Pennsylvania, like every other state in the country, faces an unprecedented budget crisis at both the state and local levels. It is so unusual that we do not really know how severe it will be. There is still great uncertainty about how far we will fall. And there is also uncertainty about how quickly we will be able to climb out of the hole in state and local revenues caused by the necessary health regulations put in place to limit the impact of COVID-19 on our lives and our health care system. Estimates of the two-year decline in state revenues range from $3 to $7 billion. A recent analysis suggests that the decline in school districts’ revenues could range between $850 million and $1 billion for FY 21.
This is a time for all of us, in government office and outside of it, to think carefully about how best to respond to an extraordinary situation. We need to gather information. We have to think deeply about how much state and local revenues (for both municipal governments and school districts) will be reduced. We need to investigate how much support the federal government, which has an almost unlimited capacity to fund state and local governments, will help and what we can all do together to ensure that federal aid will be sufficient. We have to think carefully about how to balance state and local responsibilities for managing the remaining shortfalls—which are likely to require some reductions in planned expenditures and some increases in revenues by the state, county and municipal governments, and school districts. And we have to adjust public policy to the varying circumstances of our local governments and school districts, ensuring that the impact of the recession does not fall disproportionately on those with low incomes and people of color as it has too often in the past.
Sadly, the House of Representatives is moving ahead with a bill to freeze property school taxes that is the antithesis of this careful, measured approach. To begin with, this proposal is premature in two respects. We still don’t know enough to be making a major policy change of this kind. And it attempts to set policy for one element of our school funding system entirely apart from other crucial elements including other sources of local school revenue and state funding for schools.
The proposal also does not take into account local variation in school districts and state support for them. Our previous research has shown that while property taxes are very high as a share of income in some parts of the state, they are low in many other parts. And as a whole, property taxes are not especially high in Pennsylvania compared to neighboring states. Given this variation in the impact of property taxes on Pennsylvanians, the variation in how the COVID-19 recession will affect different school districts and parts of the state, the different ways that school districts raise local revenues, and the variation in how well or badly schools are funded by the state, an across the board freeze on property taxes is not sensible public policy. At the very least, until we know what state support for schools looks like in the immediate future—and most likely beyond—local school districts must be able to adjust their own budgets and property tax revenues without having to follow rigid rules set by the state.
Finally, the proposal does not address the profound inequities in how we fund schools in the Commonwealth or how we tax our citizens. No discussion of property taxes should take place in that vacuum. We remain convinced that the best way to diminish the harmful consequences of property taxes for some Pennsylvanians in some parts of the state is to adopt measures targeted at helping those with low and moderate incomes. The unequal impact of COVID-19 on local and regional economies, and on the citizens of the state, makes such a targeted approach even more appropriate at this moment.