Legislative Concerns: Property Tax Reform

Understanding the Issues Impacting Public Education in the Commonwealth and in the Fox Chapel Area School District

Part 3:  Property Tax Reform

Overview:

Senate Bill 76 is a bill that was first introduced in 2013-2014 in the Pennsylvania Legislature that would have authorized an increase in the personal income tax or an earned income tax, as well as an increase in the sales tax, as a way to fund school districts. On January 5, Senator David Argall and seven other senators released a memorandum indicating their intention to reintroduce SB 76 in this session of the legislature. Under this legislation, property taxes would no longer be the primary source of school funding – which is why this bill is sometimes referred to as the Property Tax Independence Act or the Property Tax Elimination Act. It’s important to note that this bill does not actually eliminate school property taxes as school districts would still be able to levy a property tax to cover existing school district debt. This proposed reform does not include a redistribution formula based on need. Instead, sales tax and personal income tax would be distributed to districts based on what is currently received in local revenue. If revenues from the personal income tax and/or sales tax do not equal what districts currently receive, then it is likely that a district’s allocation would be reduced.

Implications for the Fox Chapel Area School District:

This potential legislation presents several challenges. Generally, sales taxes and income taxes are viewed as less stable revenue sources on which to build a school budget. Also, because the state would collect taxes to give to public schools, school funding would no longer be controlled locally – altering the authority and role of the local school board. Another point of concern is the ramifications of possible funding formulas for distributing these state-controlled school funds. Additionally, local businesses would no longer contribute to the school budget through property taxes. Currently, Fox Chapel Area School District’s local businesses contribute about 18 percent of the budget annually – almost as much as the district receives from state and federal resources combined. Losing this source of revenue would be detrimental to the budget. Moreover, families would be burdened by the increased sales tax and increased personal income tax.

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