State education official outlines tax reform plan
Four months after his original proposal was met with resounding resistance from school boards, Gov. Ed Rendell is advancing a revised, mandatory version of Act 72 for all school districts. Dr. Gerald Zahorchak, acting Secretary of Education, said the new proposal calls for eliminating a planned increase in the earned income tax and removing the stipulation that school boards would have the option to decide whether to participate.
The governor’s proposal is one of several that will be discussed when a special legislative session on property tax reform begins Wednesday.
Zahorchak met Friday afternoon with members of the Herald-Standard editorial board.
Act 72 allows homeowners to receive property tax reductions from revenue generated by slot machines.
The property tax reductions are not expected to arrive until 2007-08 or when at least $400 million is in the Property Tax Relief Reserve Fund and another $500 million is in the Property Tax Relief Fund, which is the fund from which the allocations are distributed.
Zahorchak said the state has gotten advice from experts in the gaming industry who have assured state officials that enough money will be generated by slot machines to provide property tax relief.
Based on the formula developed by the state, he said homeowners in Pennsylvania will see a $333 decrease in property taxes.
The state has increased education spending by $1.6 billion since Rendell took office, and the state share of education costs will increase to 44 percent once gaming revenue is realized, he said.
“The state is living up to its responsibility because the state portion of education funding has grown by a giant step,” Zahorchak said.
If the governor’s plan is approved, school district officials will begin the 2006-07 budgeting process later this year, and the budget will be subject to a possible voter referendum.
The Act requires school boards that are planning to increase property taxes higher than an annual pre-determined index to ask the voters for approval. A series of 10 exceptions can be granted by either the state Department of Education or the Court of Common Pleas that can allow a school district to exceed that index without going to the voters.
Many school officials expressed concern about the accelerated budgeting timeline, but Zahorchak said districts should have a good read on their upcoming budget because two-thirds of any district expenditures are fixed costs.
Zahorchak noted that Pennsylvania is one of only a few states that does not have some sort of limit on school spending.
He said the referendum requirements make school districts more transparent to the people they represent, by having to explain to people why the board is asking for voter approval to raise taxes above the index.
“It’s a win-win, because it’s healthy for the education community and very healthy for those outside of the education community who are left out of the conversation sometimes,” Zahorchak said.
He said now is the time to resolve the property tax issue, especially now that school districts have had more time to get more information about Act 72.
“This is not a newfound initiative. The governor wants to get this done and he will be relentless until it is done,” he said. “The legislative branch has the same desire to do property tax reform.”
During the first go-round, three local school districts – Albert Gallatin Area, Bethlehem-Center, and Connellsville Area – voted to participate in the requirements of Act 72. Statewide, 111 school boards opted in to Act 72, with the remaining 390 boards voting no or opting out by not taking any action.
He said the changes that have been made to Act 72 will likely assuage many school officials and will keep Rendell’s campaign promise to address the property tax problem.
“There is great support for property tax reform,” he said. “The process I can’t predict, but I am confident we have everything in place to get there. The people have asked for it and we should deliver it.”
Zahorchak said he expects the issue will be decided before the end of the year.