Turns out, lawmakers weren’t too keen on giving Pennsylvania the second highest state sales tax rate in the country. And legislators didn’t like Gov. Wolf’s ideas for wealth redistribution via “property tax relief.”
This is the fourth tax hike proposal put forward by Gov. Wolf that has fallen apart, gaining little support even from his own party.
The governor, and some lawmakers, must recognize the simple reality: No one wants to pay more in taxes.
Before any more is asked of taxpayers, here's how lawmakers should prioritize:
RELATED : TAXES & SPENDING, PENNSYLVANIA STATE BUDGET, TAXATION
Gov. Wolf is committed to protecting the government's monopoly on the sale of wine and liquor. When talking to reporters this past Monday, the governor’s spokesman said of Wolf “The [liquor privatization] bill he vetoed earlier this year is not something that he'd accept."
The governor’s position is head-scratching given the shortcomings of the state-run system. Perhaps the governor opposes liquor liberty because he isn’t privy to the liquor monopoly’s many failings. So, for the benefit of Gov. Wolf, and in the spirit of David Letterman, here are the top 10 reasons why state government should exit the booze business:
10.) It would end state government's conflict of interest.
7.) The agency's “modernization” efforts have failed miserably. Remember the failed wine kiosks?
6.) Opening up the market to competition will lead to lower liquor prices.
5.) The government monopoly is driving border bleed, costing the state at least $180 million in sales.
4.) The PLCB makes life difficult for entrepreneurs trying to sell their products in Pennsylvania.
3.) The public overwhelming favors privatization.
2.) The liquor control board is more than $238 million in the red.
1.) The PLCB is a corrupt, scandal-plagued agency.
RELATED : LIQUOR STORE PRIVATIZATION
As proposals to reduce, reform, or (mostly) eliminate school property taxes continue to be debated in Harrisburg, many readers have asked about our position on a dollar-for-dollar tax shift, which would redistribute the school tax burden in Pennsylvania.
We remain concerned that proposals to shift the tax burden without addressing spending levels will result in little relief to Pennsylvania families.
Pennsylvania spends significantly more per student on public schools than the national average. Moreover, increased spending has not resulted in improvement in academic performance. The "state share," on a per-student basis, is close to the national average. Calls for increased education spending tend to ignore these basic facts.
To be clear, CF opposes tax shifting schemes that result in net tax hikes, such as those found in Gov. Wolf's original budget, or the proposed "budget framework."
Revenue neutral, or dollar-for-dollar tax shifting proposals typically ask the state to contribute more, or all, public school funding in exchange for property tax reduction or elimination.Tax shifting—even of the dollar-for-dollar variety—will not solve structural problems with school spending. Here are our primary concerns:
- Tax shifting does not address overspending in public schools, which is driven by pensions, mandates, union contracts and lobbying, and a government monopoly over the school system.
- Tax shifting creates winners and losers. This is true among individuals who would be forced to pay higher sales or income tax rates (and in the case of expansion, some families would face exorbitant increases on nursing care, day care, or other items). Indeed, while the property tax is highly unpopular, it is less detrimental toward state economic growth than the income tax, which affects workers and small business owners.
- Winners and losers will also emerge at the school district level. Tax shifting effectively forces residents in District A to pay more in state taxes, while District B would get more in “relief.” Districts with high property taxes will get more relief than districts that have responsibly kept taxes low.
- Current tax shifting plans fail to provide a student-based funding formula.
- Tax shifting does not necessarily prevent property taxes from coming back, and it can become a vehicle for increasing our overall tax burden on families and businesses.
Tax shifting alone will not resolve the larger problem of overspending and unaffordable taxes. As I pointed out in my testimony on property tax reform, there are other solutions that address the spending problem in education. High property taxes are simply a symptom of poorly structured education spending. Here are five recommendations:
Weighted Student Funding
While Pennsylvania spends more per student than the rest of the country, and provides about the national average in state funding per student, that support isn’t driven out to schools that need it the most. A broken funding formula, in which school districts have been “held harmless” regardless of changes in enrollment for more than 20 years, fails our students.
Moving to a student-based funding system would ensure state dollars go to the schools that need it most—based on student enrollment and student need. We should fund children, not buildings. This reform would better allocate the $26 billion we already spend.
