Rough seas ahead

By on February 8, 2017

 School board braces for the drastic impacts of property tax reform

The Warwick School Board got an early glimpse at the challenges facing the upcoming 2017-18 school district budget at its Feb. 7 meeting.

The outlook was more than a bit alarming.

School district business manager Nathan Wertsch likes to find images to depict the outlook of an upcoming budget. This year he opted for six different graphics. There was a chess game, a slippery road sign, an overwhelmed juggler, a storm-tossed ship at sea, a dart board, and a white flag of surrender.

The symbols were meant to convey an uncertain rocky road ahead, requiring juggling and navigation of dangerous seas, with no assurance of success.

Board members looked seriously concerned as they took in the ramifications of proposed property tax reform and the skyrocketing costs of the Pennsylvania State Employees’ Retirement System, known as PSERS.

“Property tax elimination will have a devastating effect on the Warwick School District and schools across the Commonwealth,” Wertsch said.

In past budgets put together by the school district, there have always been uncertainties. The 2017-18 budget will prove to be the most challenging ever because of all the unknowns in the mix.

Superintendent April Hershey commented that the only bright side in the outlook came from Pennsylvania Gov. Tom Wolf’s commitment to increasing funding for K-12 education in the state.

The governor has proposed a state budget that includes $100 million more in basic education funding, with $25 million additional for special education and $75 million in added support for early childhood education.

It’s unlikely that these increases will be enough to close the resource gap for the Warwick School District and other school districts in Pennsylvania.

The proposal to overhaul funding for school districts is a gamble that is making Warwick’s financial planners nervous.

“There is no doubt that property tax reform might be needed, especially in regard to seniors on a fixed income,” Hershey said, adding that this will be uncharted territory.

The proposed legislation calls for reform that would eliminate school district property taxes, except to cover district debt, with 25 percent still levied for Warwick. To cover the gap, there is a proposed increase from 3.07 to 4.95 percent for personal income tax, and a proposed sales and use tax from 6 to 7 percent.

There would be winners and losers in this scenario, Wertsch reported. The winners would be big businesses and corporations, landlords and commercial property owners, delinquent taxpayers, out-of-state property owners and many retired homeowners who would no longer pay property taxes to school districts.

The losers would be renters, working taxpayers, small business owners and public school students. The school districts would lose control of finances, making it unlikely that the elimination of property taxes would be compensated by other tax revenues.

Local taxes would most likely not remain local.

Wertsch went on to explain that the dispersal of the increase in personal income taxes and sales and use taxes would benefit just six counties in Pennsylvania — Allegheny, Berks, Chester, Delaware, Montgomery and Philadelphia.

“Six counties win. The rest lose,” he said, noting that Lancaster County will most likely be on the losing side.

In his report, Wertsch made several key points, including inequity in educational funding, the fact that some residents will continue to pay significant property taxes based on district debt, residents of the poorest school districts will be hit the hardest, taxes will shift from businesses to individuals, and homeowners will lose their income tax deduction for real estate taxes.

In addition, the state will control collective bargaining and caps on debt, which means that repairs and renovations will be put on hold. With plans to update and renovate three schools in the Warwick School District in the near future, updates in HVAC, technology and maintenance may be delayed.

The Warwick School District will be approaching the 2017-18 school year with many unknowns, yet still be required to finalize a budget by June.

A look at Warwick student body numbers over the past 10 years shows a 12.3 percent decline in enrollment from 2007-08 to 2017-18. During that first year, the budget was $52,567,317. The proposed 2017-18 budget it will be $71,333,691.

District salaries have increased from $25,542,021 in 2007-08 to $29,070,926 in 2017-18. PSERS (retirement funding) has had the most startling increase, from $1,774,990 in 2007-08 to $9,460,909 in 2017-18.

Perhaps the most disconcerting aspect of the proposed property tax reform involves school board members themselves.

Based on a report from the Pennsylvania Association of School Business Officials, the elimination of property taxes is likely to result in the total elimination of taxing authorities by locally elected school boards, and ultimately the undercutting of local control.

