The end of school property taxes? Proposed Pennsylvania bill would rewrite education funding.

Beth Ann Rosica’s writings are a blend of news, opinion, and analysis.   

Pennsylvania’s elected school boards may soon lose their authority to levy property taxes. Senate Bill 962, introduced by Senator Dawn Keefer (R-York/Cumberland), would eliminate school property taxes and replace them with higher state income and sales taxes to fund public education. 

School Boards are often criticized for annual property tax increases, especially as student enrollment shrinks. Commonwealth Auditor General Tim DeFoor issued an audit report in 2023 alleging that districts across the region regularly engage in a “shell game” in order to justify increased school taxes.

The report details how districts raised “taxes while holding millions of dollars in their General Fund accounts.” While there were no findings of illegal activity, the report concluded that the districts were “adhering to the letter of the law and not the intent of the law,” when raising taxes. 

Keefer’s proposed legislation, the School Property Elimination Act, would terminate school boards’ authority to raise taxes and instead increase sales tax by two percent and personal income tax by 1.88 percent.

According to the senator, 80 percent of Pennsylvania residents will fare better under the new system. In an interview with Broad + Liberty, she said the bill will lower mortgage escrow payments, boosting housing affordability and increasing economic growth and job creation.

Senator Keefer said, “property tax is the number one issue for my constituents.” Annual increases disproportionately burden seniors and homeowners on a fixed income. The legislation is designed to combat rising taxes and at the same time address the school funding shortfall, particularly in lower socioeconomic districts. 

For example, under the proposed model, the School District of Philadelphia would receive $300 million in new funding in the first year. Additionally, the bill provides more funding for educators than the proposed cost of living adjustments.

There is also a strong accountability function for school districts incorporated into the bill. Each district is required to balance their budget annually, and if they fail to do so, they have one year under an advisor to get back on track with a balanced budget. If they are unable to balance the budget after a year, the district is dissolved and merged into another district. This would prevent districts with declining enrollment from hiring unnecessary staff and administrators.

The proposed changes — increased sales tax by two percent and income tax by 1.88 percent  — were derived from the current annual $17.7 billion dollar local share of education. According to Keefer, they “backed into” the revised rates by analyzing the local funding provided by property taxes and then calculated how to shift those dollars to other tax sources.

Education funding in Pennsylvania is a controversial topic, particularly since the landmark lawsuit in 2023 declaring the current system unconstitutional. However, very little has changed to address the funding system; instead additional dollars are thrown at the problem with limited to no positive results in academic performance for students. Keefer said, “the bill will force the issue of inequity.” 

Proponents of the bill argue that school property taxes are regressive because they are based on property value rather than a taxpayer’s ability to pay. Under this proposal, school funding shifts taxes tied more closely to consumption and income. While 80 percent of residents will pay less under the proposed change, some will pay more. Those who make more money — the top 20 percent of earners — will pay more in taxes and those who spend more on taxable items will also pay more.

Residents can analyze whether they would pay more or less under the new system, and if they ultimately pay more, when they would reach a break even point.

While some residents may be concerned about the move from local control to state control, the increased state taxes are earmarked for each county and distributed on a per pupil basis by district.

The intent of the School Property Elimination Tax Act is to significantly change how education is funded, to address the disproportionate nature of the property tax funding especially for poorer districts, and to stimulate the housing economy by making it more affordable for young people to buy homes and for seniors to maintain their homes. 

Keefer said on average, young people purchasing their first home pay approximately $500 per month in taxes. This burden pushes many out of the market. The bill also requires landlords to pass savings on to tenants for one year as they will realize savings from the elimination of the property taxes on their rental properties.

The concept to eliminate property taxes is not new. Former state Representative Frank Ryan (R-Lebanon) spent nearly five years developing a comprehensive plan to eliminate Pennsylvania’s school property taxes before introducing a bill in 2022. Today, the proposal has been revived in the Senate by Dawn Keefer and in the House by Representatives by Wendy Fink (R-York).

Keefer said prior to Covid, there was bipartisan support for the concept, but it fell apart during the lockdowns. Today, she is focused on educating constituents and members of the legislature to work towards passage of the bill.

Beth Ann Rosica resides in West Chester, has a Ph.D. in Education, and has dedicated her career to advocating on behalf of at-risk children and families. She covers education issues for Broad + Liberty. Contact her at [email protected].