EPLC Education Notebook
Monday, January 9, 2006
Many business representatives from across the state told state senators they oppose the House's plan to provide property tax relief by broadening the state sales tax to include services that are not currently taxed. Representatives of the financial services, banking, insurance, advertising and nonprofit communities testified before the Senate Committee on Legislation on Wednesday and all delivered the same message - an expanded sales tax is bad for business. Industry representatives felt the proposed sales tax on services such as management consulting and advertising would hurt their competitiveness and disproportionately impact small businesses. The proposal to tax such services was passed by the House in December as part of a larger plan to reduce property taxes (amended into Senate Bill 854), which also calls for a 0.22% increase in the state personal income tax and use of revenue from gaming to reduce residential property taxes. Rep. Mario Scavello, sponsor of the House plan, has recommended that his bill be amended to exempt management consulting services from the sales tax - a change that would remove $398 million in revenue from the bill. The plan has met resistance from Senators who previously passed their own tax relief plan (Senate Bill 30) that did not include an increase or expansion of state taxes, but rather asks voters to decide school district-by-school district if they want to increase local income taxes in order to provide property tax relief.
Members of the Coatesville Taxpayers Alliance, who, during testimony, identified themselves as advocates of citizen taxpayers, said they favor the House's plan for tax reform over the Senate plan to raise funds for property tax reduction locally. Shifting local taxes to provide property tax relief "makes worse rather than fixes the central inequity of the current system," said the Alliance. Alliance members called the Senate's plan a "false choice" for taxpayers because "financially stressed districts, rural districts, older towns, and districts with a high percentage of senior citizens just don't have the income level to achieve equitable property tax reduction at the local level." The effect of the Senate's proposal will create "division within a community in a battle at the polls and it will leave troubled school districts in the same economic condition they were in before," said Alliance members. The Alliance wants to see revenue for property tax reduction raised at the state level through a broad-based tax and spoke in support of the sales tax rather than the personal income tax as the revenue source. Members also spoke in support of a back-end referendum on school district budgets and told Senators that referendum exceptions should be restricted.
The Pennsylvania School Boards Association (PSBA) told the Committee it supports the use of a broad-based state tax to support education funding. PSBA supports the House's approach to property tax relief because it addresses the over-dependency on property taxes as a source of education funding by providing an alternative revenue source, "enhances the state's financial commitment to public education", and makes an effort to address equity in education funding by raising revenue at the state rather than local level. Joseph Otto, Business Manager of the William Penn School District, also spoke in favor of using state taxes to support property tax relief because in districts like William Penn "shifting from one [local] tax to another that utilizes the same declining tax base will not produce the desired result of substantially reducing the property tax burden." Additionally, utilizing a state tax will make property tax relief available to all homeowners by eliminating the school district-by-school district approach to tax relief proposed by the Senate and in current law, and will reduce costs associated with holding referenda in each school district for voters to approve or disapprove a local tax shift. Otto, who testified on behalf of the Pennsylvania Association of School Business Officials (PASBO), echoed the testimony of PSBA in support of changes to the exceptions for back-end referendum requirements to fairly address costs over which school districts have no real control, such as special education, health care, and pensions. Both PSBA and PASBO urged Senators to provide relief from the source of rising property taxes - state mandates - in tandem with tax reform as a way to help school districts control costs.
Negotiations on tax reform will continue between the Governor and legislative leaders over coming weeks. Senators questioned where Governor Rendell stands on property tax reform and encouraged his representative at the hearing, Budget Secretary Gregory Fajt, to provide clarification. Fajt's comments were limited to a fiscal analysis of the House's plan, which he said would raise $2.1 billion for property tax relief. Fajt's analysis and links to all testimony delivered at the Senate Committee on Legislation's January 4 hearing are available at www.pasenategop.com/news/sb854-010405-hearing.htm.
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
Governor Ed Rendell vetoed legislation that would have reduced the state personal income tax rate to 3.05% (down from 3.07%) and also cut several business taxes. House Bill 515 included no replacement for revenue that would have been lost to the tax cuts. In vetoing the legislation the Governor said he holds firm to the message put forth during his November 2004 veto of House Bill 176 that he "will not sign legislation that either significantly increases spending or reduces revenue without a specific plan to pay for it."
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.
