Peters township school district NEGATIVE EFFECTS OF PROPERTY TAX ELIMINATION under Senate bill 76

Peters township school district is a district that has achieved high academic standards at some of the lowest costs per student across the state In 2015, Peters Township spent less per student than 434 of the 500 school districts across Pennsylvania. PTSD offers 21 AP courses, has 2 National Blue Ribbon schools, and ranked 3rd in the region for Keystone Exam performance. 2

FUNDING FOR SCHOOL DISTRICTS SHIFTS FROM LOCAL TO STATE LEVEL s.b. 76 IN A NUTSHELL FUNDING FOR SCHOOL DISTRICTS SHIFTS FROM LOCAL TO STATE LEVEL Eliminates School Districts’ ability to levy real estate taxes, except to pay current debt service. Creates a state fund, the Education Stabilization Fund, that in the first year will pay each District: Amount District collected in prior year real estate taxes less annual debt service payments, PLUS A cost-of-living (“COL”) factor. Thereafter, Districts receive same amount as prior year + COL (if factors to which the COL is tied increase). HOW DOES THE STATE PAY FOR THIS? Increase state personal income tax from 3.07% to 4.34% Increase state sales tax from 6% to 7% Broaden the state sales tax to include many more goods (could be food, services, daycare, clothing +$50) COL FACTOR The COL is tied to the lesser of the: Percentage Increase in the statewide average weekly wage OR Average of % increase in sales and use, personal income and hotel occupancy tax collections. WHAT IF A DISTRICT DOESN’T HAVE ENOUGH MONEY TO PAY IT’S BILLS AFTER STATE DISTRIBUTION? S.B.76 gives local School Boards the ability to raise local personal income tax (currently .5% in Peters Township) or an earned income and net profits tax, after voter approval of a local referendum 3

s.b. 76 would give the state control OF about 80% of the revenue for peters township school district’s budget, up from only 23.9% IN 2015/2016. S.B. 76 would shift control over the District’s budget funding to the State. In 2015/16, of the 75.5% of the budget that was locally funded, over 80% of that was revenue from real estate tax collections. The District has the ability to modify real estate tax millage rates, within limits currently set by the State (2017 limits are 2.4% - this is less than Act 1’s 2.5% index because we are in a reassessment year) in order to generate sufficient revenues to fund anticipated expenses. If the District does not receive sufficient revenue to fund anticipated expenditures it will be required to cut programs or ask residents, via referendum to increase current local income tax rates. This is most of the revenue that is to be replaced by S.B. 78 (less debt service payments) 4

S.b. 76 is a revenue-based funding statute that will not provide the district with sufficient monies to pay for mandated expenses over which the district has little or no ability to control PENSION COSTS SPECIAL EDUCATION COSTS COST INCREASES BUILT INTO COLLECTIVE BARGAINING AGREEMENTS CYBER/CHARTER COSTS HEALTH CARE COSTS 5

S.B. 76 DOES NOT GUARANTEE FUNDING WILL BE SUFFICIENT TO COVER the DISTRICT’S mandatory INCREASES IN PENSION CONTRIBUTIONS – A COST THAT HAS BEEN A MAIN CAUSE OF PROPERTY TAX INCREASES ACROSS THE STATE 6 In 2010/2011 total PSERS costs were 2.87% of a $49 million budget (including debt service) in Peters. In 2015/2016 total PSERS costs were 12.58% of a $59 million (including debt service) in Peters.

In an effort to reduce future pension costs, PETERS TOWNSHIP ENDUREd A LONG TEACHERS’ STRIKE DURING THE 2015-16 SCHOOL YEAR TO KEEP SALARY INCREASES BELOW HISTORICAL LEVELS 7 For the first time, the new Collective Bargaining Agreement gave a lesser salary increase to teachers at the top of the salary scale which were less than the amounts shown in blue in the graph.

