Property Tax Post: When It Comes to Taxes, Who Should Have the Burden of Funding Public Education?




Nelson Mandela once described education as a “powerful weapon” which could be used to change the world. Most would probably agree that a good education is priceless, but even if we all agreed on this point, realistically, school supplies are costly and teachers must be paid. Thus, the price of public education is generally borne by taxpayers—some more than others.

When it comes to public schools, local property tax revenue is a primary source of funding. Many states require school districts to complete a budget to determine their financial needs for the upcoming year, and a portion of the property taxes collected by local governments is designated for school funding in each district. School districts can ask for more than their designated allotment, but generally voter approval is required. In New Jersey,[1] for instance, school districts determine their property tax rate upon completing an extensive budgetary process where anticipated needs are determined, but they must get voters to approve adopting a budget that increases their adjusted tax levy[2] beyond the tax levy growth limitation.[3] School districts must prove by clear and convincing evidence that the anticipated dollar amount of the increased tax levy is reasonable.

This process seems relatively straightforward, but funding public education with property tax revenue has had varying results throughout the country because “property values vary a lot from neighborhood to neighborhood, district to district”, according to NPR. For example, NPR reported that the inadequate local property tax revenue in parts of North Carolina required the state to contribute two-thirds of its school funding in 2013. Because of the tight budgets, certain school districts were unable to cover costs needed to pay teachers and custodians and purchase school supplies. NPR’s coverage highlighted similar instances in other parts of the U.S., including rural Sumter County, Ala., where insufficient local property tax revenue left Livingston Junior High School unable to afford building maintenance, causing, among other things, structural issues and plumbing issues. Unlike, North Carolina, however, Alabama did not provide the county with funding.

Although, it would appear that inadequate funding is one major issue associated with using property tax revenue to pay for public education, taxpayers in western Pennsylvania voiced different concerns. Specifically, some residents are hoping to eliminate school property taxes because they think “spending by school districts is out of control,” according to Trib Live, a local news service. But recent proposed legislation, introduced by Sen. David G. Argall (R), aimed at eliminating school property taxes doesn’t necessarily eliminate taxpayer-funded public schools. The proposal seems to shift the burden from one group of taxpayers (property owners) to a broader base of taxpayers by increasing the state sales tax rate by 1 percent, increasing the individual income tax rate from 3.07 percent to 4.95 and using these sources of tax revenue to make up for the school property tax levies that would be eliminated. Part of the motivation behind this particular proposal is tax relief for senior-citizen homeowners who are said to be “overburdened” by increasing school property taxes, reports.

This will not be the first time the Pennsylvania legislature has taken aim at school property taxes. Two year ago, a measure to eliminate school property taxes failed by one tie-breaking vote cast by the state’s lieutenant governor. 

If nothing else, perhaps Pennsylvania’s efforts will motivate taxpayers, legislators and educators to put on their thinking caps in order to resolve some of the issues associated with placing heavy reliance on local property taxes to fund public education. This conversation might also be ripe for discussion in light of the federal government’s plan to reduce spending by cutting billions of dollars from federal education initiatives.

Continue the discussion on Bloomberg BNA’s State Tax Group on LinkedIn: What kind of solutions do you think will lead to more balanced public education funding? Do you think taxpayers other than property owners should share the responsibility of funding public education?

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[1] For an in-depth analysis on New Jersey property tax, check out Bloomberg BBNA’s Property Tax Navigator (subscription required).

[2] The adjusted tax levy is the amount raised by property taxes for the purpose of the school district, excluding any debt service payments.

[3] The growth limitation is calculated as follows: the sum of the prebudget year adjusted tax levy; adjusted for increases in enrollment multiplied by 2 percent; adjusted for an increase in healthcare costs; and adjusted for certain liability pension contributions.