Bell Pans New Tax Formula For School Funding
WESTFALL — State funding for schools may undergo a radically new formula if the Property Tax Independence Act gets out of committee is passed by the General Assembly. Delaware Valley School District Superintendent John Bell gave a detailed presentation on that at last week's school board meeting and explained why he opposes the bill. He urged board members, district employees and concerned residents to contact local legislators and the state government to express their opinion.
Bell said information will be carried on the district website and he may schedule an informational forum for residents and business owners. If it clears committee and is passed in the Senate and then in the House of Representatives and is signed off by Gov. Thomas Wolf, the bill is touted as an end to the existing school property tax system that raises $14 billion yearly."It's an election year so if this happens, it will happen fast," Bell said of the bill's possible passage. The new bill would subsidize school operating costs by raising the income tax from 3.07 percent to 4.95 percent and increase the state sales tax from 6 percent to 7 percent. There would be more items falling under the state sales tax, including groceries, clothing, beer, liquor and non-prescription drugs as well as financial, funeral and salon services.
Bell said that many might think this bill would end local school property taxes, but he said school property taxes would remain in force for districts carrying debt from construction and from other structural expenses. When those construction costs are paid off, the local school property tax would be dropped. Under the new bill, 488 school districts in the state would continue to pay some school property taxes, depending on the district's debt load. For Delaware Valley, that revised school property tax rate to pay off debt would amount to 8 mills, a comparatively small figure to the current 108 mills, said Bell. The debt, which would include $10 million bonds purchased this month to refurbish the Career and Technical Education center, would be paid off in 15 years. Bell pointed out that the district has not had a tax increase in seven of the last 10 years.
For other districts carrying much higher debt loads near or into nine figures, those local school property taxes could reach half the current amount. About 43 percent of school districts would continue to charge at least 20 percent or more of current school property taxes. Some 24 districts would maintain 50 percent or more of their current school property taxes. Add that to higher income taxes and a higher state sales tax and residents with moderate to low income will get squeezed tighter financially, said Bell. "People who can afford to pay more are fine. People who can't pay more will be disproportionately hurt," said board Vice Chairman Jack O'Leary. And the impact carries over to the schools that would include Delaware Valley.
"There will be a lot of belt tightening all around," Bell said. "This bill would compress the smaller districts."
The only ones that would benefit, said Bell, are businesses and subsequent new business growth that would not be encumbered by high school taxes. Bell pointed out that Michigan is the only other state to have used this paradigm and adopted it 20 years ago but has abandoned it to return to its previous formula. Bell said that, unlike local school tax collections that go strictly to that school district, this proposal would funnel revenue back to the state for it to divide up for the districts. Each district would get a yearly Cost of Living adjustment but if a district needs additional funding, it would need approval from a referendum vote by local residents.
"That money goes to the state so a lot of that money will go to Philadelphia (schools)," said school board Chairman Pam Lutfy. Board members said big city school districts would benefit the most. Bell said nearly 60 percent of the school districts around the state would send more money to Harrisburg than the money they get back in tax relief... for complete story, get this week's issue.