HB 1776, The Property Tax Independence Act
Frequently Asked Questions (FAQs)

More of the most frequently asked questions (FAQs) about House Bill 1776, the Property Tax Independence Act.

Q. Will this bill eliminate the "hold harmless" feature of the current school district funding system? If not, how do we overcome the objection that growing school districts are being short-funded?

A. Under the Property Tax Independence Act, all school districts would be fully funded.

Because of significant variations between districts, and the phase-out of property taxes and into the new Sales and Use Tax, new funding will occur in two different ways. 1. Initially, all school districts will initially receive 100 percent funding sufficient to meet all financial obligations and levels will be established at a per-student expenditure level per district. Initial funding levels will increase annually based on the increase in the Consumer Price Index (CPI), allowing school budgets to remain in step with inflation. 2. Further, all districts will be evaluated in predetermined periods for changes in student population and funding will be adjusted upward or downward to reflect those changes.

Q. Much of the increase in cost is as a result of construction. Wouldn't strengthening the "Taj Mahal Act" help reduce spending that does not seem to lead to learning?

A. Most of the crushing property tax burden borne by our taxpayers and the cause of the high cost of public education is attributable to salaries, federal special education mandates and similar programs. However, the tremendous increase in property taxes during the past 10 years or so has increasingly been because of construction. In fact, the current long-term debt held by our 500 school districts is now more than $24 billion. Some legislators have been saying that this debt albatross is like the horse coming around the outside of the track that overtakes the lead horse of teacher salaries as the leader of the property tax burden. If we do not overhaul the entire public education financial system soon and put immediate controls on spending, the system will be nearly impossible to stabilize.

The "Taj Mahal Act" is a good thing, but it does not work when the voters have no say. And, it does not work when the horse is already out of the barn. It is critical to understand that the Property Tax Independence Act is not just trying to prevent a future problem. It is, in fact, trying to correct a very bad current financial problem that is getting geometrically worse by the month. The Property Tax Independence Act deals very specifically with the issue of construction debt and the entire issue of spending by requiring a voter referendum for any new construction debt that requires funding not provided in the basic school district budget.

Q. Shouldn't the focus be on spending? Isn't the taxpayer protection or Taxpayer Bill of Rights (TABOR) the more effective and, politically, the more feasible approach?

A. If you favor TABOR and taxpayer protection, then you must embrace the Property Tax Independence Act because it incorporates a common element of control that would constrain spending to at or below economic growth. Under this legislation, the taxpayers keep more of their money. That means less taxes, more consumer spending, a more vibrant economy, and more financially secure citizens. No other suggestion for tax reform has been developed and tested like the Property Tax Independence Act.

Q. Property taxes have been approved by voters of your own local community and it would seem that the place to address the issue is through the local school board and in those elections. What is the objection to this strategy?

A. The fact is, none of the property taxes in the state have been voted in by the voters. They have been voted in by a small band of school board members essentially unaccountable to the taxpayer. If we would have had genuine voter referendums like many states, this statement might be true. Therefore, the problem is in fact not really "local" in the sense that the voters have created the current problem. Secondly, there is NO "local" solution for more than 100 school districts that will be forced to declare "financial distress" in the next few years and for which the state will be responsible by law to take over. These districts are poor districts that have NO wealth from which to derive revenue. They have no property value to tax and they have no income base to tax either. The entire system is on the verge of financial collapse and, whether we like it or not, the Commonwealth by statute and Constitution has an obligation regarding public education. Therefore, the solution is NOT local.

Q. Will this bill eliminate the need for properties to be reassessed?

A. No, not immediately. However, the need for assessment will be reduced. The frequency of assessments will decrease as the most common need for reassessment is to meet the demand for school budgets. Ultimately, if all property taxes are eliminated, assessments would be eliminated.

Q. The Pennsylvania School Boards Association and Pennsylvania State Education Association are very influential in Harrisburg and would not permit any reduction in spending for their members, whether administrators or teachers, and would capture the bureaucracy as the insurance industry has captured the Department of Insurance. Is this a fair and accurate prediction?

A. It is very true that these entities are influential. That is why in most districts and certainly in a statewide view, there has been no genuine spending control in our districts. The locals have been captive and that is why the spending has increased so sharply and why the Taj Mahals have been built even against the wishes of the local taxpayers. Under the Property Tax Independence Act, spending increases are not suspended, but are realistically reduced. In part, the Property Tax Independence Act in a disciplined but realistic and predictable fashion slows the spending beneath the economic growth rate of the sales tax and forces financial discipline on the school boards by only allowing them a certain amount of revenue in which to operate. At the same time, the act does provide the revenue sufficient to meet their needs. It also introduces the concept of voter approval for new projects and expenditures.

Q. Does the bill reduce the size of the state government? How?

A. Initially, there is no change in state government size affected by this legislation, although because the Property Tax Independence Act slows the growth of spending, the size of local government will be reduced.