The Senate Appropriations Committee met on March 30 to discuss the proposed 2015-16 education budget with Acting Education Secretary Pedro Rivera. There were three topics discussed at the committee hearing that will be key to understanding the upcoming budget process:
- How well public schools are doing and whether all children are given a fair chance to succeed;
- The role of unfunded pension costs in budget concerns; and
- Property tax reform.
Today, we’ll be looking at the last topic: property taxes.
Gov. Wolf and state lawmakers have both proposed changes in property taxes used to fund public schools, but some senators routinely challenged Wolf’s proposal during the hearing. Sen. David Argall (R-Berks and Schuylkill) said partisan politics drove Gov. Wolf’s property tax reform plan, to which Rivera countered that the proposed education budget, overall, revolves around funding equity.
To understand how the plan would work, let’s look at the projected property tax reductions shown in the figure below. Each dot represents the most typical household in a school district, and the figure shows two factors:
- The student poverty rate of the school district running from left to right across the bottom; and
- The proposed percent tax reduction running along the left-hand side, from the bottom to the top of the graph.
Neighborhood poverty is reflected by school district poverty. Student poverty — as indicated by the share of students who qualify for free- or reduced-price lunch — is now the norm in our public schools, reaching 44% overall, with half of districts having rates of 40% or higher. You can see a large cluster of districts rise from left to right, showing that as school district poverty – neighborhood poverty —increases so does the proposed percent tax reduction for the most typical household. This means the plan would focus the largest shares of homeowner tax relief in lower-income areas.
Source: PBPC analysis
Skeptical senators said homeowners would not be protected against rising property taxes, but that’s not true for two reasons:
- The Act I index already caps how high property taxes can be raised without voter approval (the base index for 2015-16 is 1.9%); and
- The Wolf Administration’s proposal to increase the state share of education funding from 38% to 50% will greatly lower the primary driver of high property taxes, which is the need for school districts to raise local revenue to make up for any funding gaps.