PA HB/SB 76: Octorara vs ‘Property Tax Independence Act’

hb_sb_76_full_logoThere has been a question raised that if I am so concerned with taxes, why am I not focused on PA HB/SB 76, Property Tax Independence Act? The short answer is… my proposals to cut the budget need to happen either way.

The Property Tax Independence Act would utilize our current sales tax mechanism to fund schools, which proponents state restores the original intent of Pennsylvania’s sales tax.

This all sounds well and good, but for Octorara, the devil is in the details.

  • All schools will initially be fully funded at their current levels.
  • Schools will receive their property tax replacement funding directly from the state. The Property Tax Independence Act will fully fund all districts by replacing the property tax dollar-for-dollar at each district’s current level. All students in Pennsylvania, regardless of their location or their area’s economic condition, will have the opportunity for a quality education.
  • Equity in schools is guaranteed because the state assumes the responsibility of school funding. Each school will receive the resources it needs regardless of the local ability to pay. This solves the funding problems faced by rural, urban and fast-growing districts.
  • The Property Tax Independence Act calls for a dedicated lockbox account for all property tax replacement revenues that is separate from the General Fund. All replacement funding for the schools will be disbursed from this account through the existing Department of Education funding mechanism, requiring no growth of the current infrastructure.

This still sound pretty good, right? The next issue is spending controls. If the State is allocating the money, and schools cannot arbitrarily raise taxes, how does this affect spending?

At enactment of The Property Tax Independence Act, all districts will receive 100% funding sufficient to meet all financial obligations with a dollar-for-dollar replacement of the eliminated property tax. In the future, every district will receive identical percentage annual base funding increases that will be limited to the increase in the Consumer Price Index (CPI), effectively tying annual school budget increases to the increase in available revenue and economic activity.

If a district desires additional revenue, they can present a no-exception ballot referendum to the voters of their district to raise additional revenue by either an earned income tax or a personal income tax. However, property taxes will not be able to be re-instituted to raise revenue.

The Consumer Price Index (CPI) is a measure that examines the weighted average of prices of a basket of consumer goods and services, such as transportation, food and medical care. The CPI is calculated by taking price changes for each item in the predetermined basket of goods and averaging them; the goods are weighted according to their importance. Changes in CPI are used to assess price changes associated with the cost of living.

CPI is one of the most frequently used statistics for identifying periods of inflation or deflation. Therefore, for schools overall, this creates a situation of feast or famine. The normal economic cycle goes in waves of highs and lows. Even worse are situations when a market bubbles goes bust, an example in recent history was the Housing Bubble that caused the Great Recession.

Octorara’s own unique situation is their cost per student, which is roughly $18,000 and higher than county, state, and national averages. Initially, Octorara will receive 100% dollar-for-dollar revenue, but the law will eventually equalize revenue with the other districts, and Octorara will be in an even greater financial crisis.

In order to survive, the Octorara Area School District will have to do exactly what I am advocating: a top to bottom restructuring that includes school consolidation and teacher union concessions. High debt and high labor costs is the very cause of our high tax situation. If HB/SB 76 is past, all opinions to the contrary will have no alternative but to accept reality. There is no other alternative.

We can sit back and hope the Property Tax Independence Act passes, forcing Octorara to live on a fixed income from the state, or we can take control and start the savings now.

One thought on “PA HB/SB 76: Octorara vs ‘Property Tax Independence Act’

  1. Octorara has had no major increase or change in involvement in the last 20 years. So with them being the poorest and the highest Taxed School District in Chester in Chester County. Hb76 is and would be an excellent mechanism to control the out of control spending of School Boards like Octorara Who’s school board shows little or no regard for the districts Taxpayers and struggling Senior citizens.

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