I told voters during last year’s campaign school property tax was my top priority. Eight months into my first term as state representative for the 93rd District, my focus hasn’t changed.
In June, we hosted the first town hall meeting dedicated solely to property taxes. I invited Rep. Frank Ryan from Lebanon County to speak about his controversial yet fiscally responsible House Bill 13
, the School Property Tax Elimination Act. Colleagues in Harrisburg questioned why we would voluntarily gather angry citizens to discuss an issue with no easy solution. My answer is simple - we are elected to address issues, not avoid them. This is a time for serious, fiscally-responsible people to make serious, fiscally-responsible decisions.
First, some cold, hard facts. The Public School Employees and State Employee Retirement systems are underfunded by at least $75 billion. To put it in perspective, the state budget, which I opposed due to excessive spending, is $34 billion. In other words, we have UNFUNDED pension obligations that are more than two times our state budget.
Due to the current unfunded liability, all Pennsylvania school districts must contribute nearly 35% of payroll to the pension fund this year with teachers contributing another 4-5% (most companies contribute 3-4% of payroll to employee retirement). Many school employees can retire with a full pension - 87% of their salary - around age 58. I have great respect for teachers (my brother is one) who have made a smart career choice; however, this has nothing to do with liking teachers. It is simply unsustainable to pay anyone that much of their salary (tax free, mind you) plus benefits to NOT work for 20-30 years. We are legally obligated to fund these pensions and have every intention of doing so. That is, until the state goes bankrupt which, make no mistake, is a legitimate possibility in the next 10-12 years.
The collateral that enables school districts to continue spending taxpayer dollars…is your home. If a school district goes broke, as happened in Harrisburg, courts can force an increase in property tax to satisfy bond holders. Also, if any school district fails, the remaining districts are responsible for their debt. As long as we allow people’s property to collateralize spending, school property taxes will rise.
York County residents are unfortunate victims of hold harmless, an agreement put in place to ensure school districts with shrinking student populations never have their state funding cut. These districts get a much higher percentage of their school funding from the state, so property taxes are not a big issue for their residents. That is why it is difficult to get their legislators to vote for property tax reform. A $150,000 York County home that pays $3,500 in property taxes may pay only $1,200 or so in many parts of the state.
Most opponents of House Bill 13 don’t like having retirement savings taxed. Here are the facts. HB 13 would tax ONLY non-Social Security retirement EARNINGS at 4.92%. The vast majority of retired York County homeowners will save more money in property tax than they will pay in income and sales tax AND get to keep their home. This is a HUGE win for seniors, especially since school districts would also be prohibited from reinstating property tax.
As for low-income Pennsylvanians, most already pay no income tax and more than half live on Social Security alone. House Bill 13 would eliminate their biggest obligation - property tax. Granted, sales and income tax could increase. But the reality is, it’s much harder for the General Assembly and governor to agree to a tax increase than it is for five of nine school board members to do so with property taxes.
If we don’t get the support of seniors, the bill will never pass. The result will be property taxes continuing to rise an average of 3% per year, doubling in 20 years. Rents will increase also. Our working population is already declining while our retired population is increasing, which is why we can’t ask working families to bear all the burden. If younger people and businesses continue to leave the state, there will only be retirees left to pay the bills.
Lastly, consider how you currently pay your property tax or rent with your income. Property tax is simply an out-of-control income tax based on the value of the property you have worked so hard to pay for.
Eliminating school property taxes requires finding a funding source that responsibly generates enough revenue to meet the existing cost of education. At that point, we can address those things which drive up that cost and better serve Pennsylvania taxpayers.
Representative Mike Jones
93rd Legislative District
Pennsylvania House of Representatives
Media Contact: Scott Little