Tax Hoarders Strike Again
Last month Governor Wolf vetoed House Bill 800, which could have opened new educational opportunities to 50,000 low- to middle-income students. The legislation sailed through both chambers and would have provided much-needed relief to Pennsylvania families wanting educational freedom.
The reasoning behind Wolf’s veto of tax credit scholarships? The governor huffed and puffed several vague explanations before citing their “staggering” cost: $650 million dollars over the next five years.
Sounds like a lot of money, doesn’t it?
But that figure is only meaningful within the context of other education spending in the commonwealth. For instance, Pennsylvania school districts collectively hold $4.6 billion in reserves—taxpayer money sitting in their piggy banks with no purpose yet designated. That’s enough to fund EITC and OSTC K-12 scholarships at their current levels for 42 years.
Despite assertions of Pa. public schools being underfunded, the combined total of district reserve (general fund) balances has risen steadily for 13 consecutive years. Last year’s increase alone—$64 million—could fund 32,000 scholarships. We’re prioritizing school administrators’ nest-eggs over a program that helps students right now.
Infographic: School District Reserves are Rising
There are legitimate reasons school districts hold balances in their general funds, such as pension liability and unforeseen emergencies. But some districts hold more than 20% of their operating budgets in reserves. “Clearly that's where you start to question it,” acknowledges Auditor General Eugene DePasquale. Some districts even request tax increases above the Act 1 limit, despite holding large amounts in reserves.
One such district is Lower Merion School District (LMSD), infamous for perpetually requesting Act 1 exceptions from the state and the subject of an ongoing lawsuit for their funding practices. LMSD is one of the top hoarders of cash—keeping 21% of spending ($55.8 million) in reserve in 2017-18. Yet the school district sought Act 1 exceptions from the state to raise taxes eight of the last 10 years—a practice that has led to the district spending a whopping $31,000 per pupil.
Lower Merion’s reserve balance could fund 28,000 tax credit scholarships. Their per-pupil allotment for one student alone could provide 15 students with tax credit scholarship.
Infographic: Is Your District Hoarding Cash?
Tax credit scholarships have been life saving for students in the program. They also help students who remain in their local district schools by reducing class size and saving the district money. According to an EdChoice analysis, EITC and OSTC combined have saved Pennsylvania school districts $4 to $6 billion over the life of the programs. At $4,000 to $6,000 saved per scholarship, school districts grow in financial strength as tax credit programs expand.
Before bemoaning the “staggering” cost of EITC and OSTC, lawmakers should take into account the whole picture of education funding in Pa., including the benefits and savings of tax credit scholarships.
All things considered, if Governor Wolf truly wants to support students in conventional public schools, he should champion increases to EITC and OSTC—not veto them.