in a survey released Monday by the Associated General Contractors of America…

The survey notes that many contractors relied on stimulus-funding projects over the past years, but few expect to perform much stimulus-funded work in 2012.

In Pennsylvania, for example, 62 percent of those surveyed had stimulus work, with most of them assigning the majority of their workers to those projects. But in 2012, only one in five expects stimulus work.

More news of property tax hikes, teacher layoffs and larger class sizes – this time out of Dauphin County.

The Central Dauphin School Board Monday night approved a $155.4 million preliminary budget for 2012-13 that could mean higher taxes, larger class sizes or furloughs of as many as 50 district employees.

The Patriot-News Editorial Board notes that the asset tests for food stamps proposed by the Corbett administration are unwise and likely to punish many rural families.

Creating an asset test for food stamps in Pennsylvania is the wrong approach…

Given the economic woes many families are facing with at least one parent – sometimes both – out of a job, the car rule hardly makes sense. This is especially true in rural parts of the state. Reliable transportation is critical to achieving financial independence, and in many families that means parents having two decent cars to drive.

The other issue is the $2,000 limit in savings. Families struggling to get out of poverty are likely to be trying to save money, build up funds to help them pay off bills, make a security deposit on an apartment or catch up on mortgage payments. It makes no sense to compel people to potentially liquidate funds to be able to put food on the table.

Hunger is a problem in our state, and many people rely on food stamps to solve it.

PA Job Growth in 2011 and More Layoffs, Higher Property Taxes in 2012

A blog post by Mark Price, originally published at Third and State.

On Thursday, the Pennsylvania Department of Labor and Industry released data on employment and unemployment in December. Compared to the summer months, the top line numbers were good, with unemployment falling three-tenths of one percent to 7.6% (U.S. rate is 8.5%).

Nonfarm jobs were up 6,500, which is a pretty good number (we need to average 8,000 new jobs a month to get back to full employment in three years). Service-sector job growth in December was atrocious; the sector added just 300 jobs. Most of the month’s job growth was in durable goods, with manufacturing adding 2,600 jobs, construction adding 3,000 and mining adding another 600.

Those 3,000 construction jobs don’t represent a sudden resurgence of the construction industry. As most of you are happily aware, December was quite warm; this meant construction activity in the month was above historical averages which shows up as job growth in the final numbers. The actual trend in construction employment is at best no or very slow growth.

The bottom line is that in the last 12 months, Pennsylvania added 59,200 jobs. That’s fewer jobs than were added from December 2009 to December 2010 (63,900). The primary reason Pennsylvania added fewer jobs in 2011 than it did in 2010 is the loss of 19,800 jobs in the public sector.

Ann Belser at the Pittsburgh Post-Gazette has more on the job numbers.

For Some, Reading Is Hard

A blog post by Mark Price, originally published at Third and State.

Recent commentaries by the Pittsburgh Tribune-Review’s editorial board and the Allegheny Institute in Pittsburgh offer a good lesson for why you should really try to read all the way to the end.

Both offer up critiques of the Keystone Research Center’s recent policy brief detailing the economic impact of public-sector job cuts in Pennsylvania. Here is the Tribune-Review:

What the Keystone researchers don’t say in their report, ‘Public-sector Job Losses Put Brakes on Pennsylvania’s Recovery,’ is that to increase government hiring, the state, school districts and municipalities would have to raise taxes.

The editorial above appears to be based on commentary by the Allegheny Institute which begins:

How to speed job growth in Pennsylvania? According to the latest offering from the Keystone Research Center (KRC), the Commonwealth and local tax levying bodies should raise taxes and hire more employees.

They don’t directly say ‘raise taxes’ but how else can the state, school districts and municipalities already facing budget deficits afford to keep all their employees-never mind hiring more?

Both of these quotes got one small thing correct: we don’t, in fact, call for school districts or municipalities to raise property or income taxes. Our main recommendation is that state policymakers spend more of the state’s revenue surplus. As we explain:

Pennsylvania’s 2011-12 General Fund budget made deep cuts to education and health care while leaving unspent $620 million from a revenue surplus last year and other unused funds. Our best estimate is that the failure to spend that revenue will by itself translate into the loss of 17,714 jobs (including private jobs lost due to the ripple effects of public job cuts) over the course of the 2011-12 fiscal year …

In the last year, Pennsylvania lost 21,000 jobs in the public sector. Some 13,000 of those losses were education-related jobs. Among the 50 states, Pennsylvania experienced the sixth-largest decline in state and local jobs in the last year. The concentration of public-sector job losses in Pennsylvania helps explain why Pennsylvania job growth recently has stalled relative to other states.

Seems the Tribune-Review and the Allegheny Institute missed that. In their defense, we did bury those details on page 3 of the brief.

Read to the end before unleashing your criticism, you say? Who has time for that?

On a serious note, I should add that the best way to limit further local property taxes increases and public-sector layoffs is for Congress to pass a jobs bill that includes additional aid to state and local governments. 

As a special favor to the Tribune-Review and the Allegheny Institute, the CliffsNotes version of our policy recommendations:

Pennsylvania needs a jobs policy that will strengthen the private and public sectors. There is no shortage of practical ideas for how to create jobs. Options include:

  • Spending more of the state’s revenue surplus;
  • Enacting a natural gas drilling tax that supports shared statewide priorities like education as well as the environment and local communities;
  • Maximizing the potential for Marcellus Shale development to create jobs for Pennsylvania workers; and
  • Bond-financing infrastructure, school construction and energy efficiency investments at a time when borrowing and construction costs are both low.

