January Newsflash
Will tax relief include relief for underfunded schools?
by Paul Socolar
For years, critics of school funding practices in Pennsylvania have pointed to the state's heavy reliance on local property taxes as an unfair and discriminatory system.
In this region, it means that the wealthiest suburbs such as Lower Merion are able through property taxes to raise and spend as much as $17,000 per public school student annually, whereas a less affluent community like Philadelphia spends just over $9,000 per student.
Now, the Pennsylvania state legislature is poised to tackle property tax reform and shift more of the burden for funding education to the state government. In a special session of the state legislature called by Governor Ed Rendell, both houses are working on plans to raise revenues for distribution to local school districts for local tax relief.
But advocates for equity in school funding say that these legislative proposals for local tax relief are inadequate if they do not simultaneously deal with the underlying issue of school funding inequities.
The Education Law Center is one of several area organizations advocating that along with relieving local tax burdens, the state should provide additional dollars to help underfunded school districts that simply cannot generate enough revenue for education even when they charge high property tax rates.
"Although property tax relief is necessary and important, it's foolish for the legislature to spend all this time and enact only half a solution to the problem," commented Baruch Kintisch, staff attorney at the Education Law Center.
Kintisch called it "very discouraging" that legislators have not been willing to "stand up and say that school funding reform needs to happen as part of the special session."
But he added that his organization and others are planning to "ratchet up our advocacy efforts so that this year, in an election year, funding equity has a higher profile as an issue."
Philadelphia schools will need any financial help they can get in the coming year; the District has been under an administrative hiring freeze and budget projections for the next year are very tight. Across the state, school districts are in a similar bind, with rising employee pension costs one new cause for concern.
The Rendell administration, while it has not interjected the funding equity issue into the special session on property taxes, is promising to address it through the budget process through initiatives that direct more funding to less affluent school districts.
The state government currently funds about 38 percent of total public education spending in Pennsylvania, putting a greater funding burden on local school districts than most other states.
The 2006 "Quality Counts" report from Education Week gave Pennsylvania a grade of C- for resource equity. The annual study found that the state scored worse than all but seven other states on "wealth neutrality" - meaning that spending per district here is more highly correlated to the property wealth of the local school districts.
Legislative proposals for local tax relief could increase the state's share of education spending above 50 percent. The state House and Senate have taken different approaches, but proposed revenue sources under discussion include hikes in the state sales tax and personal income tax as well as distribution of as much as $1.2 billion in expected revenues from the legalization of slot machines.
The proposals currently under consideration would not translate into any additional dollars for schools and classrooms. State dollars would be used to provide dollar-for-dollar reduction in local property taxes. In the case of Philadelphia, some officials have proposed that the state funds be directed to wage tax reduction rather than property tax reduction.
Michael Churchill of the Public Interest Law Center of Philadelphia noted that a state House proposal to expand the state sales tax and modestly increase the state income tax would - when combined with anticipated gaming revenues - put as much as $3.3 billion in play for tax relief. He argued that with such a big pot of money potentially available, $2 billion could be directed to underfunded school districts while still offering substantial, across-the-board tax relief.
"Just dealing with tax relief and leaving a two-tier system of education with a few well-funded schools and many inadequately funded does not meet the needs of the people of the state," Churchill and colleague Thomas K. Gilhool wrote in a recent article, a version of which appeared in the Philadelphia Inquirer.
At a series of town meetings in January organized by the Philadelphia legislative delegation seeking feedback on the various legislative plans for tax relief, more money for poor school systems was not part of the property tax reform package presented by legislators. Legislators asked constituents whether they preferred property tax cuts, wage tax cuts, or a combination.
At one town meeting in North Philadelphia on January 19, State Representative Dwight Evans acknowledged that school funding equity continues to be a key issue across the state and particularly for legislators in rural areas. But he added, "There's not the appetite for the taxes" that would pay for school funding reform.
Governor Rendell's Secretary for Policy Donna Cooper maintained that there is another way to make headway on getting more funding to the neediest school districts, and that is through the state's budget process. The governor presents his budget proposal on February 7.
Cooper defended the governor's decision not to push on school funding equity in the special session. She said the administration sees property tax relief and funding equity as two separate discussions. "We feel that we are making progress on funding equity through significant annual increases in the budget process," Cooper stated.
The combined increase in preK-12 education funding in three years under Rendell has totaled $1.16 billion, which averages out to an annual increase of just over 5 percent. Cooper pointed to two programs initiated by Rendell that have boosted funding for needy school districts: the $200 million accountability block grant program and the "foundation supplement." She promised the governor's upcoming budget plan would include increases in both areas this year.
The foundation supplement was a new state initiative last year, funded at $22 million, with those funds targeted at the 225 districts in the state that spend less than $8,500 per student. Most states have a "foundation formula" insuring a minimum funding level in all districts.
But advocacy groups say the incremental gains under Governor Rendell have not gone far enough, and they are continuing to cultivate legislative champions for a more sweeping change to the funding system.
Janis Risch, executive director of Good Schools Pennsylvania, an organization focused on achieving school funding equity, emphasized that the work to bring fairness to what is still a profoundly unequal system is a long-haul, statewide effort.
Risch said her group and others would be "continuing the work of trying to bring home in each legislative district the impact that school funding inequity has."
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