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Implementing Act 1 Special Session of 2006

Implementing Act 1 Special 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. Act 1 of 2006: What’s new?. For taxpayers: Front and back-end referendum

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Implementing Act 1 Special Session of 2006

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  1. 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: What’s 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 EPLC, March 29, 2007

  3. Act 1 of 2006: What’s 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 EPLC, March 29, 2007

  4. Act 1 of 2006: What’s new? • For students: • Activity fees • Fighting for programs/activities • Living without certain things • More strikes • More cooperative programs with other districts • Fewer new facilities EPLC, March 29, 2007

  5. 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 EPLC, March 29, 2007

  6. 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 EPLC, March 29, 2007

  7. Taxpayers • Back-end referendum • Don’t 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 EPLC, March 29, 2007

  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 EPLC, March 29, 2007

  9. 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 can’t figure out a way for them to benefit as well EPLC, March 29, 2007

  10. Taxpayers • Ability to pay taxes in installments • May be helpful to some; depends on an individual’s cash flow • Probably won’t like limitations in law • Discount period vs. convenience EPLC, March 29, 2007

  11. Implications for School Boards and Districts

  12. Preliminary Budget Process • Christmas Budget Development for Valentine’s 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 • “There’s a reason it’s 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.” EPLC, March 29, 2007

  13. EPLC, March 29, 2007

  14. 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 EPLC, March 29, 2007

  15. 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? EPLC, March 29, 2007

  16. EPLC, March 29, 2007

  17. EPLC, March 29, 2007

  18. Front End Referenda • EIT overwhelmingly chosen by TSC’s • Minimum more often than maximum • When given tax shift options, TSC’s chose the most conservative course of action predominantly. • If the perspective of the TSC’s is reflective of the general public, then we should not expect a high success rate for the FER. • General disdain for tax shifting EPLC, March 29, 2007

  19. 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 EPLC, March 29, 2007

  20. 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? EPLC, March 29, 2007

  21. 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 • Exception—Department of State EPLC, March 29, 2007

  22. 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 EPLC, March 29, 2007

  23. 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? EPLC, March 29, 2007

  24. 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 EPLC, March 29, 2007

  25. 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 EPLC, March 29, 2007

  26. Questions/Answers/Comments EPLC, March 29, 2007

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