EPLC Education Notebook

Friday, December 9, 2005

Special Session on Property Tax Relief


• On Monday, the House Special Session Finance Committee moved forward a property tax relief package put forth by the bipartisan Local Tax Policy Caucus. The plan would reduce property taxes by eliminating school districts' responsibility to pay for special education, allowing districts to levy a local personal income tax, and establishing special property tax limits related to poverty. A more detailed description of each bill in the package is below. All four bills have been re-referred to the House Appropriations Committee.
  
  Special Session House Bill 14: Makes the state responsible for providing and paying for all special education services for children with disabilities; gifted education would remain under the purview of local school districts. HB 14 establishes an Office of Special Education within PDE to oversee all special education services provided in the Commonwealth, evaluate whether students qualify for special education services, develop individualized education plans for students with disabilities, and coordinate service delivery. Instruction would continue to be provided locally through intermediate units, school districts, in-house staff or private contractors. The state would take responsibility for the full costs of special education over a five year period, with 100% state funding responsibility in 2009-2010. Special Education would be funded through state gaming dollars. Funds would be transferred from the Property Tax Relief Fund (in which gaming funds are collected) to a restricted receipt account in the state's General Fund, based on an amount annually certified by the Secretary of Education.
  
  Special Session House Bill 15: Establishes a new system for local education funding. SB 15 breaks education funding into two categories - instructional and other - and identifies unique funding streams for each category. School districts would levy a personal income tax to cover instructional costs and levy a real property tax and a realty transfer tax to cover all other costs. Additionally, districts would be required to reduce school property taxes to account for the increase in revenue from the new personal income tax. Districts must reduce homestead property taxes by the full amount of the homestead exclusion allowed by state law before reducing other property taxes.
  
  HB 15 also places a limit on future school property tax increases, but not through voter referendum. Future property tax increases would be limited to the percentage increase in the statewide average weekly wage for the preceding year (excluding taxes levied for new construction or tax increases caused by home improvements that increased housing values). Prior to a property tax increase, the school board must certify its estimates of total local tax revenues used to calculate the tax increase with the court of common pleas; the court may revise the estimates and reduce the rate of the increase on its own motion or upon consideration of a petition by a school district taxpayer. HB 15 includes seven exceptions through which districts may increase property taxes beyond the percentage increase in the statewide average weekly wage without having to provide documentation to the court of common pleas.
  
  Additionally, HB 15 limits future local PIT increases. Districts may only increase the PIT rate if the district experiences an annual increase in weighted average daily membership of at least 1%; the increase is limited to the amount needed to maintain the gross PIT revenue per student ratio of the prior school year. HB 15 includes a special provision relating to the Philadelphia School District that allows the city to impose a wage tax on non-residents who work in the city, however, non-residents would be responsible for paying only the difference between their local PIT and the city wage tax. HB 15 also allows school districts to exempt qualifying senior citizens and low-income persons from the PIT. All PIT revenue would be collected at the state level. HB 15 was amended to prohibit the deduction of PIT taxes paid to other states by Pennsylvania residents from liability for a school district's PIT taxes.
  
  Any revenue collected through a local PIT, property tax or realty transfer tax that is placed into a reserve fund may be used to support any permitted expense after two fiscal years in reserve. Finally, HB 15 eliminates school districts' authority to levy nuisance taxes.
  
  Special Session House Bill 16: Exempts individuals who meet certain poverty levels from paying more than 3% of household income in school property taxes. The Commonwealth would reimburse school districts for lost revenue.
  
  Special Session House Bill 17: Amends the state constitution to change the homestead exclusion as it applies to school districts. Language would be added that reads, "The exclusions authorized by this clause for a school district shall not exceed one-half of the assessed value of a homestead property within that school district." Currently, the homestead exclusion is limited to "one-half of the median assessed value of all homestead property" in a taxing jurisdiction.



• On Tuesday, the House Special Session Finance Committee rejected Governor Rendell's plan for property tax relief. The Committee voted 18-12 to reject Special Session House Bill 1, which represents the Governor's proposal to mandate school district participation in the Homeowner Tax Relief Act (Act 72 of 2004) - the state program that trades gaming funds for property tax reduction. The bill previously was passed by the House Appropriations Committee, but was re-referred to the Finance Committee after debate by the full House.
  
