To kill or to cut? Wolf’s property tax plan has competition
HARRISBURG – The success of Gov. Tom Wolf’s plan to make Pennsylvania’s school funding system fairer could hinge on this: whether he can convince enough lawmakers that his plan would end the days of rising school property taxes.
Wolf, a Democrat, proposed a $3.2 billion plan to cut school property taxes dollar-for-dollar by raising state income and sales taxes. His goal is to boost the state’s share of public school costs to 50 percent, up from one-third, primarily to cut property taxes for homeowners in Pennsylvania’s poorest and most heavily taxed districts.
The plan has a lot in common with concepts House Majority Leader Dave Reed and other members of the Republican-controlled Legislature floated in recent years, without success.
But a key group of Republican lawmakers are devoted to something more: Increasing state sales and income taxes to eventually abolish about $12 billion in school property taxes statewide. Wolf’s plan would replace roughly one-fourth of school property tax collections, and, some Republicans said, it would not solve the real problem of rising property taxes.
As Senate President Pro Tempore Joe Scarnati and other critics put it, sales and income tax increases are permanent, but a property tax cut is temporary if school boards keep raising taxes.
In a House Appropriations Committee hearing Monday, Rep. Gary Day told Wolf’s nominee to head the Department of Revenue reducing property taxes, instead of eliminating them, creates distrust school districts will get the windfall from the state but not stop raising taxes.
“Why was the decision made to stay in the gray area of reduction?” asked Day, R-Lehigh.
Eileen McNulty, the revenue secretary nominee, suggested it is the measure best positioned to pass, even if it does not make everybody completely happy.
“You can’t make the perfect the enemy of the good,” McNulty told Day.
For the decade through 2012-13, the latest state data available, property tax collections rose 40 percent to $11.7 billion. That was almost twice the rate of inflation during a period when lawmakers passed two laws to make it more difficult for school boards to raise taxes and devoted hundreds of millions of dollars a year in casino revenue to cut property taxes.
Wolf, who released his plan March 3, is ready with a response to critics such as Day and Scarnati.
He has companion plans designed to eliminate a district’s need for more money and further limit a school board’s ability to raise property taxes, he says.
On one front, Wolf wants to prevent school boards from raising property taxes if the size of the district’s uncommitted reserve is projected to exceed 4 percent of its proposed budget.
An Associated Press analysis of state data showed about 420 school districts out of 500 total collectively held $1 billion in unassigned reserves above that 4 percent threshold in the 2012-13 school year. A 2006 state law currently sets the reserve threshold at 8 percent to 12 percent, depending on the size of a district’s budget.
On a second front, Wolf pledged to meet districts’ rising costs by seeking $2 billion in new aid over his four-year term for pre-kindergarten programs and public schools, money that is separate from the proposed $3.2 billion property-tax cut.
If there are any other ways to ensure property tax increases do not eat away at the new aid, Wolf said he is happy to work on them with lawmakers.
“This is about property tax relief, reductions, and that’s what I am focused on making sure that I achieve here,” Wolf said in an interview with the AP Wednesday.
Wolf eventually may hammer out property-tax legislation that has considerable support. But, with some lawmakers opposed to trading higher state taxes for lower school property taxes, it may collapse without support from lawmakers who back efforts to eliminate the tax.
“I can’t imagine anything other than elimination,” Sen. David Argall said Friday.
Argall, R-Schuylkill, said his legislation to abolish school property taxes may now have enough support to pass the Senate. Meanwhile, Rep. Jim Cox, R-Berks, said he plans to try to persuade Wolf to support his measure to abolish them.
“I’m certainly going to do my darndest to try,” Cox said.