DESPITE THE DISTRICT’S ABILITY TO KEEP SALARY INCREASES AS LOW AS POSSIBLE, PENSION INCREASES WILL CONTINUE TO STRESS THE BUDGET AND in some years S.B. 76 Cost of living (”COL”) INCREASES WILL NOT BE SUFFICIENT TO merely COVER THESE COSTS Ptsd projected s.b. 76 revenue DISTRICT’S historical pENSION cost increases 2012-2017 USING 2015/2016 FIGURES   ADDITIONAL PROJECTED REVENUE TO DISTRICT 6111 Current Real Estate Tax Collections $36,491,895 6112 Interim Real Estate Tax Collections $299,194 7340 State Property Tax Reduction Payments Act 1 $729,871 TOTAL PROPERTY TAX COLLECTED 2016 $37,520,960 LESS 2016 DEBT SERVICE PAYMENTS $4,655,000 PROJECTED BASE REVENUE S.B. 76 $32,865,960 PLUS COL AT 0% PLUS COL AT 2% $33,523,279 $657,319 PLUS COL AT 3% $34,509,258 $985,979   DISTRICT'S PSERS OBLIGATION INCREASE FROM PRIOR YEAR UNREIMBURSED INCREASE 2012 $2,247,476 2013 $3,218,989 $971,513 $485,757 2014 $4,683,384 $1,464,395 $732,198 2015 $6,122,764 $1,439,380 $719,690 2016 $7,366,351 $1,243,587 $621,794 2017 est. $9,168,699 $1,802,348 $901,174 A Feb. 2017 PSBA/IFO webinar estimated COL increases could be between 2-3% on average. 8

s.b. 76 funding does not account for special education costs that greatly exceed special education funding (“SEF”) Over the last 5 years, PTSD has spent $21.5 million more on special education than the State has contributed to the District in its annual SEF. S.B. 76 funding will not take into account that over the last 5 years, the District’s special education costs have increased an average of $350,000 per year. Because the District’s state SEF has remained essentially at the same levels as 2001-02, the district’s other revenue must increase to cover these costs. Federal Law (IDEA) obligates Districts to maintain their effort by not reducing special education spending from year-to- year except in certain exceptions. 9

THE DISTRICT’S SPECIAL EDUCATION EXPENSES ARE NOT UNREASONABLE AND IN FACT ARE ONE OF THE LOWEST PER STUDENT IN WASHINGTON COUNTY. 10

Pension and special education cost increases are the primary drivers of real estate tax increases in peters township THE DISTRICT’S need to increase real estate taxes is not a result of unfettered spending, but directly resulting from increases in pension and special ed. Costs with no additional funding from the state. In 2 years (2011/12 and 2013/14), rather than pass ALL OF those costs onto its residents in the form of increased real estate taxes, the district cut other expenses (such as not filling positions when teachers retired) in order to absorb some of those costs. From 2010/11 through 2015/16, the District increased real estate millage by 15.57 collectible mills. During that time, pension and special education costs increased by the equivalent 14.53 collectible mills. 11

S.B. 76 FUNDING DOES NOT TAKE INTO ACCOUNT CYBER/CHARTER SCHOOL ENROLLMENT, WHICH TAKES MONIES AWAY FROM DISTRICT OPERATIONS and is unpredictable During the teachers’ strike of 2015-2016, District families faced an educational year stretching to the end of June. As a result, the District saw a large increase in cyber/charter enrollment which could have been addressed when setting real estate millage. S.B. 76 funding would not take this factor into consideration. 12

PETERS TOWNSHIP REAL ESTATE TAXES COLLECTED The PA INDEPENDENT FIscal OFFICE’S projectED cOST OF LIVING increases FOR s.b. 76 distributions of around 2-3% will fall below historical increases in real estate TAX revenue collections in ptsd THAT ARE NECESSARY TO FUND MANDATES AND OPERATING COSTS PETERS TOWNSHIP REAL ESTATE TAXES COLLECTED   2014 2015 2016 6111 Current Real Estate Tax Collections $32,480,833 $34,713,972 $36,491,895 6112 Interim Real Estate Tax Collections $291,372 $267,332 $299,194 6411 Delinquent Real Estate Tax Collections $500,522 $504,993 $506,633 6412 Delinquent Interim Real Estate Tax Collections $0 7340 State Property Tax Reduction Payments Act 1 $729,300 $732,887 $729,871 TOTAL CURRENT, INTERIM, DELINQUENT TAXES COLLECTED AND CASINO REVENUES RECEIVED $34,002,027 $36,219,184 $38,027,593 PERCENTAGE INCREASE IN REAL ESTATE TAX COLLECTIONS FROM PRIOR YEAR 6.52% 4.99% 13

ON AVERAGE, Ptsd will lose OVER $500,000 of ANNUAL revenue generated from newly constructed real estate that will not be replaced with distributions under s.b. 76 This graph shows the increase in assessed value of real estate in PTSD solely caused by new CONSTRUCTION Even if PTSD would NOT have raised taxes since 2008/2009, new construction would have generated an additional $4.3 million in tax revenue to the District Since S.B. 76 distributions are only based on taxes collected in the prior year, PTSD will lose out on over $500,000 of revenue per year. 14

