Back-to-school time is finally here for many students across the country, and some taxpayers are learning a tough lesson in property tax. Among the various factors that most people consider when deciding where to purchase a home, the quality of the school district is at the top of the list for many potential home buyers.
A considerable amount of funding for school districts comes from state and local governments. Most states use “sales and income taxes (both corporate and personal),” in addition to property tax, to raise revenue for education expenditures, according to PBS.org. Affluent school districts with higher property values can raise more money through increased property taxes. The increased revenue may be used to fund newer buildings, equipment and other amenities. But for poorer communities that raise less money through property tax increases, the lack of funds means overcrowded classrooms, less money spent on learning materials and reduced staff. A few states are working out the math to give the schools what they need, but at what cost?
Pennsylvania was in the news recently for property tax hikes related to the state’s contribution to school pensions. “More than 85 percent of districts in southeastern Pennsylvania are raising taxes for the coming school year—an average of 2.7 percent,” according to a story by local news outlet philly.com. The Pittsburgh Post-Gazette also reported that a survey completed by 355 of Pennsylvania’s 500 school districts, including Philadelphia, found “85 percent said they planned to increase property taxes next year, 46 percent plan to reduce staff, and 34 percent plan to increase class size.”
School districts in Columbus, Ohio will be presented this year with “[t]wo proposals to raise property taxes for Columbus City Schools that would cost nearly $250 per $100,000 of home value, an increase of about 18 percent,” reported by the Columbus Dispatch last June. “The tax bill just for schools on a $100,000 house would rise from $1,365 to as high as $1,665.” The money is needed to build new schools, for operations and ongoing maintenance.
The school board in Washington County, Utah voted last week to increase property tax. The Spectrum reported that the increase was necessary due to inflation and could possibly generate $700,000 for county schools. The story notes that the school board “approved a 3 percent tax increase due to inflation adjustments” and “approving this recent budget change means the school district’s property tax budgeted revenue would increase by 1.85 percent from last year’s property tax budgeted revenue.”
Pierre, South Dakota is increasing its budget for the next school year, but somehow managed to decrease the school district’s property tax levy by using money from a half-cent sales tax increase that became effective on June 1, 2016. Local news outlet The Capital Journal reported in June that “[a]lmost all of the increased budget, a total of roughly $1.47 million, will go to teachers, certified staff, and classified staff as substantial pay raises.”
As the new school year begins, it seems school administrators, local officials and taxpayers are challenged with finding a balance among the commitment to educational excellence, properly compensating staff, maintaining schools and the risk of raising taxes so much that it will adversely impact the community.
Continue the discussion on LinkedIn: What are other social, political and economic issues and concerns raised by property tax revenues used to fund education, including salary increases and pensions for educators?
For more information about state tax issues, sign up for a free trial on Bloomberg BNA’s Premier State Tax Library.
By Cynthia N. Wells
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