  During the meeting, Rep. Stan Saylor said he opposed the bill because the idea had already been rejected through school boards. Only 20% of school boards chose to participate in Act 72 when the tax relief plan was initially offered. Saylor also expressed concern that the level of tax relief provided by the plan is too small to represent the real reform expected by voters. Rep. David Levdansky, who voted to move the bill forward, said school boards' rejection of Act 72 was based mainly on the legislation's required back-end referendum on school budgets and not on the law's tax relief component. Levdansky said homeowners have expressed support for the Governor's plan because the vast majority submitted applications to receive property tax relief through the program.



• On Monday, the House Special Session Subcommittee on Sales Tax Initiatives met to review a proposal from Rep. Dave Reed that would provide dollar-for-dollar property tax reduction using a combination of the state sales tax, state personal income tax, and state gaming funds. To pay for property tax relief, the sales tax would increase to 7% (from 6%) and the PIT would increase to 4% (from 3.07%). Property taxes would be reduced for businesses and vacation homes, as well as homeowners. Reed's proposal also addresses the distribution of funds to school districts. Each district would receive a per-pupil amount based on the district's average daily membership. Depending on the amount raised by gaming, districts could expect either $2,579 or $2,867 per pupil. Reed's proposal gives school districts the option of reducing property taxes by an additional 25% through a local earned income tax. The three-bill package has been assigned to both the Sales Tax Subcommittee ( Special Session House Bill 50) and the Alternative Revenue Sources Subcommittee (Special Session House Bills 51 and 52), who plan to meet jointly next Wednesday to review the package as a whole.


Links to legislation introduced in the Special Session are available on the EPLC web site at www.eplc.org/clearinghouse_k12finance.html#legislation.


Pennsylvania Education Policy Activity

House Actions


• The House passed a package of legislation this week (House Bills 2243, 2244, 2245 & 2246) which cuts the administrative budgets of state departments by 10 percent for the current fiscal year and cuts $7.305 million from a state tutoring program to provide additional funding for Medical Assistance (MA). The legislation also prohibits the state Department of Public Welfare from imposing a monthly premium on the families of certain disabled children who receive services through MA; premiums were proposed by DPW this year due to budget constraints. State funding for Medical Assistance - Outpatient Services would increase by 10 percent to $928.385 million and the appropriation of available federal funding for outpatient services would increase by 10 percent to $1,297.501 million. Additionally, HB 2243 requires insurance companies to provide coverage of up to $2,000 per month for autism spectrum disorders for individuals under age 24. The legislation awaits Committee assignments in the Senate.
  
  The prohibition of MA premiums addresses concerns that the proposed premiums could negatively affect school districts' special education budgets. During a hearing of the House Health and Human Services Committee held in October, DPW Secretary Estelle Richman said if the cost of the state premium causes families to drop out of the MA program it could "have the unintended consequence of reducing federal funding to Local Education Agencies, school districts and Intermediate Units, through the School-Based Access Program which is tied to the number of children enrolled in MA." School districts that provide health-related services for special education students are eligible to have a portion of the service costs reimbursed through federal Medicaid dollars as long as the student receiving services is enrolled in MA and a parent grants permission. Under federal law, districts are responsible for providing health-related services for special needs students and would bear the full cost if families drop MA coverage.



• The House also passed the following legislation this week (each bill awaits referral to a Senate Committee):
  
  House Bill 338:Repeals the 5% gross receipts tax on cell phones. The bill includes no replacement for the $345 million hole the tax cut would create annually. Repeal of the tax, enacted in 2003, would slash about $35 a year from cell phone bills.
  
  House Bill 194: Requires that low-interest loans available for the installation of sprinkler systems in college dormitories include costs associated with sprinkler installation, plumbing and renovation needs, asbestos removal, and modifications to smoke detection and fire alarm systems. This requirement would apply only to bonds issued after HB 194 becomes law.
  
  House Bill 609: Creates a low-interest loan program to assist with the installation of sprinkler systems in off-campus student residences not owned by a college.
  
  House Bill 509: Requires properly trained campus police at Pennsylvania State System of Higher Education universities to carry firearms in the course of duty.



• On Wednesday, the House Education Committee passed Senate Bill 384, which allows associations that represent school retirees to request and receive information about the last district of employment and home address of retired teachers from the Pennsylvania School Employees Retirement System (PSERS). As originally introduced, the bill applied only to the Pennsylvania Association of School Retirees, who wants to obtain the information for recruitment purposes. However, the House Education Committee amended the legislation so that the Pennsylvania Federation of Teachers also will be eligible to receive the PSERS information. The Committee further amended SB 384 so that annuitants must "opt-in" to allow disclosure of their personal address. This reverses previous language in the bill that required annuitants to take action to refuse having their personal information shared. SB 384 has been placed on the House Tabled Bills Calendar.