Collective Bargaining Reform
Employee benefit cost growth has greatly exceeded salary growth in public schools. These costs are driven by unaffordable union contracts.
Reforming the collective bargaining process—providing taxpayers and voters with more information about the terms and costs of contracts—could result in major savings for public schools, money that could go back into the classroom.
Mandate relief, including prevailing wage reform and seniority reform
School districts across the state have complained about unfunded and unaffordable mandates. Among the largest of these is the prevailing wage mandate, which requires school districts to pay more for construction projects than the private sector pays for the same work. Prevailing wage mandates increase the cost of construction by 10 to 30 percent, which for Pennsylvania school districts results in $160 to $480 million in additional annual costs.
Likewise, state law that limits when school districts furlough employees, and requires furloughs be done solely on the basis of seniority, deny schools the flexibility to manage costs. Reform that values teacher performance above seniority would improve the quality of education across Pennsylvania, while giving schools the tools they need.
Over the past six years, pension payments from school districts have increased by $2 billion. This amounts to a $600 tax increase per Pennsylvania homeowner, or the salary of 20,000 teachers. Rising pension costs were the justification for 98% of school districts recently seeking exemptions to raise property taxes above inflation.
We need pension reform that moves the state out of the defined benefit business. Establishing a defined contribution retirement plan for new hires provides costs that are predictable and affordable. Responsible pension reform removes politics from pension management and prevent future crises from threatening our public schools.
Lawmakers should expand school choice programs, such as the Educational Improvement Tax Credit (EITC) and the Opportunity Scholarship Tax Credit (OSTC). These programs allow low and middle income families to attend better, safer schools.
Moreover, the EITC and OSTC save Pennsylvania taxpayers money. The average EITC scholarship is less than $2,000, while the average OSTC scholarship is approximately $4,000. These scholarships are significantly less than the average per-pupil spending in traditional public schools.
RELATED : EDUCATION SPENDING, TAXES & SPENDING, PROPERTY TAXES, TAXATION
Among the many questions in a tentative state budget deal is how revenue from the sales tax increase would be distributed. The Associated Press notes this will be a major source of contention should the plan pass.
Under a formula initially proposed by Wolf, Philadelphia would get 14 percent of the money; under the House GOP plan, it got 5 percent. Under Wolf's plan, wealthy Lower Merion would get less than 1 percent; the House GOP plan would give it almost three times as much.
Last Thursday, Gov. Wolf said he wants to see "a progressive formula to distribute the resulting property tax reductions."
While we don’t yet know what the new formula might look like, we can look at how the $616 million in slot machine revenue is currently distributed.
Overall, slot machine revenue for property tax relief yields $222 per homeowner. This varies widely by school district—from $46 per homeowner in Bryn Athyn school district to $653 per homeowner in Chester-Upland.
Most districts (376 or 75 percent), however, receive less than the average $222 per homeowner.
Meanwhile, Philadelphia’s revenue—$86 million or 15 percent of the total—is dedicated to reducing the city wage tax rather than property taxes.
This redistribution—along with school tax increases—shows why most homeowners are disappointed. They’ve never seen the promised tax relief from gambling.
The table below shows the top 10 and bottom 10 current recipients, per homeowner.
|Property Tax Relief By District|
State Property Tax Reduction Allocation
|Estimated Tax Relief per Homestead and Farmstead|
|Allentown City SD||Lehigh||$9,639,281.38||16,948||$569|
|York City SD||York||$2,901,801.73||5,473||$530|
|Pleasant Valley SD||Monroe||$4,069,921.61||8,604||$473|
|William Penn SD||Delaware||$3,404,197.02||7,380||$461|
|Cheltenham Township SD||Montgomery||$3,609,813.90||8,062||$448|
|Harrisburg City SD||Dauphin||$2,774,667.62||6,331||$438|
|Mid Valley SD||Lackawanna||$261,188.73||4,010||$65|
|Eastern Lancaster County SD||Lancaster||$446,237.91||6,857||$65|
|Saint Marys Area SD||Elk||$348,202.23||5,596||$62|
|Mars Area SD||Butler||$327,476.67||5,717||$57|
|Cumberland Valley SD||Cumberland||$916,543.69||16,489||$56|
|Palmyra Area SD||Lebanon||$342,742.08||6,572||$52|
|Bryn Athyn SD||Montgomery||$9,283.10||202||$46|
Promising property tax relief is one thing, but delivering real relief requires a fair formula and strict spending controls.