What is missing in Harrisburg (as well as Washington, D.C.) is the political will needed to enact effective policies to create jobs. How many more months of failed austerity economics must Pennsylvanians suffer through before we get a needed change in direction?

Yes, Governor, Texas Levies Property Taxes

A blog post from Michael Wood, originally published on Third and State.

The Patriot-News reports that Governor Corbett, speaking to a meeting of township commissioners Monday, said: “Texas doesn’t have a personal income tax. Texas doesn’t have a property tax. So when we’re talking about taxes, don’t you think we ought to compare apples to apples and oranges to oranges?”

Let me set the record straight: Texas levies property taxes – $40 billion worth in 2009, according to the Texas Comptroller. It is their largest state or local tax – by a lot. The state’s sales tax brings in only about half of the amount it takes in from local property taxes.

I hope the Governor merely misspoke, as he could have meant to say Texas levies no personal income tax (true) or corporate net income tax (also true – but the Lone Star State levies a margins tax on all businesses, and they do it on a combined reporting basis).

Unlike in Pennsylvania, Texas levies property taxes on all property unless officially exempted by law. This includes personal property, business inventories, non-business vehicles, and oil and gas property. Oil and gas assets (which include oil and gas reserves that haven’t been pulled out of the earth) account for 5% of all taxable property in Texas. This equates with more than $2 billion in property tax payments in 2009.

Pennsylvania levies a corporate net income tax, which very few oil and gas corporations pay, in part because of federal tax incentives that lower or erase their state and federal tax bills. Tax data from 2008 showed that 85% of oil and gas corporations that filed corporate net income tax returns paid $0. Many other drillers are structured as limited liability companies or limited partnerships allowing them to pay the much lower personal income tax rate on profits.

In total, oil and gas firms in Pennsylvania paid $38.8 million in 2008 business taxes – including corporate net income, personal income and capital stock and franchise taxes. Patriot-News columnist Heather Long updated some of these figures in a weekend piece. Unlike in Texas, drillers in Pennsylvania paid no local property taxes on gas reserves and no state drilling taxes.

No matter what the Governor says or meant to say, drillers pay much less in taxes in Pennsylvania than they do in Texas.

PA Republicans Looking to Undermine Education Stimulus Package

Pennsylvania House Republicans seem to be of two minds on school property taxes.  While the likes of Rep. Rohrer go about claiming to have a solution but don’t have a bill (sometimes literally) which will do anything but shift the burden from the wealthy to the poor and working stiffs, others are working in Harrisburg to raise your property taxes.

Every unfunded mandate from either Harrisburg or Washington raises your property taxes.  NCLB is a prime example since the GOP only funded it to the tune of 30%.  Guess where the other 70% came from?  Every time education funding is cut from the state or federal government your property taxes increase.  This is a dirty little fact most legislators won’t explain at those tax revolt meetings.  I find it interesting that these almost never include people with children in the public school system.  Property taxes have become a sort of class war between seniors who forget they got a free education and young families looking to insure their children’s futures.

Now the House Republican Caucus is pushing a plan to divert the education funds from the American Recovery & Stimulus Act (ARRA) from their intended purpose.  This will raise your property taxes as sure as the sun will rise in the east.  From the Education Voters PA group:

Federal economic stimulus funds designated for investments in education targeted at improving education and preventing job losses would disappear into the budget under a new political proposal unveiled by the Senate Republican Caucus today.  They presented a 2009-2010 state budget proposal that undermines the Commonwealth’s funding formula. This move would force school districts to increase property taxes, thus counteracting the positive effects of the stimulus funds which – if used appropriately, would help prevent tax increases and maintain needed investments in targeted education reforms.

The General Assembly’s recent efforts have been focused on increasing student achievement and funding Pennsylvania schools more rationally.  This proposed plan seeks to fund other portions of the state budget with these dollars, while school districts’ financial struggles increase.

The federal economic stimulus package – the American Recovery and Reinvestment Act (ARRA) – provides Pennsylvania with $2.6 billion in funds for education over the next two years. $1.6 billion of these dollars comes from the State Fiscal Stabilization Fund, which must be used to support basic education and allows state to use the funds to continue making critical investments in basic education or restore cuts in higher education ($44 million). This proposal rolls back funding to prior year levels, reducing the investment in education by substantially decreasing the state allocation, pushing responsibility to make up needed dollars to the local level.

“We think that policymakers in both parties who believe in responsible and transparent stewardship of this money should step up and call for an accountable, investment-based approach that maintains the state’s progress on funding reform.  The big worry on stimulus money is that it will just be absorbed and it won’t do what we need it to do – that money should be used to provide additional investment in education, not one thing else” said Susan Gobreski, Executive Director of Education Voters PA, and a member of the coalition.

She said: “We have this money that, in many ways, belongs to the next generation and we should spend it carefully, appropriately and on its intended use – the future – not play sleight of hand with these funds.”

PA School Funding Campaign spokesman Tim Allwein said: “Senate Republicans today released a plan that merely shifts responsibility for education from the state to local taxpayers and school districts.  School districts throughout the state are suffering lost revenues and increased costs. This year, more than ever, school districts need state funds to prevent the need to increase the property tax burden on local property owners”

Below is snapshot of school districts across the Commonwealth illustrating the amount of increased property taxes the average household will be forced to pay to make up the difference between fully funding the second year of the Act 61 funding commitment and the cuts proposed in the Senate Republican Caucus plan.