• On Tuesday, the House Local Government Committee amended and moved forward a package of legislation related to the awarding of non-bid contracts, including three bills relevant to school districts. House Bill 1860 amends the Public School Building Authority Act to increase the dollar amount requiring full advertising and bidding of contracts to $18,000, up from $4,000, subject to future adjustment by an index based on the consumer price index for all urban consumers (CPI). House Bill 1866 amends the Pennsylvania School Code to increase the dollar amount above which school districts would be required to undergo full advertising and bidding of contracts from $10,000 to $18,000 and to increase the amount requiring telephone price quotes from $4,000 to $7,000, also subject to future adjustment by an index based on the CPI. HB 1866 also allows districts to award construction contracts without seeking competitive bids for jobs less than $18,000 (up from $10,000) and allows districts to use their own maintenance staff to perform construction or renovation work less than $7,000 (up from $5,000). Both bills make it illegal to sign multiple smaller contracts in order to avoid competitive bidding requirements for business that should be part of a larger transaction. Finally, House Bill 1867 raises the dollar amount under which non-competitive bids can be awarded for joint purchases between entities such as school districts, counties and townships. All bills related to the package have been placed on the House Tabled Bills Calendar.



• On Monday, the House Appropriations Committee passed House Bill 1085, which makes any student who is a Pennsylvania resident and has been accepted into an approved higher education institution eligible for state grants from the Pennsylvania Higher Education Assistance Agency (PHEAA). The original bill spoke specifically to homeschooled students, who have encountered problems receiving PHEAA grants because they do not meet current eligibility requirements of being a graduate of an approved high school or holding a secondary school diploma. HB 1085 was previously amended by the Education Committee to extend beyond homeschoolers to address an issue raised by PHEAA related to students with parents in foreign service. Some Pennsylvania residents who complete their secondary education abroad also encounter problems receiving PHEAA grants if they do not attend a foreign high school approved by PHEAA. HB 1085 awaits consideration by the full House.



Senate Actions


• The Senate has approved legislation that would reduce the state personal income tax rate to 3.05% (down from 3.07%) and also cut several business taxes. On Monday, the Senate concurred in House amendments to House Bill 515; Gov. Rendell has said he will veto the legislation. The bill includes no replacement for revenue that would be lost to the tax cuts. Under the PIT reduction, a family with a household income of $50,000 would save only $10.



• On Monday, the Senate Appropriations Committee moved forward House Bill 894, which exempts retired teachers who return to school service from state-mandated professional development requirements if they work no more than 180 school days. Retirees who return to teaching for more than 180 days would be required to fulfill the state's continuing education requirements. HB 894 also requires the Department of Education (PDE) to provide access to its free, online professional development courses to all educators, not just those currently employed by a school entity. Finally, the bill requires PDE to maintain all retirees' teaching certificates in active status. HB 894 was passed by the Senate Education Committee on June 8 and now awaits consideration by the full Senate.


All legislation from the Pennsylvania General Assembly, including bills cited in this Notebook, can be found at www.legis.state.pa.us/cfdocs/legis/home/session.cfm.


Research and Reports

Higher Education


• A new report from The Brookings Institution makes recommendations for leveraging Pennsylvania's higher education assets to revitalize local communities. "Higher Education in Pennsylvania: A Competitive Asset for Communities", says the "true value - both real and potential" - of the Commonwealth's higher education sector has not been fully realized. The report provides examples of how some Pennsylvania institutions are positively impacting their communities and makes recommendations for how local, regional and state leaders can develop partnerships with higher education to advance economic development. Among its recommendations for state policy leaders, the report says the state should: establish a higher education advisory board, target state investments near colleges and universities, and create a state grants program to facilitate university-community partnerships. Read the report at www.brookings.edu/metro/pubs/20051205_highedPA.pdf.



Achievement Gap


• A study of 257 California elementary schools serving primarily low-income students identifies instructional practices and policies that lead to higher academic achievement. The report identifies four practices associated with high-performing schools: prioritizing student achievement; implementing a coherent, standards-based curriculum and instructional program; using assessment data to improve student achievement and instruction; and ensuring availability of instructional resources. Additionally, researchers say their findings point to the importance of principal and district leadership in high-performing schools. Specifically, in high-performing schools "principal leadership in the context of accountability-driven reform is being redefined to focus on effective management of the school improvement process" and "district leadership, accountability, and support appear to influence student achievement."
  
