Implications for taxpayers, school boards and students

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Implementing Act 1Special Session of 2006

• Implications for taxpayers, school boards and
  students
• Tim Allwein, PA School Boards Association
• and
• Jay Himes PA Association of School Business
  Officials

2
Act 1 of 2006 Whats 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

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Act 1 of 2006 Whats 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

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Act 1 of 2006 Whats new?

• For students
• Activity fees
• Fighting for programs/activities
• Living without certain things
• More strikes
• More cooperative programs with other districts
• Fewer new facilities

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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

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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

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Taxpayers

• Back-end referendum
• Dont 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
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

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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 cant figure
  out a way for them to benefit as well

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Taxpayers

• Ability to pay taxes in installments
• May be helpful to some depends on an
  individuals cash flow
• Probably wont like limitations in law
• Discount period vs. convenience

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Implications for School Boards and Districts
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Preliminary Budget Process

• Christmas Budget Development for Valentines 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
• Theres a reason its 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.

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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

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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?

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Front End Referenda

• EIT overwhelmingly chosen by TSCs
• Minimum more often than maximum
• When given tax shift options, TSCs chose the
  most conservative course of action predominantly.
  
• If the perspective of the TSCs is reflective of
  the general public, then we should not expect a
  high success rate for the FER.
• General disdain for tax shifting

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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

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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?

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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
• ExceptionDepartment of State

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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

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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?

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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

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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

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Questions/Answers/Comments