“As a result, locally elected school board members — individuals locally elected by their communities to make the important decisions, including funding decisions, about how to run and operate the district’s schools — will be rendered useless,” the report states.

Details of the Warwick School District’s February 2017 budget update and the PASBO’s report on the effects of property tax elimination are available on the school district’s website at warwicksd.org under Quick Links and then Budget.

Laura Knowles is a freelance reporter who covers the Warwick School District for the Record Express. She welcomes reader feedback at lknowles21@gmail.com.

Property tax elimination is a wolf in sheep’s clothing

Editor, Record Express,

Our elected officials in Harrisburg plan to introduce legislation to eliminate property taxes. Because property tax is overt and unpopular, this legislation is likely to be cheered and supported by senior citizens and homeowners throughout our community. The elimination of property tax, however, is not the panacea that it appears to be; rather it is a wolf in sheep’s clothing.

Eliminating property tax will not eliminate nor reduce taxes; the truth is that it merely changes how taxes are collected and shifts the burden from one group of taxpayers to another. Currently, property tax in Pennsylvania amounts to $14 billion. To offset the loss of revenue, legislators plan to increase the personal income tax from 3.07 percent to 4.95 percent, increase the sales tax from 6 percent to 7 percent, and expand the higher sales tax to food, clothing, and personal services such as those provided by hair salons, lawn care services, financial services, funeral services, and others. Along with increased state taxes, citizens will pay more federal income tax since there will be no deduction to claim for property tax.

Eliminating property tax also means that corporations and for-profit businesses, which contribute approximately $3 billion in property tax, will be exempt from paying property tax. As they pay less, citizens will be strapped with higher taxes.

Since income and sales tax revenues are controlled by Harrisburg, passage of this legislation eliminates local control and expands state government control. Our local community will be entrusting our state legislature to determine how much money the Warwick School District, and all other districts, may spend on the education of our children. Given the current state budget deficit and the failure to resolve the public pension crisis, it is difficult to have confidence in state government’s financial wherewithal.

Shifting from property tax to higher income and sales tax raises several unanswered questions about how education will be funded. The proposed legislation does not address where education funding will come from during a recession, it does not account for cost increases due to student population growth or demographic changes, it does not resolve the grave spending inequities across the Commonwealth, nor does it ensure that the distribution of education dollars will be free of political favoritism. At first glance, eliminating property tax looks great, but having no plan to equitably and appropriately fund education is dangerous.

It is important to note that eliminating property taxes will likely benefit our senior citizens. It is certainly wrong if senior citizens were to have to leave their homes because of high property taxes. Many senior citizens deserve and need property tax relief, but the solution cannot be at the cost of devouring public education.

There are common sense alternatives. For example, in Massachusetts, senior citizens over the age of 65 and whose property tax exceeds more than 10 percent of their income are eligible for a tax credit. This type of common sense legislation provides the necessary relief for our senior citizens, yet maintains a reliable funding source for education, ensures corporations and for-profit businesses pay their fair share, and prevents broad sweeping tax increases for all citizens.

The legislature can also significantly lower property taxes by passing other common sense measures that reduce the cost of education. The legislature should resolve the pension crisis, fix the broken charter school law, work to control escalating health care costs, address askew collective bargaining laws, and appropriately fund education programs for children with disabilities. These measures will greatly reduce the cost of education, which will result in lower property taxes for all.

I urge you to contact Senator Aument and Representative Mentzer and implore them to develop common sense laws that protect education funding, reduces the cost of public education, and provides the necessary tax relief for our senior citizens. Eliminating property tax may look alluring, but beneath the façade are increased income and sales taxes without a plan to pay for public education. Indeed, it is a wolf in sheep’s clothing.

John GeorgeWarwick Township

Dr. John George is the former superintendent of the Warwick School District and currently serves as Executive Director of the Montgomery County Intermediate Unit.

 

 

 

 

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