HB/SB 76 - School Property Tax Elimination Talking Points

1. School Property Tax Elimination will result in the majority of SWSD residents paying more in total taxes. HB/SB 76 is a three-way tax shift • It is a tax shift from property taxes to personal and consumption taxes. • It is a tax shift from commercial/industrial to individuals. • It is a tax shift from senior citizens to non-senior citizens. Since this legislation is "revenue neutral", individuals in SWSD will need to make up for the loss of commercial/industrial property taxes. This would equate to an increase in total taxes in the amount of $359 or 21.95% over the total tax obligation right now, for every individual in our district over the age of 25. Since this legislation is "revenue neutral", if the 18% of senior citizens living in the SWSD pay less under this proposal, then the 82% of everyone else living in SWSD will need to pay more to make up the difference. •

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For a 5% reduction for seniors, everyone else would need to pay $455 or 27.81% more. That is $910 more per year for a two adult household. For a 10% reduction for seniors, everyone else would need to pay $473 or 28.91% more. That is $946 more per year for a two adult household. For a 15% reduction for seniors, everyone else would need to pay $491 or 30.00% more. That is $982 more per year for a two adult household. These amounts are in addition to what they would already be paying with their current property taxes. The increase in PIT from 3.07% to 4.95% (a 61.24% increase) is the largest single tax increase in PA history.

2. The money raised in taxes in the South Western School District will not stay here, but instead will be sent to Harrisburg and then redistributed throughout the state, with six counties (Allegheny, Bucks, Chester, Delaware, Montgomery or Philadelphia) getting most of the money. Do we really want our money going to fund school districts in these municipalities? 3. Provisions in the legislation prohibits school districts from borrowing money without having a voter referendum where the voters would have to approve increasing their EIT or implementing a school district PIT to cover those costs. • We will not be able to borrow money for our building renovation projects which will lead to deteriorating buildings.

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We will not be able to get a line of credit to help handle the cash flow challenges that will be experienced by this legislation. We will not be able to lease any equipment such as Driver Ed cars or high volume copiers as leases are considered debt. If we cannot borrow money without a voter referendum - will we be able to refund bonds to take advantage of lower interest rate and save taxpayers money?

4. Cash Flow Issues - How long will it take the state to get up and running with the new taxes (PIT and SUT) to be able to distribute funds to school districts? 3 months? 6 months? longer? •

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If this change occurs on July 1, 2017, SWSD will face a serious cash flow problem until the state is able to collect and distribute those tax revenues to the schools. How will we be able to operate in the absence of those funds? A quick back of the napkin cash flow projection for SWSD show us running out of money in October. With no funds to pay staff or bills and the inability to borrow funds, we would likely need to shut the schools down for a period of time until funds become available again. We collect in excess of $32 million in property taxes in August, September and October. Will we receive that level of funding this year in that same time period? How with these funds be distributed to school districts?

5. The inability to borrow funds without approval through a referendum process will result in more school buildings in a state of disrepair. •

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SWSD needs to do a $10 to $15 million renovation to our middle school. We are currently waiting for the outcome of the PlanCon Advisory Committee and the General Assembly's action on that recommendation to begin our renovation project. This project will include upgrading all of the mechanical systems. If a referendum fails, how will SWSD get the funds to replace our boilers, HVAC system internal plumbing, electrical system, roofs, energy management systems and asphalt? What about future renovations to district buildings? Here in Hanover, we take pride in maintaining our facilities, which is why they last as long as they do. In a system where funding is unavailable or not easily available the maintenance of facilities will suffer.

6. The lack of local control in local funding decisions will impact many phases of school operations including staffing, collective bargaining, programing, etc. • Will the state implement a state-wide teacher's contract?

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If that contract is higher than what we are currently paying, where will the additional money come from? Will the state funding increase each year cover the rising pension costs each year?

7. What happens to our state funding the next time there is a state budget impasse? Do we just close schools at that point? 8. What happens to our funding when there is an economic downturn or recession? Will we receive less money than the year before? 9. Property tax elimination means that budget cuts will be coming. This legislation will create significant financial challenges for school districts, which will result in cuts to programs, services and staff. Education as we know it today will suffer and become a thing of the past. 10. School property tax elimination may not eliminate school property taxes at first, as districts will still be able to levy property taxes on the current outstanding debt. So while taxpayers will receive a much lower property tax bill from SWSD, they will still receive a property tax bill from SWSD until 2032-33. Not to mention they will still be receiving county and municipal property tax bills. Only in Pennsylvania can a property tax elimination bill not eliminate property taxes. 11. Fake News - One of the biggest misconceptions in Pennsylvania today is that senior citizens are being taxed out of their homes. Proponents of Property tax elimination indicate that 10,000 people in PA lose their homes each year due to school property taxes. The fact is that the majority of homes that are sold each year are done so because the homeowner failed to pay their mortgage. In SWSD, over a four (4) year period of time (2011-14), we had 9 houses sold at the county tax sale. That equates to 2.25 per year out of 11,300 total properties. That works out to a rate of 0.020% or 0.0002. If the assembly line at Utz's or Snyder's had a failure rate of 0.020%, do you believe they would stop production to address the problem? Probably not. 12. PA residents will pay approximately $600 million more in federal taxes as a result of the loss of the property tax deduction on the federal tax returns. I wonder what keeping that money in PA does for our economy - or conversely, I wonder what the impact on our state's economy will be of having that money flowing out of PA.

