PA budget reforms impact LM

On March third of this year, Pennsylvania Governor Tom Wolf revealed his 2015-2016 budget plan, through which he aims to address issues faced by all Pennsylvanians, especially senior citizens and member of the middle class. Specifically, these include reforms in the areas of jobs, government, and – perhaps most relevant to the Lower Merion community – education.

Currently, Pennsylvania encounters economic struggles in several areas. Governor Wolf summed up his major concerns, explaining that we have “a 2.3 billion budget deficit, [that] we are wnear the bottom of the country in job growth, [that] our state’s credit rankings have been in decline, and [that] our schools are struggling.”

In terms of education, the main goal of the potential tax shifts is to relieve some of the financial responsibility for funding public schools from property owners in districts to the state government. That sounds like lower taxes, but at the same time, the plan would supposedly raise educational funding by $2 billion within four years. So what would that actually look like?

Well, there would certainly be tax reductions, but not across the board. Basically, the area that would receive major cuts would be property taxes- supposedly a 50% reduction for the average homeowner. But, to make that possible, the plan proposes to increase the personal income tax rate to 3.7% (currently 3.07%) and the sales tax rate to 6.6% (currently 6.0%).

The reason behind these increases is something called ‘homestead exemptions.’ Adopted in 1997 as an amendment to the Pennsylvania constitution, it makes it a rule that a person may not have to pay taxes on up to 50% of the median home value in their jurisdiction. I’ll use Lower Merion Township as an example to demonstrate this. Our median home value, according to Zillow.com, is $600,800. Half of that is $300,400. Therefore, under the homestead exemptions, a person whose home is valued at $300,400 would not have to pay any property taxes, and a person whose home was valued at $1,000,000 would only pay taxes on $699,600 worth of property.

But under the current slots-funded tax relief in Pennsylvania, no district in the entire state receives enough money to actually fund homestead exemptions in their entirety. Hence Governor Wolf’s desire to increase the rates of income taxes and sales taxes. Under his new proposal, homestead exemptions would be fully funded in 113 school districts in Pennsylvania, which could lead to tax reductions on properties that area not identified as residential. No immediate changes would occur, of course, but according to Wolf, this plan would bring a batch of school property tax cuts in October of 2016.

Homestead exemptions, while an important part in Governor Wolf’s new budget, are not the only aspect that will impact education. Other plans are to exhort payment from payment from natural gas companies, to increase funding for public schools by 50%, to take a step in the goal of pre-kindergarten for all children in Pennsylvania, and to restore cut to institutions of higher learning within two years.

Finally, one last questions to ask. How exactly would this budget impact Lower Merion School District? Well, for 2014-2015, it is estimated that we will receive a total of $6,558,460 in funding. Under the new proposal, that number would increase by $276,506, to a total of $6,834,966. In terms of the homestead exceptions, we would see a property tax relief of $24,085,506, or 16.27%.

Overall, it is impossible to completely foresee every impact that the new budget proposal would, if implemented, have on Pennsylvania. But one thing is for sure- the plan is an example of bipartisan economics. Borrowing causes, focuses, and beliefs from both the political left and right, the plan (whether or not it passes) is a sign that at least some percentage of the people running our government in Harrisburg are capable of putting aside their differences when the well-being of Pennsylvanians, especially schoolchildren, is in question.

#politics