By Peter N. Calcara, vice president – government relations
The Pennsylvania General Assembly wants to address the longstanding issue of property tax reform. This is not a recording.
Most public policy issues get addressed in some form or fashion, while others never seem to get resolved. A few (very few) meander from legislative session to session, never successfully, or even inadequately, addressed. School district consolidation is one of these issues. How many times have you heard someone say we have too many school districts in Pennsylvania (500)? State oversight of hard alcohol is another. Changes have been made to the manner in which Pennsylvanians can purchase beer and wine, but the state still has a firm grip on liquor stores and the sales process through the Liquor Control Board. The granddaddy of them all, though, is school property tax reform.
The issue predates my time in Harrisburg. In fact, I was a Senate staffer when Gov. Bob Casey’s local tax reform plan was approved by the General Assembly just before the clock wound down on the 1988 session. Voters ultimately rejected the plan in 1989, and the issue has lived on in the ether of legislative issues ever since. It has swung from being a front-burner issue to one that is sporadically talked about by a handful of legislators and interest groups. It seems to rise to the top of the issues heap in election years as one that many legislators campaign on (but soon forget).
In January 2020, Sen. Joseph Scarnati (R-Jefferson), the highest-ranking member in the chamber, breathed new life into the issue of school property tax reform. In his acceptance comments as president pro tempore of the Senate, Scarnati told the chamber that he would like to see the Senate take up property tax reform. He did not endorse any one plan, but acknowledged that tackling the issue would not be easy and would require “tough votes” from lawmakers.
So, where are we now?
Legislators do have a good running start at, perhaps once and for all, addressing the issue. You may be surprised to learn that a bipartisan, bicameral workgroup of legislators has been meeting since last August to review the issue of school property taxes. The group’s goal is to seek a consensus that could garner the necessary 102 votes in the state House, 26 votes in the state Senate, and the signature of the governor. The workgroup came up with five plans (summarized below) to provide significant school district property tax relief. Note that the word used was “relief” and not “elimination.” Some lawmakers and a fringe group of outside stakeholders still dream of the total elimination of school property taxes (a $14 billion to $15 billion proposition), the votes for which simply are not there. The pie-in-sky notion that Pennsylvania can eliminate a major source of funding for public education and not have it impact other programs and services is misguided and fiscally dubious.
Here are thumbnail summaries of the five proposals advanced by the workgroup:
- Reduce school property taxes by $8.62 billion, increase the personal income tax from 3.07% to 4.07%, and raise the sales tax from 6% to 7% to provide money for homestead exclusions. School districts would have to levy a local earned income of at least 1%. The Property Tax and Rent Rebate Program would be expanded.
- Cut school property taxes by $6.44 billion through an increase in the personal income tax from 3.07% to 4.62%.
- Raise the personal income tax from 3.07% to 4.32% and cap the rebates for homestead properties at $2,340, effectively eliminating school property taxes for more than 2 million homeowners.
- Boost the personal income tax from 3.07% to 4.72% and cap the homestead rebate at $5,000, effectively eliminating school property taxes for more than 3.1 million homeowners.
- Effect an $8.5 billion elimination in homestead school property taxes by raising the personal income tax from 3.07% to 4.82% and the sales tax from 6% to 7%.
State budget hearings have concluded, and the General Assembly is supposed to be in session the next few weeks, but of course all that may change. With the coronavirus pandemic wreaking havoc on everything, it’s really anyone’s guess what happens with these proposals. However, once we return to normal, don’t be surprised to hear more talk coming out of Harrisburg about property tax reform.
The PICPA will have a major voice when the process begins to unfold. The local tax workgroup of our State Tax Committee will be fully engaged, offering different ideas, reviewing legislative language, and working with legislators.
Maybe, after nearly four decades of chasing the school property tax reform specter, it will finally materialize in Pennsylvania. After all, it is an election year.
For the latest on property tax actions when they occur as well as other legislative and regulatory updates, check out PICPA's weekly Legislative Update.
Sign up for weekly professional and technical updates in PICPA's blogs, podcasts, and discussion board topics by completing this form.