Thank you for the opportunity to meet with you and to discuss with you some of our concerns regarding this proposed legislation. As always, if you have any questions as to how legislation will impact the operations of the South Western School District, its taxpayers, staff and most importantly its students, please feel free to contact us at any time.

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Implications of Property Tax Elimination for Taxpayers LOCAL TAX DOLLARS DON'T STAY LOCAL. Unless your school district is in Allegheny, Bucks, Chester, Delaware, Montgomery or Philadelphia County, it's unlikely much of the increase in personal income or sales tax you will pay under property tax elimination will actually find its way to your school district. To replace the property taxes levied by all school districts, a large portion of the new state dollars collected will flow to the school districts in just 6 counties. This means that education funding is no longer local and your tax dollars are likely to be shipped across the state to benefit students hundreds of miles away. IT DOESN'T ELIMINATE SCHOOL PROPERTY TAXES. Property tax elimination maintains school property taxes to pay off school district debt. Taxpayers in over 40% of school districts will maintain at least 20% of their current school property tax bill-in addition to paying more in statewide personal income tax and sales tax. Taxpayers in 24 school districts will maintain at least 50% of their current property tax bill, and taxpayers in some districts will continue to pay 100% of their current school property tax bill even after an elimination bill passes. IT DOESN'T ELIMINATE OTHER LOCAL PROPERTY TAXES. In addition to property tax elimination not eliminating school property taxes, it doesn't even touch county or other local government property taxes. This means that taxpayers will still be paying an ever-increasing $5 billion in non-school property taxes each year.

IT'S DOUBLE TAXATION ON THE POOREST CITIZENS. The residents in some of Pennsylvania's poorest school districts will be hit the hardest by property tax elimination. Not only will they not have their property taxes eliminated-many will maintain more than 50% of their current property taxes-but they will also be paying the increased personal income and sales taxes, which will be shipped out of their community to subsidize the education in some of the wealthiest school districts in the state. This proposal is nothing more than robbing Peter to pay Paul. IT SHIFTS TAXES FROM BUSINESSES TO INDIVIDUALS. Eliminating property taxes across the board means that the property tax burden carried by businesses will be shifted to individuals in the form of increased personal income and sales taxes. Across Pennsylvania, businesses are currently paying approximately $2.7 billion in property taxes, which will be shifted away from those businesses. Property tax elimination gives Wal mart a free ride at the expense of individuals and small businesses. IT GIVES A WINDFALL TO THE FEDS. The elimination of property taxes means that approximately $600 million will be sent to the federal government each year through lost federal income tax deductions. More Pennsylvania money will go to Washington D.C. than ever before, meaning that there will be hundreds of millions of dollars less to be used to generate additional sales tax revenue. WHO NEEDS LOCAL CONTROL, ANYWAY? With the elimination of school property taxes, comes the total elimination of taxing authority by locally elected school boards and a total undercutting of local control. As a result, locally elected school board members-individuals locally elected by their communities to make the important decisions, including funding decisions, about how to run and operate the district's schools-will be rendered useless. The state will oversee and second guess every decision made by a school board. This elimination of local control and focus on big government for education flies in the face of over 100 years of PA tradition.

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Implications of Property Tax Elimination for Parents PROPERTY TAX ELIMINATION MEANS CUTS ARE IMMINENT. Property tax elimination will create significant financial challenges for school districts, giving them no option but to respond to these challenges through cuts to programs, services and staff. With no ability to raise needed revenue to respond to district needs, when special education costs increase, when enrollment increases or when the middle school HVAC system fails, the district will have no option but to cover those necessary costs through cuts. Education will suffer. PROPERTY TAX ELIMINATION KILLS LOCAL DECISIONMAKING. With the elimination of property taxes,

comes the elimination of virtually all local control that is the hallmark of Pennsylvania school district governance. School boards, parents and communities will no longer have any authority to make decisions that impact the educational, extracurricular or other programming at the school district. Without this authority, school districts will not be able to add new academic programs, increase staffing or implement extracurricular programs to respond to the needs of their students, and education will become a state-driven, one-size-fits-all approach in 500 school districts. PROPERTY TAX ELIMINATION LOCKS IN INEQUITY IN EDUCATION FUNDING. If property tax elimination

