Property owners would still pay school taxes for years under relief bill
Legislation to eliminate school property taxes in Pennsylvania might sound like music to the ears of property owners, but it wouldn't happen overnight — in some cases, some local taxpayers wouldn't see relief for more than 15 years.
In the meantime, property owners also would be paying more in sales and personal income taxes.
Sen. David Argall, R-Schuylkill County, plans to introduce legislation that would shift about $14 billion in taxes from property owners, including businesses, to consumers and anyone earning a paycheck. He said he's still working with Gov. Tom Wolf on the details of the bill, but plans to unveil it in the next few weeks.
In 2015, similar legislation was defeated in the Senate with a 25-24 vote. Argall said he will re-introduce it this year because he believes the recent election has provided him with support he needs for it to pass.
"I can't go to Wal-Mart or get gas without someone asking about it," he said of the legislation. "I've never dealt with an issue like this before."
Argall said the legislation he will reintroduce will almost exactly mirror his 2015 bill, which would have shifted education funding from property taxes to higher and expanded sales taxes and higher personal income taxes. He's making technical changes before he moves forward, he said.
However, even if the legislation were to pass this year, school districts would still be able to collect property taxes until their current debt is paid off. In York County, the years until the 16 districts would retire their debt range from six years to 16 years.
During those years, property owners also would be paying more sales tax on more goods and would be paying higher income taxes.
Under the bill, the state sales tax would increase by 17 percent and would apply to more purchases now exempt such as groceries, clothing, diapers, basic cable TV and more. The personal income tax would increase by 60 percent.
Also, residents would still pay municipal property taxes — it would just not include school property taxes, which are a huge source of local revenue for districts.
Meanwhile, school districts currently in debt would continue to collect property taxes until that debt is retired.
For instance, property owners in the West York Area School District would continue paying school property taxes until 2034 if the debt isn't refinanced before then.
The local school district that would end its debt the earliest with the current numbers is Central York, a district that expects to be done paying off its $40.9 million debt by 2023.
According to Wayne McCullough, director of leadership and development with the Pennsylvania Association of School Business Officials, 98 percent of districts in the state will continue to collect a property tax after personal income taxes and sales taxes increase. McCullough spoke last month at a public information meeting on the tax reform at York Suburban.
Concerns: Not only would the legislation take quite some time for full property-tax relief, but local school administrators are worried the switch would not provide reliable, adequate funding for their budgets.
For example, West York Area School District Superintendent Emilie Lonardi pointed out that if the economy takes a downturn and people don't have jobs or are not buying as many goods, the amount collected in those taxes would decrease as well.
Districts already don't know how much state funding to expect from year to year, and the nine-month-long budget impasse that occurred from June 2015 to March 2016 still looms fresh in administrators' minds.
"Property taxes helped so many districts to get through the beginning of the year without a state budget," Lonardi said.
Argall said the Independent Fiscal Office and the Senate Appropriations Committee have done extensive reviews of the bill that have shown it would replace, dollar for dollar, the money raised in school property taxes.
"They even project that we might be able to run a rainy day surplus, so if there is indeed an economic downturn in the county, we will be OK," he said.
Red Lion Area School District Superintendent Scott Deisley also pointed out that areas on the east side of the county have a lot of people who commute to Maryland. These individuals could get around a higher sales tax by purchasing goods in Maryland.
Argall said he doesn't think this will be a huge factor because he believes the sales taxes will be fairly similar to Maryland's, if his legislation is passed.
Another concern is that businesses — which now can account for a large portion of school funding, particularly in more commercial districts — also would be exempt from paying school property taxes.
While some argue the bill would make the state more business friendly, Lonardi said this would make a dramatic difference for West York.
"It would affect us terrifically because right now we have a significant number of commercial properties and more coming in the next few years," she said. "If those just go away, and they give us the funding at the state level that they give us now, we'll be in trouble."
Argall explained the state Constitution prevents legislators from eliminating school property taxes for just one group.
Despite these issues, Lonardi and Deisley said they are not opposed to eliminating or lowering property taxes, they just want to be sure it is done right.
Deisley said the average taxpayer in the Red Lion district pays about 5 percent of his or her gross family income on property tax, which he recognizes is a lot of money. In fact, Red Lion School District lowered school property taxes last year to try to alleviate the problem.
"I do think something needs to happen with the property tax, but I think there are too many unanswered questions with the proposed legislation to tell if it will be a help or hindrance," Deisley said.
Lonardi echoed his sentiment, saying it might be better to explore other options such as freezing school property taxes at their current rate or finding other ways to replace property taxes.
"We have thousands of students across the commonwealth to educate, so this has to be done right," she said.
Taxypayers: For at least some property owners, the threat of losing their homes because they are unable to pay school property taxes outweighs the concerns administrators have pointed out.
Albert Weisser is a senior citizen living in Wrightsville, which is in the Eastern York School District, and he supports the proposed legislation.
Weisser estimates he pays between $1,500 and $2,000 in school property taxes on his home in Wrightsville. While he can afford the taxes, he knows plenty of senior citizens on fixed incomes who cannot. He thinks approving this legislation would mean more people "have skin in the game" when it comes to paying school taxes.
"The people on fixed incomes, especially the people on Social Security, they're getting hammered," he said. "They're not getting an increase in Social Security, but school taxes keep going up and up."
Residents in the Eastern York School District experienced a 6.7 percent tax hike for the 2016-17 school year, and due to a decreasing fund balance the district is expected to raise taxes again for the 2017-18 school year.
For Wrightsville council member Eric White, the legislation is a fabulous idea for exactly that reason. Like Weisser, he believes the change will be more fair overall. White is a multi-property owner. Just for his home, he pays $5,000 a year in school property taxes, but for all of his properties he estimates he pays between $30,000 to $35,000.
"I don’t like the idea of after you’ve struggled and purchased a piece of property, you’re constantly battling fear of losing that property to taxes," White said.
He thinks school property taxes can hamper business growth. As a council member, White said he's talked with a lot of business owners and property owners on Social Security who aren't able to pay property taxes in the borough.
As for the aspects of the bill that make administrators wary, White said schools can plan ahead for bad economic years.
"You just have to go with the flow and adjust accordingly," he said.
No matter what, White is hopeful the bill will pass. "People are to the point where they have to decide whether they want to eat or save their home."
Argall said the legislation was developed by 80 taxpayer groups through Pennsylvania who shared the sentiments given by White and Weisser — he's simply introducing it on their behalf. He said it's not often taxpayers go to senators asking them to raise taxes in some areas, which caught his eye.
"I'm not trying to ruin public schools, I'm trying to find a different way to fund them," he said. "A much fairer way, I might add."