RELATED : GAMBLING, TAXES & SPENDING, PENNSYLVANIA STATE BUDGET, PROPERTY TAXES, TAXATION
How would you feel if your employer took funds meant for your health insurance and spent them on partisan politics? Sadly, this is a reality for thousands of teachers in Philadelphia.
Evan Grossman of Watchdog.org has the story:
Every year, the [School District of Philadelphia] is bound by its contract with the Philadelphia Federation of Teachers to pay more than $69 million for employee health care benefits.
The payments come in increments of $167.41 per teacher every two weeks during the school year, adding up to some $4,352 annually for each of the PFT’s 16,000 members. Those funds come from a pool of state and local taxes. The PFT’s Health and Welfare Fund receives a chunk of that money, which is earmarked for supplemental benefits, such as dental and vision, along with other programs like life insurance and its annual educational conference, which will be held in March 2016.
The Watchdog investigation found that more than $6 million from that fund was loaned, interest-free, to the union’s bleeding building fund, where it appears to have been spent on building maintenance and upgrades. According to Internal Revenue Service filings completed by the union, that money may never be paid back.
Part of the cash, loaned in five separate installments, was also used to subsidize the rent of the Jewish Labor Committee.
While teachers are working hard in the classroom, the Philadelphia Federation of Teachers (PFT) is secretly draining their insurance fund to subsidize politics and facilities upgrades.
Philadelphia is one of only two school districts in the state where teachers enjoy no-cost health insurance—generous benefits unheard of in the private sector. When Philadelphia’s School Reform Commission attempted to restore fiscal sanity to the money-bleeding district by asking for modest health cost sharing, the union responded with a lawsuit. The union’s refusal to accept even minor health care concessions is more remarkable given that millions of dollars from the Health and Welfare Fund are not even spent on health insurance.
As long as the Health and Welfare Fund serves as a slush fund for political activity, union leaders will fight tooth and nail to retain their unique taxpayer-funded health care privileges.
Of course, this isn’t the first time PFT leadership has used students and teachers as pawns in a larger political game. And it likely won’t be last—at least until government unions are more transparent in their operations and more accountable to their membership.
RELATED : EDUCATION, TEACHER UNIONS, HEALTH CARE, PUBLIC EMPLOYEE PENSIONS AND BENEFITS
There is a clear need for improved governmental accountability and transparency in Pennsylvania, but how does the commonwealth compare to the rest of the country?
According to the Center for Public Integrity’s 2015 State Integrity Investigation, not very well.
Ranking 44th nationally, Pennsylvania scored a “D” or worse on 11 of the 13 categories. The 2015 results saw Pennsylvania take a major step back from 20th in 2012.
What caused Pennsylvania to fall behind? Apart from slight changes in methodology, continued poor oversight and regulation of lobbying, weak political finance monitoring, and inadequate accountability measures were all cited as reasons for Pennsylvania’s decline. Recent episodes of corruption charges against top state officials and budget gridlock demonstrate the need to refocus on reform.
Pennsylvanians are also feeling the crunch of bloated bureaucracies like the Liquor Control Board and the Turnpike Commission. The commonwealth will continue receiving poor marks for integirty until these entities are brought into the sunlight.
RELATED : ACCOUNTABLE GOVERNMENT, TRANSPARENCY
Should voters have the right to approve property tax increases? This is a central point of contention within a rumored budget framework that purports to provide Pennsylvanians with property tax relief.
In exchange for increasing the state sales tax to 7.25 percent—with higher amounts in in Allegheny County (8.25 percent) and Philadelphia (9.25 percent)—Pennsylvanians are promised significant property tax reductions, to tune of $1.5 billion.
Unless taxpayers are given proper control over property tax rates, however, nothing would stop school boards from large tax increases in future years. This could completely negate any tax relief doled out by the rumored budget agreement.