is approved, the state will send one school district $5,100 per student in total state funding, while another school district will receive nearly $28,000 per student in total state funding. The state will be picking educational winners and losers, indicating that to Harrisburg, some of Pennsylvania's students are worth more than others. PROPERTY TAX ELIMINATION MEANS SCHOOLS MAY STRUGGLE TO OPEN THEIR DOORS. The massive shift to increased personal income and sales taxes to replace school property taxes can't happen overnight. If school districts can't levy a property tax after June 30, 2017, many school districts won't have the revenue (since the state hasn't implemented the increased taxes yet and since districts will be prohibited from borrowing) to open their doors to students in September. What happens to students' education while the state sorts out the administrative chaos created from this shift? PROPERTY TAX ELIMINATION MEANS SCHOOLS WI.LL DETERIORATE. The health and safety of students

and staff should be of utmost importance, but under property tax elimination, most school districts will have no ability to respond even to the most critical of school building maintenance needs. With no ability to raise revenue or even incur debt, most school districts won't be able to replace a leaking roof, update school security infrastructure, fix a faulty heating system or even pave a parking lot. As a result, schools will deteriorate to the detriment of students and their ability to learn. IT DOESN'T ELIMINATE SCHOOL PROPERTY TAXES. Property tax elimination maintains school property taxes to pay off school district debt. Taxpayers in over 40% of school districts will maintain at least 20% of their current school property tax bill-in addition to paying more in statewide personal income tax

and sales tax. Taxpayers in 24 school districts will maintain at least 50% of their current property tax bill, and taxpayers in some districts will continue to pay 100% of their current school property tax bill even after an elimination bill passes.

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Senator Richard Alloway II Senate Box 203033 Harrisburg, PA 17120-3033 Room: 172 Main Capitol (717) 787-4651 FAX: (717) 772-2753

For Penn and West Manheim Township residents

Senator Richard Alloway II 37 South Main Street Suite 200 Chambersburg, PA 17201 (717) 264-6100 FAX: (717) 264-3652

Senator Scott Wagner Senate Box 203028 Harrisburg, PA 17120-3028 Room: 9 East Wing (717) 787-3817 FAX: (717) 783-1900

For Manheim Township residents

Senator Scott Wagner 218 North George Street York,PA 17401 (717) 846-2828 FAX: (717) 852-8478

Hon. Kate A. Klunk 118 Carlisle Street Hanover, PA 17331 (717) 630-8942 Fax: (717) 630-9731

For all South Western School District residents

Capitol

Hon. Kate A. Klunk 123A East Wing PO Box 202169 Harrisburg, PA 17120-2169 (717) 787-4790

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March 6, 2017

Senator Richard Alloway II Senate box 203033 Harrisburg, PA 17120-3033 Dear Senator Alloway, As a parent of a student at South Western School District, I am very concerned about the property tax elimination legislation that I am hearing about. There are several factors that concern me. 1.

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Over time, I am concerned that eliminating property taxes will ultimately lead to a reduction in total revenues for our school district. If that happens, the district will be forced to make budget reductions that will have a negative impact on the school district in general and in my child's education. I am concerned that a majority of us taxpayers will end up paying more out in total taxes under this proposal, since businesses will no longer pay their share of the property tax burden. It goes without saying that if businesses are no longer paying school property taxes, and if the proposed legislation is to be "tax neutral", then the rest of us will have to make up the difference and pay more in total taxes. This is definitely something that I do not want or need. If anything, property tax reform efforts should be directed at individuals and families rather than businesses that can simply write them off as the cost of doing business. I am concerned that the borrowing limitations included in this proposal, will handcuff our school district and its ability to borrow funds to maintain its buildings. Up to this point, our district has borrowed money and done major renovation and additions projects every few years to one of our buildings. As a result, our buildings are in pretty good shape. Forcing the district to go through a referendum, asking voters to pay more in taxes in order to borrow money to take care of the ongoing building maintenance will lead to deteriorating facilities as the likelihood of voters to vote to increase their taxes are very slim. Once the buildings begin to deteriora.te due to the lack of attention caused by the lack of funding to address major renovation costs, there will be no turning back. I am concerned that or local tax dollars will no longer stay local. Instead, they will be funneled up to Harrisburg for redistribution to other school districts and to other state programs for all we know. Why should my tax dollars be used to pay for educating students in Philadelphia or Pittsburgh? You are already doing that with our personal income tax money. Leave these funds local. Finally, I am truly concerned that this legislation will have a negative effect on the educational opportunities for my child. I want my child to have the same, if not better educational opportunities as the students that went before them. This legislation does not offer that.

I believe the negative consequences of property tax elimination for school districts, students and taxpayers are significant. I have to believe that there are other ways to address concerns with school property taxes that won't devastate education in Pennsylvania. Please oppose efforts to eliminate school property taxes. Sincerely,

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