Michael Churchill testified to a group of Senators on March 21, 2016, about a tax reform bill that would affect property tax and how it would be used to fund public schools.
The Public Interest Law Center supports reforming Pennsylvania’s local property tax as used to fund public schools. Pennsylvania’s heavy reliance on such taxes to pay for its schools is unfair to taxpayers and to students.
Only six states depend upon property taxes for school funding to the extent that Pennsylvania does (45% of all K-12 funding). Nationally only 29.9% of funding comes from property taxes. Although the tax burden is low in some districts, it can be four times higher in other districts on property with the same value. Property taxes are not based on ability to pay, and they particularly hurt persons on fixed incomes who may be forced to increase payments or to sacrifice their homes.
It is unfair to children because it causes wide disparities in funding, the largest in the country, from $9,000 per student to $25,000 per student. And it is unfair to children because it yield inadequate amounts to enable students to meet state imposed proficiency standards. The 2007 Costing Out Study showed large numbers of districts need substantial increases in funding; since then state appropriations have increased less than the unfunded increases in pensions and health care costs.
We need to fix the local property tax system, but in a way that does not destroy our educational system. The way to do this is to reduce our dependence upon property taxes—it does not require elimination.
SB76, the bill to eliminate all property taxes, would cripple Pennsylvania’s educational system.
Replacing local money with state money does nothing to end the huge inequalities in funding which currently exist. SB76 locks in the past unfair funding difference by requiring districts which may want to catch up to do so only if approved by a referendum.
Worse, the existing cuts in education would become permanent because there would be no state funding available for increasing educational spending. Currently $12 billion is raised by local property taxes. As SB75 notes, it will require extraordinary increases in Personal Income Tax rates and sales tax rates and coverage to raise this sum to replace existing spending. There clearly will be no fiscal capacity in the state to appropriate additional money to end the inequalities and inadequacies which currently exist. If there is so much trouble finding funding for $400 million this year, how will we do it after spending $12 billion replacing local property taxes.
SB76 also limits any increases in state funding to the growth in sales tax revenues or weekly wage rate growth, factors completely unrelated to educational need or existing state mandates to fund delayed pension costs.
By eliminating taxes on all property SB76 relieves business of any role in supporting schools and increases the amount of revenue necessary to be raised by at least $3 billion. Businesses depend on public schools to provide an educated work force and need to contribute to supporting the schools. Elimination of all property taxes is a very expensive way to provide relief to those families that need it.
Schools need a balanced system of support. The current system is unbalanced, with far too much coming from property owners. But shifting it all to the personal income tax and sales tax is not balanced either. Both Governor Wolf and Republican legislators led by Rep. Saylor had proposals last year which would have reduced homeowners property taxes by an average of 40%, with a cost that ranged from $3.8 billion (Governor Wolf) to $4.5 billion (Rep. Saylor). By utilizing relief directed to homeowners and renters Governor Wolf’s proposal was more efficient in targeting relief to persons affected by high property tax rates. Either proposal would be better than SB 76 and if coupled with increased appropriations distributed via the proposed Basic Education Funding Commission formula would start to reduce the huge spending disparities in the state while also reducing the disparities in local tax burden.