HARRISBURG — The first big political fight of the year revives an old battle over property taxes.
Pressure to reform the tax collected for schools is getting so intense that a group of administrators is telling members to write up two budgets — one based on the old tax-collection scheme, the other based on the new way.
Their dual duty comes as support for tax reform grows. David Baldinger, who leads the Pennsylvania Taxpayers Cyber Coalition, a grass-roots group lobbying to end the school property tax, cited increasing efforts to get Gov. Tom Wolf to get behind the plan and get it off the table before ratcheting up his 2018 re-election campaign.
But school officials are wary, saying reform limits how much local leaders can raise taxes. It also comes even though Wolf and Republican lawmakers say they have no interest in “broad-based tax increases.”
Two Susquehanna Valley administrators are taking a "wait-and-see" approach.
"No, we're not drawing up a second budget," Midd-West School District Superintendent Rick Musselman said Wednesday night. "We're not doing a second budget until Harrisburg takes action."
Danville Area School District business manager Janis Venna is taking the same tact, she said Wednesday. "There has been a lot of talk about tax collection reform, but it's early. There's a lot of time for us to watch what legislators do in Harrisburg. It's still February, and our budget is a work in progress. We'll see how things turn out."
Meanwhile, supporters of reform are pitching it as a "tax shift" — not an increase.
While retiring school property taxes, the plan circulating at the Capitol would make a dollar-for-dollar swap that raises sales taxes from 6 percent to 7 percent. The state's personal income tax would grow from 3.07 percent to 4.34 percent.
Schools would become more dependent upon the state for their revenues and less so on local property taxpayers.
Though tax reform died in the state Senate in November 2015, Republicans say there's enough support now to pass it. On Wednesday, Democrats asked Wolf to convene a special session to discuss the issue.
Senate Minority Leader Jay Costa, D-Allegheny County, noted in a letter to Wolf the "inability among policymakers to coalesce around one specific plan."
But Republicans appear to have little interest in alternatives, sensing enough momentum for a plan already in the works.
Sen. David Argall, R-Schuylkill County, is circulating a proposal that resembles the one that came close to passing in 2015.
Baldinger said Wolf is "backed into a corner."
“It would be political suicide," he said, for the governor to be the only person standing in the way of reform if it passes the Legislature.
Wolf is due to release a budget next week. In the past, he has proposed to reduce school property taxes. A spokesman for the governor didn’t respond to a request for comment.
Mark DiRocco, executive director of the Pennsylvania Association of School Administrators and former Lewisburg Area School District superintendent, said the reform being considered creates stark winners and losers.
“If you are retired and on a fixed income, you will probably look favorably on the plan,” he said. Retirees with little earned income pay less in income taxes, and they don't pay as much sales tax because they don’t spend as much.
They'll come out ahead with a property tax break.
Younger families that spend more, on the other hand, will find themselves paying more in sales taxes — even if their property taxes are reduced.
School officials also worry because sales taxes and income taxes fluctuate. During a recession, the state could be challenged to come up with enough cash to cover the $14 billion generated by school property taxes.
“I’m not sure why they would want to take over tax collection for 500 school districts,” DiRocco said.
Voter anger focused on school boards will shift to the Capitol, he said.
“If there’s a problem, they are going to get deluged,” he said.
Schools officials are protesting the timing, too.
Michael Calla, superintendent of the Sharon School District in Mercer County, said talk of reform is "disconcerting" because it seems the state is looking to the coming budget cycle to implement it.
Based on that short schedule, school districts will continue to collect property taxes until June 30. Then they'll get reimbursements from the state on a quarterly basis.
The Pennsylvania Association of School Business Officials told administrators to consider drawing up two budgets as a hedge against the uncertainty.
Not only are questions being raised about the timing of payments, a move to funnel nearly all school tax revenue through Harrisburg makes officials nervous since less than two years ago, they were forced to borrow amid a state budget impasse.
Himes' group isn’t alone in sounding alarms. The Pennsylvania School Boards Association has attacked the reform plan. It notes that businesses pay about $2.7 billion in property taxes — a burden that would be absorbed by residents paying more in sales and income tax.
But Baldinger expressed frustration at the resistance.
“They just can’t stand the idea that they won’t have their hands in taxpayers’ pockets,” he said.
Critics say few people really understand how little impact the plan will have, however.
School districts may continue collecting property taxes to pay off debt, which more than 9 of 10 of the state's 500 districts have amassed. Calla, the Sharon superintendent, noted "significant" portions of school property taxes are used to cover debt.
“Most residents of Mercer County will pay increased sales and personal income tax," he said, "and continue to pay significant property taxes for many years to come.”
For 23 debt-ridden school districts, the tax reform plan cuts school property taxes by less than half, according to Himes' group. Those include Sharon; New Castle in Lawrence County; Richland and Greater Johnstown in Cambria County; Windber in Somerset County; and Mount Carmel and Warrior Run in Northumberland County.
“That tax will remain in place, not forever, but for at least the short-term," Himes said. "And the short-term is at least the next 10 years,”
John Finnerty covers the Pennsylvania Statehouse for CNHI's newspapers and websites. Email him at email@example.com. Follow him on Twitter @cnhipa. The Daily Item reporter Rick Dandes contributed to this report.