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June 14, 2013 | By | Posted in Features

PA property taxes continue uphill climb as lawmakers debate reform

By Melissa Daniels | PA Independent

PROPERTY TAX PROBLEMS: The amount of taxes collected by school districts has gone up five times in the last 20 years.

PROPERTY TAX PROBLEMS: The amount of taxes collected by school districts has gone up five times in the last 20 years.

HARRISBURG — After years of seeing Pennsylvania property taxes creep up, some lawmakers are saying enough is enough.

Before casting a “no” vote on this year’s state budget, Rep. Mark Painter, D-Montgomery, explained why he opposed the plan.

Reading from a prepared speech on the House floor, Painter said he thinks the GOP-backed proposal is bound to lead to higher property taxes in his southeastern district.

Painter recalled, during his days as a township tax collector, seeing home owners cry in his office, fearful of losing their homes due to rising property taxes.

“They cried because they didn’t know how they were going to be able to pay their school taxes, they didn’t know how they were going to be able to keep their homes,” he said. “The claim that this budget doesn’t raise taxes will ring hollow in Limerick Township.”

PAINTER: The southeastern Pennsylvania representative said he's concerned the state budget will lead to higher property taxes in school districts.

PAINTER: The southeastern Pennsylvania representative said he’s concerned the state budget will lead to higher property taxes in school districts.

Painter’s constituents are far from alone.

State data shows that year after year, residents are paying more and more in property taxes – more than a five-fold increase in the last 20 years.

Last year, schools brought in more than $11.48 billion in property taxes. In 1981, that figure was $2.05 billion.

Overall, the 20-year average for increases is $314 million each year, or 5.9 percent.

Department of Education spokesman Tim Eller said property tax collections increase year to year for a variety of reasons, only one of which is school districts raising rates.

“That could increase from one year to the next for several reasons,” Eller said. “They raised the rate, there’s a reassessment, home values may have increased, or there’s new construction coming in the district.”

Only one year out of the 20-year time span, the 2008-2009 school year, saw a property tax decrease. That year, districts collected $35.5 million less than they did the year before.

Before that, tax collection was going up anywhere between 3.6 and 10.8 percent every year.

The data does show that recent increases have slowed. Last year, overall collections grew by 2.9 percent, or $327 million from the year before. The year before that, the increase was 3.7 percent, and 3.1 percent the year before that.

Eller said the Act 1 index instituted in 2006, which limits property tax increases to a formula-generated level each year, has helped. Since schools have to stay under the limit, or apply for an exemption with the state, they can no longer hike up taxes as needed to fill a one-year budget gap.

Most districts have held to that rule.

In the 2013-2014 school year, the index was set at 1.7 percent. According to state data, 311 out of 497 school districts indicated they would not raise taxes above the cap. Out of the remaining 186 schools that had adopted a preliminary budget, 171 districts planned to raise taxes above that limit and received approval from the state to do so. Another 15 must receive voter approval to do so.

State data shows not all of the districts who apply for the exemption end up using it.

Last year, 197 school districts applied for a total of $159.9 million in referendum exceptions. But only 105 districts ended up using the exemptions, tallying tax increases of $48.2 million.

Jay Himes, executive director of the Pennsylvania Association of School Business Officials, said the number of districts spurning tax hikes, despite mandated operational cost increases from the state, is “pretty responsible.” In the last five years, anywhere between 25 percent to 34 percent of districts have had no increases at all, according to PASBO data. 

When districts decide to raise taxes, it’s not a “knee-jerk reaction,” Himes said.

“We would argue, and argue strenuously, that if we were getting the same state support that even our surrounding states would get, there would be much less pressure on property taxes,” he said.

Himes described property taxes as a “see-saw,” finding a balance with what the local tax base can provide and the state funding received. Lower or level state funding, matched with mandated increases in operating expenses, means districts have to look to property taxes with no other taxing options available to find local revenue, Himes said.

Conversely, increased state funding means level, or decreased, property taxes.

Himes said the reason school property taxes get so much attention is because they arrive in one annual bill. Local and state income taxes extracted from weekly paychecks are harder to track.

“If you ask people how much they pay in local or state income tax, I don’t think they could tell you,” he said.

And while plenty of Democrats, like Painter, relegated the proposed state budget as yet another burden to Pennsylvania property owners, a bipartisan proposal to eliminate property taxes is once again up for debate.

Rep. Jim Cox, R-Berks, has been a proponent of using different mechanisms to fund schools. This year, he and Sen. Dave Argall, R-Schuylkill, are pushing House Bill 76, which would increase personal income tax and create a higher, broader sales tax.

Last year, a similar proposal  failed to pass the House Finance Committee. Then a bipartisan committee of lawmakers studied the issue in depth, and HB 76 was once again up for discussion.

But there’s no indication that this will be the year the General Assembly bites the bullet on property tax reform, despite broad support. The proposal has 67 co-sponsors in the House and 20 in the Senate, a mix of Republicans and Democrats from all corners of the state and much of the area in between.

Last month state Rep. Rick Saccone, R-Washington, penned an op-ed in favor of the plan. Like Painter, he pointed to residents at risk of losing their homes as a call to action.

“Those on fixed incomes are too often forced to surrender their homes, because after years of paying off their little castle, they can no longer afford to pay the government property tax,” wrote Saccone. “This is unconscionable and must be remedied.”

Contact Melissa Daniels at melissa@paindependent.com

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Melissa Daniels is a reporter for PA Independent. She can be reached at 717-350-0962 or Melissa@PAIndependent.com

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