“Root Cause” Of School Budget Crisis

This Sign LiesThis year’s award for political deceit will surely go to the Tredyffrin Republicans.  Their signs on the earned income tax (EIT) have made them the Party of Pinocchio.

There is no EIT question on the November 8 ballot.  The Tredyffrin GOP are trying to holler “fire” and hope their multitudes will rush not to the exits, but to the polls.

There is no fire—that is, no tax question on the ballot. Further, Democratic candidates have uniformly said they are opposed to an earned income tax.

There is, however, smoke on the horizon—a budget crisis looming for our school district.  The Republican tax demagoguery only makes the search for solutions more difficult.

School Board Tax Study Group

Six Republicans and 3 Democrats serve on the Tredyffrin/Easttown School Board. Starting their budgeting for 2012-2013, they voted to set up a Tax Study Group of 8 community volunteers to determine the impact of an EIT and to specify pros and cons. This was intended as an exercise in objective analysis. As the board’s finance chair noted, our school district’s revenues are derived almost entirely from property taxes, and the board needed to at least examine other revenue sources in fulfilling their fiduciary responsibility. However, implementing an EIT would require voters approving by referendum.

This past Thursday the study group held 2 final public meetings to report their findings. Their presentation was both instructive and sobering. If you are concerned at all about your property taxes, the quality of our children’s education, or both, it is worth downloading (here) and scanning through their presentation slides. (Even better, the complete EIT presentation is also broadcast on the district’s TV network, Comcast Channel 14 and Verizon Channel 20, every evening at 9:00 p.m. through November 14.)

Earned income tax is a wage tax and does not include retirement income, interest and dividend income, or social security benefits. This is the first presentation to explicitly enumerate the number of wage earners, the number already paying EIT to other municipalities, detailed budget impact, and other specifics.

There are 3 causes for the school-funding crisis:

  • The stagnant real estate market and our poor economy, resulting in fewer property transfers and greatly reduced earnings on our reserve fund.
  • In the recession many homeowners and businesses have sought reassessments for a loss of $6.5 million in revenue to our school district since 2006.
  • A ballooning pension liability, rising from $4.7 million in 2011 to $13.3 million in 2015.

The sobering implication of the team’s report:  Setting aside the enormous political hurdles to approving an EIT, the revenue gains from the tax would be no lasting salvation to our district and don’t reach to the “root cause” of our financial pains. Pressed to identify the root cause, the study group members give it a name—“Pennsylvania School Employees’ Retirement System.” PSERS is the government-administered defined benefit pension plan for Pennsylvania school employees. With some $50 billion in assets, it’s one of the oldest public pension plans in the U.S., and some 739 school districts participate in the program. They’re probably all at risk because of actions by the Pennsylvania legislature, going back to 2001, which increased benefits but delayed paying the bill until 2013.

Team To Handle Financial ChallengesSchool Board President Karen Cruickshank sees our funding difficulties as “state-created,” and she has called on the legislature in Harrisburg “to fix your mess.” Karen is calling for school districts throughout the state to rally together in a coordinated effort. Read her comments in an on-line Tredyffrin-Easttown Patch article.

In addition, we encourage you to read this article in Pattye Benson’s Community Matters blog, where our school board candidates—Karen Cruickshank, Jerry Henige, Jenny Wessels and Scott Dorsey—tell how they would address the budget crisis and what skills they bring to the board. Vote for them this Tuesday.

 
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