Special Session on Property Tax Relief

Testimony of Matthew J. Brouillette, President, Commonwealth Foundation

Thank you, Chairman Wenger and members of the Committee for the invitation to testify this afternoon. My name is Matthew Brouillette and I am the president of The Commonwealth Foundation.

Before I discuss the root of the property tax problem in Pennsylvania, allow me to provide you a snapshot of where we’ve been and where we’re going with regard to public school tax revenues.

Over the past twenty years public school funding increased in inflation-adjusted dollars from $8.72 billion in 1980 to more than $15 billion in 2000. In other words, in 1980 we spent about $4,500 per student in inflation-adjusted dollars, and in 2000 we spent about $8,300 per student. This, however, is a spending trend that, I would argue, the taxpayers of this state cannot sustain.

If Pennsylvania continues to increase public school tax revenues at the same rate as it has over the past thirty years, we are on track to spend more than $17,700 per student by the year 2010.

Now, I would argue that a high level of investment in education would be worth the expenditure if the educational outcomes comparably increased as well. However, we have experienced a virtual collapse of productivity in the performance of additional education tax dollars. By almost any measure, Pennsylvanians can conclude that they are getting a poor return on their current $17.4 billion tax investment in public education.

Chart 1 (attached) shows just how more dollars have failed to produce more scholars in Pennsylvania. While expenditures increased more than 123 percent faster than inflation between 1987 and 2000, academic performance on the SAT has remained relatively flat. In fact, Pennsylvania outscored only 4 states and the District of Columbia in 2000 (46th in the nation) and our performance relative to other states has been declining for decades (1990 = 43rd in the nation; 1978 = 39th in the nation).

We are, however, getting two things in return for this profligate spending.

First, Pennsylvania has the highest average teacher pay in the nation when adjusted for the cost of living (according to a 2002 study from the American Federation of Teachers, “the average teacher in Pennsylvania had the highest purchasing power” at $52,832). Having the highest teacher pay would be a good thing, however, if we actually paid teachers according to competency, performance, or demand. Unfortunately, union-negotiated salary schedules shortchange high-performing teachers at the expense of mediocre and incompetent teachers. But even more troubling is that our children are subjected to union-protected, inept instruction.

The other thing we know we are getting for this extravagant spending is higher taxes. Taxpayers—particularly homeowners—are experiencing tax increases between two and three times the rate of inflation to pay for the ever-increasing union contracts.

Here’s just one example of how this is working across Pennsylvania. The Council Rock School District in Bucks County went on strike earlier this month over the issue of salaries and benefits. In Council Rock, the average teacher salary last year was $75,000, and about 40 percent of district teachers received more than $87,000. But they wanted more.

When offered a 3-year, 9.25 percent salary increase by the school board, union members in the local PSEA affiliate headed for the picket line instead of their classrooms.

The union wanted a four-year contract with salary increases totaling nearly 18 percent, with no employee contributions to health benefits for entire families. In the end, the union accepted a contract that will require an additional $6 million in new tax levies to fund salary increases of 9 percent over the next five years.

How can they make such extravagant demands and get away with it? The answer is because they can—and they’ve been getting away with it for years. And this leads us to the reason we are here today.

As you can see from Chart 2, public education has not suffered from a lack of taxpayer money. Tax revenues from every source have gone up over the past twenty years. But it is property tax increases of near triple-the-rate-of-inflation that have pushed the General Assembly into this Special Session on Property Tax Reform.

Why have property taxes outpaced all other tax revenue sources?

There are two reasons: First, school boards in Pennsylvania—unlike the overwhelming majority of school boards in the nation—wield unilateral and unaccountable taxation power. Second, unions possess monopoly influence over these powerful local taxation units of government.

Ultimately, the blame for skyrocketing property tax increases lies with local school boards that have been willing to “tax out” homeowners rather than curb spending or say “no” to budget-busting union demands.

That being said, I would argue that the real driver behind these tax increases is the labor unions. The unions recognize that school boards have unilateral power to increase property taxes to meet their contract demands—without the consent or approval of the taxpayer.

The unions see a blank check sitting at the bargaining table and do everything they can to fill in the highest possible amount. The only thing that can stop them is a courageous board that can out maneuver the union’s media strategy and/or withstand the pressure generated by union operatives and activists in the community.

But solutions to these problems are not easy—not necessarily because they are so complex but because the special interests—school boards and labor unions—will resist any changes that might curtail their access to taxpayer dollars.

But if the General Assembly intends to do anything meaningful, it will have to muster the political courage to completely eliminate or severely limit the taxation power of local school boards, as well as control spending in public education.

I would be happy to further discuss possible solutions to these problems, but in conclusion, let me reiterate that if we remain on the same funding path we’re on today, we will be spending more than $17,700 per student in less than 8 years!

Therefore it is clear that we must both protect taxpayers and exercise some fiscal discipline in public education. The citizens of this state deserve nothing less.

Thank you.

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Matthew J. Brouillette is president of The Commonwealth Foundation, an independent, non-profit public policy research and educational institute based in Harrisburg, Pa.