An updated total for school property tax elimination
The new legislative session has thus far had a bill proposed for the total elimination of school property taxes in the state with replacement revenue provided by increases to personal income (3.07 percent to 4.95 percent) and sales and use taxes (6 percent to 7 percent, higher in Philadelphia and Allegheny County due to local sales taxes) as well as a bill to freeze school property tax payments for residents age 65 or older.
School district property taxes account for close to 70 percent of all property taxes collected in Pennsylvania based on a recent estimate.
The price tag for total elimination based on a forecast produced by the state’s Independent Fiscal Office would be $12.4 billion dollars. That’s based on current and interim school tax collections statewide ($14.2 billion) less the amount of property tax revenue that would be retained by school districts for debt service ($2.2 billion) and accounting for the current amount of revenue produced by slot machine gaming for homestead relief ($0.5 billion).
Over the five year period to 2023-24 the baseline would rise $3.1 billion to $15.5 billion. It would take until 2035 for all school district debt to be retired and for property taxes levied by school districts to pay off the debt to go away.
As we noted in a 2016 Brief when the General Assembly last considered legislation to eliminate school property taxes and replace them with statewide tax levies, the key issue is that “each district would receive additional state funding to replace all the property tax dollars that have been eliminated. Thus, Lower Merion under the new scheme would receive $24,369 per-pupil in additional state funds to replace the lost property tax revenue to accompany the $3,615 in state funds already received. Meanwhile, Shenandoah would get $4,000 per pupil in property tax replacement to go with the $9,766 currently received from the state. Thus, the total funding per-pupil disparity between the districts would not be changed.” The likelihood of a lawsuit pertaining to the distribution scheme would be very high.