  The study is based on a survey of approximately 5,500 teachers and 257 principals from schools across the state of California with similar demographics but wide variations on the state's academic performance index (API). Researchers analyzed which common educational practices were correlated with high API scores. The study concludes that the range of API levels demonstrated by schools with similar demographics shows that socioeconomic background is not the sole predictor of academic success, rather "what schools do - and what resources they have to do it with - can make a difference." Read more in "Similar Students, Different Results: Why Do Some Schools Do Better?" at www.edsource.org/pub_abs_simstu05.cfm.



• A new policy alert from the National Center for Public Policy and Higher Education predicts that "if current trends continue, the proportion of U.S. workers with high school diplomas and college degrees will decrease and the personal income of Americans will decline over the next 15 years." The alert speaks to the negative impact on America's tax base and the international competitive disadvantage that may result from this trend. However, authors say closing the achievement gap between racial/ethnic groups can help increase the percentage of Americans with bachelor's degrees and increase the future income tax base. Read more at www.highereducation.org/reports/pa_decline/index.shtml.



Assessment


• "Using Student Progress to Evaluate Teachers: A Primer on Value-Added Models", an informational publication from the Educational Testing Service (ETS), reviews the growing use of value-added assessment and concerns about using such analysis to evaluate teachers. Learn more at www.ets.org/Media/Research/pdf/PICVAM.pdf.



No Child Left Behind


• The U.S. Department of Education needs to be more transparent in its decision-making process when approving or rejecting changes to state accountability plans required by NCLB, says a new report from the Center on Education Policy (CEP). In "States Test Limits of Federal AYP Flexibility", CEP analyzes approved changes to state accountability plans that the Center says make it easier for schools and school districts to make adequate yearly progress. The report reviews the most common flexibility method requested by states and the most popular methods approved by the USDE, and says the Department needs to do better in publicly explaining why certain changes were accepted or rejected. Read more at www.cep-dc.org/fededprograms/FederalAYPFlexibility/StateAccountabilityPlanReport.doc.



Other


• Next week...SPECIAL SESSION MEETINGS - The House Special Session Finance Committee meets Tuesday (December 13) to consider Special Session House Bills 3 and 29, followed by a meeting of the Special Session Subcommittee on Income Tax Initiatives. The House Special Session Subcommittee on Property Tax Reform meets Wednesday. The House Special Session Subcommittees on Sales Tax Initiatives and Alternative Revenue Sources hold a joint meeting on Wednesday. The House Special Session Subcommittee on Sales Tax Initiatives meets Thursday to consider Special Session House Bills 12 and 50.
  
  OTHER EVENTS - The Senate Finance Committee meets Tuesday to consider Senate Bills 292, 592 & 993 and House Bill 1427. The House Education Committee meets Wednesday to review proposed regulations related to Academic Standards and Career Education. The Governor's Commission on Training America's Teachers holds a regional meeting in the Lehigh Valley on Wednesday and holds a Commission meeting in Harrisburg on Friday. The House Education Committee holds an informational meeting on high school reform/raising expectations on Thursday in Harrisburg. For information on these and other upcoming events, see www.eplc.org/calendar.html.



• The PA House and Senate have published their Session Schedules for the beginning of 2006.
  
  The Pennsylvania House will be in Session: (nv = non-voting)
  January 3 nv, 23 nv, 24, 25, 30, and 31
  February 1, 6, 7, 8, 13, 14, and 15 nv
  March 6, 7, 8 nv, 13, 14, 15, and 20 nv
  April 3, 4, 5, 10 nv, 24, 25, and 26
  May 1, 2, 3, 8 nv, 22, 23, and 24
  June 5, 6, 7, 12, 13, 14, 19, 20, 21, 26, 27, 28, 29, and 30
  
  The Pennsylvania Senate will be in Session:
  January 3, 4 nv, 23, 24, 25, 30, and 31
  February 1, 6, 7, 8, 13, 14, and 15
  March 13, 14, 15, 20, 21, 22, 27, 28, and 29
  April 3, 4, 5, 17, 18, 19, 24, 25, and 26
  May 1, 2, 3, 22, 23, and 24
  June 5, 6, 7, 12, 13, 14, 19, 20, 21, 26, 27, 28, 29, and 30

To return to the EPLC Education Notebook homepage, click here.

To return to The Education Policy and Leadership Center homepage, click here.