Property tax reforms still waiting on budget’s final day
By Eric Boehm | PA Independent
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HARRISBURG — Voters in Pennsylvania will have greater control over local property tax increases, if the state Senate and House can work out some last minute disagreements over legislation being pushed by Gov. Tom Corbett.
The state House on Thursday night was expected to vote for amending a 2006 state law, which limits the school districts’ ability to increase local property taxes. Though negotiations were ongoing with the state Senate, the two chambers were hoping to reach an agreement that will get the new bill to Corbett’s desk by the end of the day Thursday. Corbett has said he wants to sign the property-tax reform measure along with the state budget bill by the end of the week.
The bill is seen by Republicans as a crucial piece of the budget puzzle because it will limit school districts — many of which are facing significant reductions in state spending in the new budget — from raising local property taxes to make up the difference. Under the new rules, most property tax increases would require approval from voters in a referendum.
The average property taxes in Pennsylvania are more than $1,200 annually.
Corbett said Thursday that he would not sign the budget unless the property-tax reform package was included, adding pressure to the budget's final day.
Speaker of the House Sam Smith, R-Jefferson, said Thursday evening that the state House was on board with the governor's plan.
“It was part of the agreement to get it done, and we are prepared to get it done in a way (Corbett’s) happy with," Smith said.
But Democrats argued that the reduced state funding combined with preventing local tax increases was a one-two punch that would damage public education in Pennsylvania severely.
State Sen. John Wozniak, D-Cambria, said the new restrictions would put incredible pressure on school districts’ finances.
“It seems the new philosophy on how to reduce government is to starve it, regardless of the legitimacy of the programs,” Wozniak said. “We’re preventing them from raising taxes locally, and we’re cutting them from the top. That’s a double play in a very difficult year.”
The proposal makes changes to Act 1 of 2006, which restricted districts from raising property taxes above an index determined by the state Department of Education. If a district wants to exceed the index, voters must approve the tax increase.
However, the current law gives districts 13 exceptions — including building projects, debt, pension payments, court settlements and special education costs — that they can use to increase taxes above the index.
Because of the exceptions, property-tax increases rarely go to a referendum. Since 2006, school districts have pushed to exceed the state index more than 1,300 times. Only 12 of those requests have ended with a voter referendum, and only five of those referendums were approved.
Republicans in the state House and Senate are split over the number of exceptions to keep in the law, but the version of the bill that was set for a floor vote late Thursday night would cut the total from 13 to three.
Exceptions for special education, pension liabilities and future payments on existing debt would remain in place. Importantly, debt payments on future debt would not be included, so if a district decided to build a new school, for example, it would have to get voter approval or find a way to pay for the construction without tax hikes.
However, the pension exception would be more limited than in the current law, by taking increases in employee compensation out of the equation.
“These are things that school districts have little to no control over. These are mandated costs,” said state Rep. Phyllis Mundy, D-Luzerne.
House Majority Leader Mike Turzai, R-Allegheny, said Thursday that the property-tax referendum was important to head-off local tax increases in the wake of a state budget that cut basic education funding by $800 million.
Corbett elevated the property-tax reform measure during a news conference earlier in the week.
“The Legislature needs to protect taxpayers from being hit with property-tax hikes that go well beyond the rate of inflation,” Corbett said.
For a f time Tuesday and Wednesday, it appeared the property-tax reforms might be combined with a voucher and charter school bill, but those measures failed to get enough support. By Wednesday night, negotiations were focused on the property-tax issue exclusively.
