Time to Act (not 72) on Pennsylvanias School Tax Crisis

The Homeowner Tax Relief Act of 2004 (Act 72) failed long before nearly 80 percent of Pennsylvania’s school boards even had the opportunity to reject it. Despite Gov. Ed Rendell’s proclamation that Act 72 was the “most sweeping tax-reform program in Pennsylvania in a generation,” it was neither sweeping nor reform.

Act 72 is poor public policy because it does not address Pennsylvania’s school spending crisis. And yes, it is a school spending crisis. Skyrocketing property taxes are only the symptom of the public school establishment’s insatiable appetite to spend.

Today, Pennsylvanians pay for the 3rd most expensive public school system in the nation, when adjusted for the cost of living. And we do so for two reasons.

First, according to the Colorado-based Education Commission of the States, Pennsylvania remains the only state in the nation where school boards have virtually unlimited power to increase school property taxes. Second, the school employee labor unions exploit school boards’ unfettered access to taxpayers’ wallets through their monopoly influence over local school district spending decisions.

By granting school boards unlimited taxing power, policymakers have effectively placed a blank check at the district’s bargaining table. And the labor union for cooks, janitors, bus drivers and teachers does everything it can to fill in the highest possible amount.

The only thing that can stop the union is a courageous board that can outmaneuver the opposition’s media strategy and withstand the pressure generated by union operatives and activists in the community. But because most school boards have been unwilling to engage in prolonged fights with union negotiators, ever-increasing amounts of taxpayer money are regularly bargained away in order to maintain labor peace.

The end result is that like two wolves and a lamb voting on what to have for lunch, Pennsylvania homeowners are regularly outvoted by school board members acting in concert with the Pennsylvania State Education Association, the commonwealth’s wealthiest and most powerful labor union. And Act 72 would have done little to change this voting pattern.

Now, in the aftermath of the Act 72 disaster, what should policymakers do?

First, put the Act 72 idea in the cylindrical filing cabinet. Decouple the issues of property tax rebates and taxpayer referendum on school tax increases. And when gambling revenues start flowing into the state’s coffers from the slots losers, just give taxpayers their promised rebates—no strings attached.

Next, address the spending crisis in public education that is taxing citizens out of their homes. Either entirely eliminate or severely restrict the power of school boards to increase taxes. Only strong and permanent—not loophole and exemption ridden—taxpayer protections will do. Local taxpayers should be given complete referendum power at the ballot box, or the funding of local schools should be shifted to the state.

If policymakers have the courage to say “no” to the school spending lobby, such options already exist in the Capitol’s legislative hopper. Rep. Daryl Metcalfe’s House Bill 188 would require all increases in property taxes to be subject to voter approval, strengthening the taxpayers’ hand while keeping the current state/local school funding scheme in place.

But if policymakers are willing to totally revamp how Pennsylvania funds public education, they could consider a plan from the Commonwealth Caucus. House Bills 116-120, known as the Plan for Pennsylvania’s Future, would eliminate all local school taxes, including property and other nuisance taxes. By broadening the base of the Sales and Use Tax but lowering the rate from 6 to 5 percent, the entire school funding burden could apparently be shouldered by the state.

This kind of shift in school funding responsibility has benefited Michigan homeowners for more than a decade. In 1994, the citizens of that state overwhelmingly embraced a constitutional amendment which eliminated the power of school boards to increase property taxes for operating purposes.

Proposal A, as it is known in Michigan, increased the sales tax from 4 percent to 6 percent (as well as a few other relatively minor tax changes) and shifted the bulk of public school funding from the local level to the state. Although education spending has continued to increase in the Great Lakes State, it hasn’t done so by forcing citizens to sell their homes in order to pay their school taxes.

It is time for Pennsylvania policymakers to strike the root cause of the commonwealth’s school property tax crisis—public school spending. Of course, it will require bold legislation that one way or another empowers taxpayers at the expense of the public school spending lobby. Anything less will merely be another scene from a failed Act 72.

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Matthew J. Brouillette is president & CEO of the Commonwealth Foundation (CommonwealthFoundation.org), an independent, non-profit research and educational institute located at the foot of the Capitol in Harrisburg.