Act 72 and Property Tax Reform

Jason, over at Tube City, is right to be skeptical about the Act 72 "shell game" (!) that the governor is trying to impose on local school districts. Better, he suggests, would be a centralized property tax collection and distribution system, which would equalize budget disparities between high and low income school districts. Jonathan Potts notes (in Tube City comments) that it would likely take a court battle to make this happen, and current interpretations of the PA Constitution make a win for equity unlikely.

My guess is that Jonathan is right (on both counts), but before we go down that road, note that sometimes, we should be careful what we wish for.

Once upon a time in the West, California had a public school system that was the envy of the other 49 states. Along came Serrano v. Priest, the multi-round court case based on district-to-district inequality, which led to implementation of a system much like the one Jason is describing: collection of real estate taxes in Sacramento, and central distribution of school budgets based on a state-wide dollars-per-pupil formula. What happened next? As real estate values went way up in some areas, homeowners in wealthier towns didn't see their tax dollars coming back to the community. The whole state exploded, with property tax reform, in 1978. Assessments were capped at 1978 values, with marginal increases on an annual basis and reassessment only on change of ownership. Local tax increases can be implemented only with a super-majority vote.

Result? Over about a decade, the state's public schools, along with a lot of other public services, went into the toilet. California schools overall were starved for cash; they went from first to worst nationally, more or less. Since then, thanks to the dot-com boom and private foundation money raised in wealthy suburbs, a few school districts are doing fine again. On a per student basis, the Mt. Lebanon and Palo Alto districts spend roughly the same amount of money. In Mt. Lebanon it comes straight out of our taxes. My friends in Palo Alto pay much less in tax, but they more than make up for it with direct cash and in-kind "contributions" to the schools, and to the school foundation -- and that's if they keep their kids in the public schools. A lot of people, even in "good" districts like Palo Alto, still pay private school tuition. And, either way, they make mind-numbing mortgage payments.

If you don't live in a wealthy town, of course, you aren't lucky enough to have the luxury of the public/private choice. It's private if you can afford it; public if you can't. My kids never went to Palo Alto schools. They went to Oakland (CA) schools, where it's the PTA budget that covered things like art, and music, and the school library. People still ask me whether I miss living in the Bay Area. Since I can't afford private schools, and I can't afford to buy a house in Palo Alto (for example), the answer is: absolutely not. And I'm not alone -- a lot of our friends with young kids booked out of the Bay Area in the mid and late 90s, when our kids were moving out of preschool and into elementary schools, and we were all looking at some pretty harsh choices for schools.

The lesson isn't that the PA system is great. Jason and Jonathan are right that there's a lot of inequity and inequality here. But if we're funding schools with property taxes, you can't solve the problem by centralizing school budgets unless you solve the assessment problem at the same time. Otherwise, at best you're simply deferring the problem to another day; at worst, you're setting the state up for a much uglier problem. If we're not funding schools with property taxes . . . well, that's another (long) post altogether.