EDITORIAL: Better way to budget
- Tax caps have had unintended consequences that can be traced to uncertainty about state funding.
Pennsylvania school districts must let the state Department of Education know within a week if they’ll seek exceptions to raise taxes higher than their assigned limits.
It's a tight time frame — about two months before Gov. Tom Wolf makes his budget address and six months before the state budget is due — that forces school boards to make a lot of guesses.
And they're likely to guess on the high side, which is unfortunate for property owners who could end up paying higher taxes because of the uncertainty.
However, it's a predicament that could be avoided if Pennsylvania lawmakers followed the lead of other states and simply budgeted less often.
Included in the 2006 Act 1 property tax reform package, the caps were intended to rein in out-of-control tax increases some districts were slapping on their residents year after year.
Each district is assigned its annual own cap, based on increases in the average weekly wage across the state and the federal employment cost index for elementary and secondary schools, which measures the cost of employing school personnel.
It’s not easy for a district to exceed the cap, but it is possible.
Act 1 allowed districts to seek exceptions to the limits in certain circumstances, but they need approval from either the Department of Education or from voters through a ballot referendum.
Plus, the law strengthened to limit the number and scope of exceptions districts can use. There are now only three — down from 10 — reasons a district might be allowed to raise taxes above their assigned cap: special-education costs, pension costs and grandfathered debt service.
In the sense that it’s no longer common for property owners to see 8 percent, 9 percent or even higher tax hikes, the tax caps are working. The caps assigned to York County’s 16 districts this year range from 2.5 percent to 4 percent.
However, as we’ve noted before, the tax caps have had unintended consequences that can be traced back to uncertainty surrounding the state budget.
School districts and the state Legislature both are required by law to approve their budgets before July 1 every year.
While districts must have a plan in mind by mid-January — because they need to let the state know by then if they might exceed their tax caps — and almost always approve their budgets on time.
State lawmakers, on the other hand, usually don’t get to work on a budget until June and there’s no telling when they’ll finish.
Not knowing how much state funding they’ll receive is incentive enough for some districts to seek exceptions to their tax caps.
Then there’s the year-to-year uncertainty of state education funding.
School boards working on their budgets might feel like they’re in pretty good financial shape, but they have no idea what their state funding and assigned tax caps will be the following year.
It’s a guessing game, and if they guess wrong they could be hurting financially the next year with no way to make up the lost funding.
Just to be safe, some districts’ business managers have told us, they will recommend raising taxes right up to their limit.
The state’s 2015-16 budget was so late — nine months to be exact — some lawmakers suggested it might be time for Pennsylvania to join the nearly two-dozen other states that budget on two-year cycles.
Why not? Heck, they almost did it by accident that year.
A bi-partisan group of state senators — including Mike Folmer, a Lebanon Republican who represents part of York County — joined Lt. Gov. Mike Stack earlier this year in support of a bill establishing a two-year budget cycle.
Besides freeing up time for more pressing issues and reducing the partisan wrangling that comes with budget negotiations, Stack argued a two-year budget would give school boards greater predictability and stability when figuring out their needs.
The bill died last year at the close of the legislative session, but we hope someone — perhaps Folmer — introduces it again this year.
Lawmakers clearly need the extra time to budget, and school districts and their taxpayers deserve the stability.