PENNSYLVANIA EDUCATION POLICY FORUM PROPOSED SCHOOL PROPERTY TAX RELIEF AND REFERENDUM REQUIREMENTS FOR SCHOOL DISTRICT TAX INCREASES May 13, 2004 William G. Harper Director of Finance and Business Operations South Fayette Township School District

REAL ESTATE TAX REDUCTION and BACK-END REFERENDUM CONCERNS CURRENT PROPOSALS SLOT MACHINES (and/or Sales Tax?) What will generate the needed or desired revenue? FRONT-END REFERENDUM – IN ORDER TO QUALIFY? (Wage Tax or Personal Income Tax Options?) Will counties be required to initiate if school board does not? Who will vote? REAL ESTATE TAX REDUCTION (Equitable Formula for Distribution of Funds?) Why is there no allowance for addition education funding? BACK-END REFERENDUM (Realistic Timing and Practicality?) Will this result in the erosion or elimination of school board control? Who will vote?

MAJOR CONERNS: DISTRIBUTION OF FUNDS Based upon a calculated “index” Complicated formula to determine index Factors based upon measures of wealth – personal income and property Factors based upon tax effort – personal income and market value Factor based upon enrollment (Average Daily Membership)

MAJOR CONERNS: DISTRIBUTION OF FUNDS Property tax relief floor (10%-15%) and ceiling (40%- 60%) Property tax relief to be based upon Homestead and Farmstead Exemptions (application process and fixed amount) – Will counties be able to provide the necessary data accurately and in a timely manner? Will property tax relief favor districts with high tax effort, including some of the wealthiest? Will property tax relief be restricted in some of the poorest districts?

MAJOR CONERNS: BACK-END REFERENDUM Referendum timing: If a school district must go to referendum in April or May and the referendum is defeated, what options will the school district have? Referendum language is due days prior to April-May election date – Language due in January-February Typical school district budget development: begin in November-December working draft in January-March preliminary adoption in April-May final adoption in May-June

MAJOR CONERNS: BACK-END REFERENDUM Other timeliness issues: State subsidy: Governor’s budget proposal in February-March State Subsidy: General Assembly budget adoption in May-June (if timely) Kindergarten enrollment / class selection (January-March) Group insurance rates – March and later Other data not available in January-February: staff needs/retirements, supply/equipment costs from routine annual bids and/or detailed estimates, property/casualty insurance rates, etc.

MAJOR CONERNS: BACK-END REFERENDUM Will the “back-end referendum” trigger be set at a reasonable level? (SAWW & COL are inadequate) Will state school subsidies for the next fiscal year be “guaranteed” in December or January each year so that school districts may determine Real Estate Tax needs earlier in the budget process? Will the General Assembly commit to school subsidies on a multiple (3-5) year basis to allow school districts to project their budgets on a multiple (3-5) year basis? Could school subsidy be removed from the annual state budget debates?

MAJOR CONERNS: BACK-END REFERENDUM Will Special Education Subsidy be revised to pay for actual Special Education enrollments rather than using the current “state average” enrollment as a basis? The current formula results in a drain on local resources in many districts. Will state reimbursement for construction and renovation be increased, in order to relieve the burden on local resources?

MAJOR CONERNS: BACK-END REFERENDUM Will adequate allowances be made for expenditure increases not controllable at the local level, including, but not limited to, Retirement Contributions, Health Insurance Premiums, Pupil Transportation Costs, Property/Liability Insurance costs and expanding Special Education costs due to the limitations on class size?

MAJOR CONERNS: BACK-END REFERENDUM To help avoid the referendum trigger: Will school districts be permitted to furlough staff for economic reasons? (Section 1124) Will school districts be permitted to furlough staff based upon performance rather than inverse seniority? (Section ) Will school districts be granted more flexibility (local control) in reducing or eliminating programs? Will “Mandate Waivers” be expanded and approvals be easily obtained or will specific mandates be eliminated completely to benefit all school districts?

MAJOR CONERNS: BACK-END REFERENDUM What will school districts do to avoid a referendum? Reduce staff? (Collective Bargaining Impact?) Freeze or reduce pay rates? (Collective Bargaining Impact?) Increase class size? (Collective Bargaining Impact?) Eliminate classroom aides? (Collective Bargaining Impact?)

MAJOR CONERNS: BACK-END REFERENDUM What else will school districts do to avoid a referendum? Delay textbook purchases / replacements? Delay technology purchases / upgrades? Delay needed maintenance projects? Delay equipment purchases / replacement? What is the future impact of such actions?

MAJOR CONERNS: BACK-END REFERENDUM Will school districts reduce or eliminate “non-mandated” programs and/or charge fees for such programs? Student Athletics? Student Activities? Student Transportation? Field Trips?

REAL ESTATE TAX REDUCTION and BACK-END REFERENDUM CONCERNS If Fund Raising Successful – Equity in Distribution is Critical Front-End Referendum Will it be property owners against renters? Back-End Referendum Will it be parents against senior citizens? Will people run for school board? Recommendation – Drop the referendum ideas !

REAL ESTATE TAX REDUCTION and BACK-END REFERENDUM CONCERNS If Back-End Referendum is Enacted – Listen to School District Concerns Confirm a Workable Timeline Confirm the Availability of Data Confirm Availability of Workable Options Eliminate Unfunded Mandates Must Be Practical & Reasonable