Thankfully, Sen. Don White's SB 909 would protect taxpayers from this scenario by requiring voter referenda when a school board requests higher taxes. This commonsense legislation makes school boards accountable to the residents in their districts. Could property taxes increase under SB 909? Yes, but school boards would have to make a compelling case to raise taxes—and voters would be given the opportunity to vote yes or no.
Act 1 in 2006 promised Pennsylvania voters access to tax hike referenda. However, Gov. Rendell pushed for nearly a dozen exceptions which excused school boards from actually facing voter approval. Since then, the Department of Education has approved 1,428 school districts for waivers from referenda, including 172 in 2015-16. It is common, too, for districts to receive multiple exceptions in the same year (pension obligations and special education costs are the most common).
Number of Districts Approved for Exceptions
SB 909 eliminates these exceptions and empowers taxpayers with control over local taxes. Currently, 34 other states require a school district to hold a referendum vote in order to approve the levy of school taxes or an increase in the tax rate.
Predictably, the requirement for voter referenda has been met with fierce resistance the Pennsylvania School Board Association (PSBA) and other staunch defenders of the educational status quo. PSBA executive direction Nathan Mains recently penned this piece, foreshadowing the dystopian world in which SB 909 passes and taxpayers are given a voice:
Scenario 1: In five years or less, school facilities will start to see the effects of no investment in their upkeep. Roofs start leaking because there is no money to fix them, buildings are overrun with weeds because maintenance staff were let go. Students are injured as ceiling tiles and drywall start to crumble.
Scenario 2: Pennsylvania student achievement rates over the next decade are compared to the results of Third World countries because the state has opted not to meet its financial obligation of funding public education and has instead left each community to its own devices.
Needless to say, the hysteria is reaching fever pitch. The central claim from the PSBA is that voters will always reject potential tax increases, forcing school districts to make draconian cuts. However, this flies in the face of the experience of other states which employ voter referenda.
Consider Ohio, where voters approved 85 of 101 potential increases to school taxes in 2015. Older data from New York, New Jersey, and Michigan tells the same story: Taxpayers approved more than half of all school budgets, tax increases, or bond issues.
Here’s the bottom line: Taxpayers are willing to raise their own taxes when districts demonstrate the need for additional revenue and a plan for responsible spending.
A budget agreement that shifts taxes without providing local control is a bad deal for taxpayers, who deserve a voice—especially given the astounding growth in property taxes since 2004. Even including the "relief" from slot machine revenue, passed in 2004, property taxes have grown by 34 percent.
RELATED : ACCOUNTABLE GOVERNMENT, INITIATIVE & REFERENDUM, EDUCATION, EDUCATION SPENDING, TAXES & SPENDING, PROPERTY TAXES
Is a $600 million tax increase needed to end a five month-long budget impasse? Lawmakers are considering it. Yet, a shortage of tax revenue is not the source of Pennsylvania’s budget difficulties. According to the Independent Fiscal Office, state revenue collections are at an all-time high. So is government spending.
With revenue and spending at record levels, government spending should first be prioritized in order to avoid raising taxes on working people. The Commonwealth Foundation identified nearly $700 million in corporate welfare spending that could be scaled back or eliminated, with the savings used to plug the nearly $1 billion deficit.
|Corporate Welfare Grant & Loan Programs||2014-15 Budget (Thousands)|
|Agricultural Promotion, Education and Exports||$250|
|Ben Franklin Tech Development Authority Transfer||$14,500|
|Commonwealth Financing Authority Transfer||$77,755|
|Council on the Arts||$898|
|Discovered in PA Developed in PA||$5,000|
|Food Marketing Research||$494|
|Grants to the Arts||$8,590|
|Hardwoods Research and Promotion||$350|
|Infrastructure and Facilities Improvement Grants||$19,000|
|Marketing to Attract Business||$2,008|
|Marketing to Attract Tourists||$7,264|
|Municipalities Financial Recovery Revolving Fund Transfer||$4,000|
|New Choices/New Options||$500|
|Open Dairy Show||$177|
|Partnerships for Regional Economic Performance||$11,880|
|Pennsylvania Race Horse Development Fund||$250,118|
|Transfer to the Nutrient Management Fund||$2,714|
|World Trade PA||$5,824|
|Film Tax Credit||$60,000|
|Job Creation Tax Credit||$10,100|
|Research and Development Tax Credit||$55,000|
|Keystone Opportunity Zone||$87,500|
|Keystone Innovation Zone||$25,000|
|Resource Enhancement and Protection Tax Credit||$10,000|
|Alternative Energy Production Tax Credit||$10,000|
Of the $700 million in corporate welfare, about 36 percent is dedicated to the Horse Race Development Fund, which uses gaming revenues to fund prizes for wealthy horse owners, many of who live out of state. Gaming revenue is also used to fund property tax relief. However, lawmakers are planning to use that revenue ($616 million) to pay for pensions, which raises a question: Why not divert the gaming revenue away from horse racing to pay for property tax relief or pension obligations?