Federal Education Policy Activity
The U.S. Department of Education recently established a Center for Rural Education that will be led by former U.S. Commissioner of Education William L. Smith. For more information about the Center, see www.ed.gov/nclb/freedom/local/rural/index.html.
Research and Reports
K-12 Education Funding
States across the nation, including Pennsylvania, continue to provide less resources to schools with high concentrations of low-income and minority students, according to the latest report from The Education Trust. "Such unequal resources make it difficult to say that all children in America have equal opportunities to become educated citizens," says the Trust. Nationally, states spend approximately $900 less per student in school districts with high concentrations of poor students than in low-poverty districts, a gap that remains "effectively unchanged" since the Trust began analyzing education funding gaps six years ago. States spend $614 less per student in high-minority districts than in low-minority districts. The result, says the Trust, "is that children who have less in their personal lives end up with less in what we would consider to be children's civic lives."
According to The Education Trust, in 2003, Pennsylvania spent $716 less per student in high-poverty districts than in low-poverty districts and $135 less in high-minority districts than in low-minority districts. The inequity demonstrated by these absolute dollar figures actually understates the true inequity faced by poor and minority students "because it is generally accepted that poor children need more support to reach the same standards reached by their more advantaged peers." The Trust re-calculated these absolute dollar gaps using a 40-percent adjustment to reflect the supports needed by low-income students. After the adjustment is applied, Pennsylvania's gap between the highest and lowest-poverty districts grows to $1,270 per student and the gap between the highest and lowest-minority districts reaches $424 per student. (The adjustment factor used by the Trust is based on federal law which "uses a 40-percent adjustment to determine where state funding policies are fair to low-income students, and reduces Title I funding to states that do not meet this standard.") Even without applying the 40-percent adjustment for low-income students, Pennsylvania's funding gap translates into a difference of $17,900 between two typical classrooms of 25 students, $286,400 between two typical elementary schools with 400 students, and $1,074,000 between two typical high schools of 1,500 students. (Figures are based on funding for the 2002-2003 school year.)
The Trust acknowledges that "simply throwing money at schools is not enough." Dollars need to be targeted to practices known to improve student achievement. The report highlights how Massachusetts has improved student achievement by spending wisely and outlines four steps through which state policymakers can begin to improve funding equity. Read "The Funding Gap 2005: Low-Income and Minority Students Shortchanged by Most States" at www2.edtrust.org/NR/rdonlyres/31D276EF-72E1-458A-8C71-E3D262A4C91E/0/FundingGap2005.pdf.
Education Week has released its annual Quality Counts report, a look at where the 50 states stand on a number of education indicators. Pennsylvania received an overall grade of "C+", the same grade awarded to the average state. The Commonwealth scored above average in two of the four policy categories graded - standards and accountability and teacher quality - and below average for school climate and resource equity.
Pennsylvania's grade for school finance equity held steady from last year at a "C-" (below the "C" awarded to the average state). Pennsylvania continues to rank poorly on indicators of equity between districts. Nationally, Pennsylvania ranks 39th (tied with Georgia and Florida) on an indicator of whether wealthier districts receive more state and local funding than property-poor districts and 27th (tied with Washington) on an indicator of how much it would cost to bring all districts up to the state's median per pupil spending level. The state spent an average $8,997 per pupil in 2003, more than the national average of $8,041, but lower than most neighboring states. (Indicators are based on funding for the 2002-2003 school year.)
Pennsylvania earned its highest grade and showed the most improvement in Efforts to Improve Teacher Quality (up from a C+ to a B). The state earned high marks for its assessment requirements for initial certification and the classroom observation required for veteran teachers to earn permanent certification. Scores for School Climate (C) and Standards and Accountability (B-) remained the same as last year. Within the Standards and Accountability criteria, the Commonwealth earned the maximum number of points for its academic standards, "which have been rated clear, specific and grounded in content in the four core subjects by the American Federation of Teachers", but that high mark was offset by "a weak showing" on indicators related to assessment and school accountability.
The Education Week web site includes individual state reports that provide additional information on student achievement on the National Assessment of Education Progress (NAEP), high school graduation rates, and trends in students' "chance for college". Access the Pennsylvania state report at www.edweek.org/media/ew/qc/2006/17shr.pa.h25.pdf. Additionally, this year's full Quality Counts report, titled "A Decade of Standards-Based Education", has a special focus on the growth and development of the standards movement and its impact on student achievement. Read the full report at www.edweek.org/qc06.