S.B. 76 SHIFTS ALL COSTS OF FUNDING EDUCATION IN PA AWAY FROM BUSINESS AND ONTO INDIVIDUALS EVEN THOUGH ONLY 9.7% OF THE ASSESSED VALUE OF REAL ESTATE IN PETERS TOWNSHIP IS COMMERCIAL, INDIVIDUAL TAXPAYERS WILL BE PICKING UP ABOUT $2 MILLION OF EDUCATION FUNDING THAT IS CURRENTLY PAID BY BUSINESSES IN PETERS TOWNSHIP. 15

ANNUAL DEBT SERVICE PAYMENTS PTSD s.b. 76 funding eliminates a district’s ability to apply savings from reductions in debt service payments to future costs of operation S.B. 76 will only permit the District to levy real estate taxes at a millage rate sufficient to collect revenues equal to the debt service obligations in any given year (projected to be $4,619,344 in 2017). These annual reductions in debt service payments that the District previously used to pay for ever-increasing mandated costs are lost under S.B. 76. ANNUAL DEBT SERVICE PAYMENTS PTSD 2016 $4,655,000 2021 $4,192,310 REDUCTIONS IN ANNUAL DEBT SERVICE PAYMENTS FROM 2016 TO 2021 $462,690 17

S.B. 76 legislates UNFAIR FUNDING, DISCRIMINATING AGAINST THOSE DISTRICTS THAT HAVE DONE A GOOD JOB OF KEEPING EXPENDITURES AT REASONABLE LEVELS SIMILARLITY OF PETERS AND A NEIGHBORING DISTRICT NEIGHBOR PETERS % STUDENTS RECEIVING FREE AND REDUCED LUNCH 5.3% 5.50% NUMBER OF STUDENTS 4063 4220 PERSONAL INCOME PER WADM $261,200 $259,000 TOTAL EXPENDITURES PER STUDENT 2015 $18,524 $13,337 PROJECTED S.B. 76 DISTRIBUTIONS USING 2015 FIGURES NEIGHBOR PETERS 6111 Current Real Estate Tax Collections $44,007,970 $34,713,972 6112 Interim Real Estate Tax Collections $26,848 $267,332 7340 State Property Tax Reduction Payments Act 1 $1,387,506 $732,887 TOTAL PROPERTY TAX COLLECTED 2016 $45,422,324 $35,714,191 LESS DEBT SERVICE PAYMENTS $8,060,601 $4,466,927 PROJECTED S.B. 76 DISTRIBUTION FROM EDUCATION STABLIZATION FUND BASED ON 2015 FIGURES $37,361,723 $31,247,264 S.B 76 DISTRIBUTION PER STUDENT $9,196 $7,405 The big difference to note is the substantially higher total spending per student in the neighboring district. This results in higher real estate tax revenue collected, that in turn results in a higher distribution under S.B. 76 S.B. 76 would pay two neighboring districts, with similar socio-economic characteristics and academic results differently. S.B. 76 would pay the neighboring district $1,700 more per student than Peters. 18

RATHER THAN FOCUS ON REAL ESTATE TAX REFORM, THE LEGISLATURE SHOULD FIRST RESOLVE THE FACTORS THAT ARE CAUSING MANDATED COST INCREASES TO DISTRICTS S.B. 76 is supposed to resolve the pressures of high real estate taxes. However, instead of focusing on the cause of escalating real estate taxes, i.e., rising mandating expenses, S.B. 76 merely changes the way education will be funded. S.B. 76 does NOTHING to address rising costs, but merely changes who will pay for them and how. In doing so, the funding source for education will become less predictable and more affected by economic recessions. While supporters emphasize that the monies in the Education Stabilization Fund are continuously appropriated, meaning they will be distributed even if a state budget is not passed, what happens when the Fund, that is financed by revenue that will decrease in a recessionary period, doesn’t have enough money to distribute at least as much as districts received in the prior year? Instead of providing Districts with a mechanism to raise funds to pay for these mandatory increases in expenses, it leaves the Districts with no funding source and very little room to cut expenses except for cutting educational programs. If efforts were made to reduce mandated costs to Districts, it is likely that real estate tax reform would not be necessary. Act 1 already limits the amount that Districts can increase real estate taxes and those increases would not be necessary if the state would reduce mandated costs to Districts or fund those programs that are mandated. In addition, it leaves no option for District’s to pay for capital improvements except by asking its residents, who will still have a school real estate tax and increased personal income and sales taxes to agree to further increases in a local income tax. Please contact your State Representative and Senator to VOTE NO ON PROPERTY TAX ELIMINATION LEGISLATION.