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Delco educators say property tax reform will shift burden, not eliminate it

At a meeting of Delaware County educators Friday, the Haverford School District superintendent criticized a property tax elimination proposal gaining traction in Harrisburg as merely a "tax shift," and warned that it would leave Pennsylvania taxpayers holding the bag for $2 billion that businesses would no longer have to pay in real estate levies.

"The truth is, this isn't a tax elimination – it's a tax shift, a shift which may not provide reasonable and realistic relief," said Superintendent Maureen Reusche.

With Gov. Wolf set to release his proposed 2017-18 budget on Feb. 7, about 80 school board members, superintendents, and other administrators gathered at the Delaware County Intermediate Unit in Morton to air their grievances about education funding and their struggles in the face of key costs – many out of their control – that are pounding their budgets.

Looming large among their concerns: the Property Tax Independence Act, which would fund education by raising the state sales tax  from 6 percent to 7 percent while expanding it to cover items such as groceries and clothing, and increasing the earned income tax. The bill is expected to be introduced in the Senate  this session.

The idea of replacing property taxes with sales and income taxes goes back at least 15 years, but has picked up steam in the last year, said Lawrence Feinberg, a Haverford school board member and public education advocate. He said the bill has a good chance of passing the Senate.

Supporters say it's a more equitable way to fully fund education in the state. Critics say it will fall short. They also say it would unfairly target lower- and middle-income people, who would have to pay 4.95 percent in earned income tax, an increase from the current 3.07 percent, as well as the higher sales tax.

Reusche also pointed out that despite the promise of no more property tax bills, school districts could still need to collect real estate taxes to pay off existing debt, much of which was issued in 20-year bonds.

She said that 215 of Pennsylvania's 500 districts would continue to require homeowners to pay 20 percent of their current property tax bill; in 24 districts, half of the current bill would still fall to taxpayers. A few districts would need all or almost all of their levy to pay down current bonds, according to research from the Pennsylvania Association of School Business Officials. In Delaware County, taxpayers in 15 districts would continue paying from 7.58 percent, in the William Penn School District, to 39.75 percent in Chester Upland, one of the poorest school systems in the state.

Businesses, which now pay $3 billion in real estate taxes, could be the biggest beneficiaries of the Property Tax Independence Act, Reusche said. Since they would pay only $1 billion in personal income and sales taxes under the proposed law, "this leaves a $2 billion shift from businesses to individuals," she said.

Shifting the cost of public education to a different funding stream fails to address the driving factors behind rising school taxes, critics say. Those include skyrocketing pension costs – half of which are covered by school districts and half by the state - and charter and cyber charter school payments.

Southeast Delco School Superintendent Stephen Butz said pension costs for Delaware County districts have  increased from $27.7 million in the 2009-10 school year to $121.3 million in 2014-15. As a result, he said, many districts have scaled back music and physical education programs, social services and counselors.

Charter schools also have driven up spending, with Delaware County districts paying $18.7 million for cyber charter schools in 2015-16, up more than $5 million since 2011-12. Interboro School Superintendent Bernadette Reilly said calculating charter tuition payments "has no basis in what it actually costs to educate a child in the charter school." Rather, it is devised from a formula based on the school district's prior year budget expenditures, and that varies from one district to another.

Moreover, the academic performance of many charters and cyber charters, she said, "has been dismal."