Pennsylvania workers already pay high enough taxes. Whether it's horse racing funds or another form of corporate welfare, government should first cut back where it can before putting greater strain on the budgets of families across the commonwealth.
The current proposal—higher taxes and excessive government spending—represents the policies of the past, policies which have led to poor job growth, personal income growth, and population growth. A new course is needed, and it starts with restraining the growth of government and protecting working people from tax hikes.
RELATED : TAXES & SPENDING, SPENDING LIMITS, TAXATION
In light of stagnating achievement among K-12 students, the last thing Pennsylvania should do is crack down on alternative educational options. Yet a growing chorus says 35,000 students enrolled in Pennsylvania's innovative cyber charter schools should be denied the educational experience that best suits their needs.
I recently submitted a letter to the editor to the Easton Express-Times on this subject:
A Stanford University study is the most recent catalyst for cyber school criticism, but the online education frontier is perpetually under fire in Pennsylvania. Gov. Tom Wolf, for example, proposed massive cuts to online schools in his March budget address.
Remembering a few key points is critical when analyzing cyber school performance. First, there is no typical cyber charter student. Many children enroll in cyber schools after enduring bullying or unsafe conditions in a traditional school. Online education is often the only feasible alternative for students in a persistently failing district. What's more, cyber students typically enroll with substantial learning gaps that cannot be rectified in a single school year.
Just as traditional public schools vary, the online education network is diverse in course offerings and academic achievement. It would be a mistake to paint the entire sector with a broad brush.
A charter reform bill, HB 530, currently awaits action in the state Senate. Notably, many cyber charter leaders are supportive of the legislation. Increased accountability for public schools—all public schools, not merely cyber—is a reasonable policy goal with bipartisan support.
But it would be a mistake to ignore the crucial void filled by Pennsylvania’s cyber schools. Singling out cyber schools with Wolf's punitive cuts—and treating these students as second-class citizens—does not serve the best interests of Pennsylvania families desperate for choice and opportunity.
RELATED : EDUCATION, ACADEMIC ACHIEVEMENT, CYBER SCHOOLS, SCHOOL CHOICE
The conventional wisdom in Harrisburg suggests Gov. Wolf is nearing an agreement with the legislature on a state budget. The specific details remain largely unclear, although it appears the deal would increase Pennsylvania’s sales tax to the second highest rate in the nation—amounting to a net tax increase of $190 per family of four.
Central to the budget framework is a substantial increase in state education spending. Wolf has reportedly agreed with legislative leaders to increase the Basic Education line item by $350 million and the Special Education line item by $50 million.
How do these figures—touted by Wolf's office as a "record increase" in school funding—compare to earlier stages of the budget negotiations? See the chart below.
The first columns illustrate the funding Wolf requested in March during his budget address. The middle columns represent the additional funding provided by the House and Senate in the no-tax, on-time budget, which was ultimately vetoed by the governor. The third columns represents the “budget framework” agreement.
If reports are accurate, Gov. Wolf will emerge with most of the new spending he requested in March—including more than 87 percent of the Basic Education funding.
This is notable, given the broader context of education spending in Pennsylvania. The commonwealth currently spends more than $15,000 per public school student, which ranks 11th in the nation. What’s more, funding for public schools is already at an all-time high, both at the state level and overall.
Pennsylvania may be on the verge of a record-high increase to an already record-high level of education spending. Of course, most evidence suggest a tenuous relationship between spending and educational outcomes.
RELATED : EDUCATION, EDUCATION SPENDING
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