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Back to School 2001: School funding reform up and running again
Tuesday, August 28, 2001 By Pamela R. Winnick, Post-Gazette Staff Writer
Each year since 1994, state Rep. Frank Dermody has tried to reduce school property taxes and give the state the primary role in funding schools.
Each year, he's failed.
In 1996, the House voted overwhelmingly to eliminate school property taxes, but the bold move fizzled in the Senate.
Dermody, D-Oakmont, wasn't the first to make the attempt. In 1989, then-Gov. Robert P. Casey backed a statewide referendum to switch to the income tax as a way of funding schools. Voters resoundingly said no.
But now the momentum appears to be rebuilding.
During the upcoming session, which begins Sept. 24, the state Legislature will be juggling no fewer than 60 proposals from both parties to revamp school funding. Among them will be a resolution sponsored by state Sen. Jane Orie, R-McCandless, directing that a joint legislative committee conduct a nine-month study.
Also studying the issue is a bipartisan committee appointed by state Rep. Mario J. Civera Jr., R-Delaware, chairman of a House committee on education funding reform that held hearings on school tax reform Aug. 1.
Fueling the movement are two concerns.
First, homeowners, particularly senior citizens, complain that their property taxes are too high.
"The property tax is the single most burdensome tax for many low-income and older persons," AARP representative Gladys Montgomery testified before the House committee. "States should broaden their method of financing public education, thereby taking some of the burden off the regressive property tax."
Second, reformers say the property tax system creates gross disparities between wealthy suburban school districts and rural and inner-city schools, with per-pupil spending ranging from a low of $6,000 to a high of $14,000.
All students should be on the "same level playing field," said state Sen. James J. Rhoades, R-Schuylkill, who introduced Senate Bill 1283 last session. The legislation would have increased the state's share of school funding from 40 percent to 80 percent, decreased school property taxes by as much as 67 percent and raised the state personal income tax by 2 percentage points, to 4.8 percent.
The bill died in committee, but Rhoades said it would be reintroduced.
Unlike many other states, Pennsylvania is not under court order to revamp its system.
Since the 1980s, the highest courts of several states, including New Jersey, Ohio, Texas, New York and West Virginia, struck down school property taxes because poor students weren't receiving the same educational opportunities as wealthier students.
But such constitutional challenges have not prevailed in Pennsylvania.
In 1999, the state Supreme Court upheld the dismissal of a lawsuit brought by rural school districts and another brought by the Public Interest Law Center in Philadelphia on behalf of black clergy and citizens groups.
But, as made clear by the rising tide of interest in tax reform, the Legislature does not need a judicial gun at its head to enact tax reform. Liberals and conservatives alike are uniting to overhaul a system that they consider to be antiquated and unfair, a vestige of an earlier America when local government was the primary taxing authority and income tax was nonexistent.
Orie said her committee would look closely at Michigan, where voters approved a radical reform in 1994.
Michigan's voters passed Proposal A, which increased the state sales tax from 4 percent to 6 percent, voting down an alternative proposal to increase income tax. The measure also created a minimum level of per-pupil spending among the state's 554 school districts.
Eventually, the Michigan Legislature also imposed a state school property tax, which, at 6 mills, was far lower than that imposed by school districts before 1994.
Seven years into reform, some pronounce it a qualified success. But not everyone is happy.
In 1994, some districts had been spending as little as $2,400 per pupil, said Don Wotruba, a lobbyist for the Michigan Association of School Boards. In the 2001-02 academic year, the minimum per-pupil spending will rise to $6,500, an increase of nearly 50 percent since 1995.
"It's really held property taxes down," he said. "And it's created equity among districts."
The increase in funding has not been reflected in higher test scores -- standards and testing were part of the reform package -- but school officials contend that educational quality is improving.
William Punnicliff of East Lansing recently retired as superintendent of the Flushing School District, which has 4,000 students in a suburb of Flint. Before 1994, his district raised $4,500 per pupil; when he retired last year, that number had risen to $6,000 per pupil.
"The additional revenue allowed us to purchase computers, add staff and reduce class size," he said.
Less pleased are the wealthier school districts, including Ann Arbor, Bloomfield and Grosse Point, whose money flows into a state pot that helps fund the poorer districts.
When the measure was passed, all districts in the state were permitted to raise their own property tax rates if they wanted to spend more than the state-mandated amounts. That measure was phased out in 1997.
In addition, to placate affluent districts, the Legislature created a category known as "hold harmless" districts, 44 school districts whose per-pupil spending was higher than average in 1994. These districts can, if their voters agree, raise their own property tax rates to spend more than the minimum set by the state.
Spending among some of those districts is as high as $12,500 per student, according to Brian Whiston, a lobbyist for the Oakland Intermediate Unit, which represents 28 districts north of Detroit. Increases in state aid, however, have been below the rate of inflation.
"They're not happy campers," said Michael Addonizio, associate professor of educational policy at Wayne State University. "If, for example, a shopping center goes into the district, the money goes to the state instead of the school district."
Even districts that have benefited from reform are not completely happy. One problem with the Michigan system is that funding is based on a per-pupil formula, so districts with declining enrollment lose funding.
"The economic fortunes of a district rise and fall with enrollment," Addonizio said.
A lingering question in school finance reform is whether increased spending necessarily translates into educational improvement.
"The problem is that you pour money into a pot and it leaks out at the other side," said Robert Strauss, professor of economics and public policy at the Heinz School of Public Policy and Management at Carnegie Mellon University.
Strauss, who served on Casey's local tax reform commission in 1987, would couple tax reform with accountability, including more testing and stricter controls over hiring.
As legislators explore tax reform, they will have to choose among a number of revenue sources, treading carefully among different constituencies, weighing the economic impact of one tax against another.
The increase in Michigan's sales tax did not hurt its economy, Addonizio said, in large part because of a booming tourism industry and the influx of shoppers from Canada.
However, Michigan had a relatively low sales tax -- 4 percent -- when the increase to 6 percent was approved in 1994. Pennsylvania's sales tax is already 6 percent, leaving little room for increase. But, at 2.8 percent, its personal income tax is low compared to states like New York, whose rate is close to 8 percent. (Seven states, including Washington, have no personal income tax.)
But an increase in the personal income tax rate is likely to incite wage earners who protested loudly when Act 50, another tax reform proposal, was considered by some districts. Income tax also has a fiscal disadvantage to the state; it is dependent on the economy.
Because taxes are a political thicket, Strauss believes, it will take several years before a proposal passes both houses and is signed into law.
"You're seeing momentum build," he said, "but when the price tag comes in, they're not going to get a majority.
"Gov. Ridge probably doesn't want to be remembered as the governor who raised personal tax rates."
Tomorrow: The region's most troubled school districts are gearing up for a difficult year.
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