1. 1 Implications for taxpayers, school boards and students Tim Allwein, PA School Boards Association and Jay Himes PA Association of School Business Officials Implementing Act 1 Special Session of 2006

2. EPLC, March 29, 20072 PSBA/PASBO Presentation Act 1 of 2006: What’s new?  For taxpayers: Front and back-end referendum Limitations on school district spending Lower property taxes; higher income taxes (for many) Relief for “low income” senior citizens Ability to pay school property taxes in installments

3. EPLC, March 29, 20073 PSBA/PASBO Presentation Act 1 of 2006: What’s new?  For school boards: Preliminary budget development and deadlines The “index” Front and back-end referenda Back-end referendum exceptions Allowing installment payments of property taxes

4. EPLC, March 29, 20074 PSBA/PASBO Presentation Act 1 of 2006: What’s new?  For students: Activity fees Fighting for programs/activities Living without certain things More strikes More cooperative programs with other districts Fewer new facilities

5. EPLC, March 29, 20075 PSBA/PASBO Presentation Taxpayers  Front-end referendum In 2007, to choose whether or not to “shift” property taxes to greater income-based tax Beyond 2007, to increase or implement a tax shift

6. EPLC, March 29, 20076 PSBA/PASBO Presentation Taxpayers  Restrictions on school district spending Too liberal – index, back-end referendum exceptions Will remind them why school district taxes are unfair One of the reasons why state taxpayer group organization wants to repeal the law

7. EPLC, March 29, 20077 PSBA/PASBO Presentation Taxpayers  Back-end referendum Don’t see it as effective Will people turn out to vote on issues? Will people listen to arguments or simply just vote their pockets? See only that school districts are not giving them the opportunity to vote on spending

8. EPLC, March 29, 20078 PSBA/PASBO Presentation Taxpayers  Lower property taxes; higher income taxes Most working people end up with higher tax liability Working renters get a double dose Opportunity to buy in to the fairness issue

9. EPLC, March 29, 20079 PSBA/PASBO Presentation Taxpayers  Relief for “low-income” senior citizens Probably the one highlight from a taxpayer point of view May be enough to push the front-end question to victory in May Non-seniors wonder why legislature can’t figure out a way for them to benefit as well

10. EPLC, March 29, 200710 PSBA/PASBO Presentation Taxpayers  Ability to pay taxes in installments May be helpful to some; depends on an individual’s cash flow Probably won’t like limitations in law Discount period vs. convenience

11. 11 Implications for School Boards and Districts

12. EPLC, March 29, 200712 PSBA/PASBO Presentation Preliminary Budget Process  Christmas Budget Development for Valentine’s Day Preliminary Budget Adoption  The early budget process required a focus on the index Will our district be able to stay within the index? Did not require precision on line item by line item basis “There’s a reason it’s called a preliminary budget. The figures are still very preliminary. The more time we have to prepare budgets, the better information we have. But for now, we have to make do with the best we can.”

13. EPLC, March 29, 200713 PSBA/PASBO Presentation

14. EPLC, March 29, 200714 PSBA/PASBO Presentation PDE Accommodated Preliminary Budget Process  Did not restrict exception filings for school districts not at the index  Provided flexibility for school districts  Allowed just-in-case filings  Negated the incentive to inflate millage rates for exception filing

15. EPLC, March 29, 200715 PSBA/PASBO Presentation Cause and Effect?  Did Act 1 have the effect of reducing property taxes?  Is the Act 1 index not a threat in many districts?  Is it the reflection of usual property tax patterns in many fiscally conservative districts?  Is this the normal and customary election year “no tax increase” behavior?  First year phenomenon?  The results of a generous increase in BEF last year?  None, some or all of the above?

16. EPLC, March 29, 200716 PSBA/PASBO Presentation

17. EPLC, March 29, 200717 PSBA/PASBO Presentation

18. EPLC, March 29, 200718 PSBA/PASBO Presentation Front End Referenda  EIT overwhelmingly chosen by TSC’s  Minimum more often than maximum  When given tax shift options, TSC’s chose the most conservative course of action predominantly.  If the perspective of the TSC’s is reflective of the general public, then we should not expect a high success rate for the FER.  General disdain for tax shifting

19. EPLC, March 29, 200719 PSBA/PASBO Presentation Front End Referenda  Board members concern that voter uncertainty will reflect negatively on their own campaigns  “No” vote on the question and “no” vote for the candidate  Can repeat with back-end referendum

20. EPLC, March 29, 200720 PSBA/PASBO Presentation Crystal Ball  What to expect on May 15  Two easy predictions; one question More FER will fail then will be approved by the voters The approval rate for PIT will be less than for EIT How will incumbent board members fare?

21. EPLC, March 29, 200721 PSBA/PASBO Presentation Act 1 Implementation to Date  Better than expected  Usual first time kinks  PDE has developed an excellent on line system for electronically filing exceptions  Interpretation and guidance have been appropriate and for the most part timely  Outreach has resulted in good communication to school districts and education organizations  Exception—Department of State

22. EPLC, March 29, 200722 PSBA/PASBO Presentation Students  Pressure on non-mandated programs and services Extracurricular activities: sports, musicals; plays; clubs; field trips; Greater financial contribution from participants Transportation, before and after-school programs More strikes? Fewer new facilities

23. EPLC, March 29, 200723 PSBA/PASBO Presentation Implications and Future Concerns  The up and down nature of the index Correlation to other cost drivers e.g. construction costs, energy, etc.  Back end referenda Voter approval for tax increases will be the last option  Installment payment of taxes Cash flow issues?

24. EPLC, March 29, 200724 PSBA/PASBO Presentation Implications and Future Concerns Pressure  At the district level High stakes process with no easy recovery  At the state level State assistance even for low aid ratio districts may have significant ramifications Sustained state assistance below the index may have long term impacts

25. EPLC, March 29, 200725 PSBA/PASBO Presentation Implications and Future Concerns  An earlier primary  School construction  More pressure to spend down reserves?  Future of back-end referendum exceptions  Blame for failure of May questions put on school boards

26. EPLC, March 29, 200726 PSBA/PASBO Presentation Questions/Answers/Comments