POTTSTOWN

  SCHOOL DISTRICT

ADMINISTRATION BLDG.   Beech & Penn Streets   PO Box 779    Pottstown PA 19464-0779
Tel. (610) 323-8200    Fax (610) 326-6540  

ACT 72 OPT -OUT RESOLUTION

DECLINING TO LEVY THE ACT 72 ADDITIONAL INCOME TAX;

AND DETERMINING THAT ACT 72 IS NOT IN THE BEST INTEREST

OF THE SCHOOL DISTRICT , OR THE RESIDENTS OF POTTSTOWN

May 19, 2005  

BACKGROUND:   Act 72 of 2004 is the Pennsylvania school slot money, tax, and referendum law. Act 72 establishes many complex rules and provides a one-time school district option to accept or decline slot money – and opt in or out of Act 72.  For schools that opt in, Act 72 among other things imposes:  (1)  A requirement to increase the current income tax rate, or adopt a new income tax.     (2) A requirement to follow an entirely new budget process.  (3) A requirement to apply proceeds from increased income taxes to reduce home owner real estate taxes.  (4) An extensive regulatory scheme for future real estate tax increases.  (5) Limitations on future school building projects, and on school director rights and responsibility to operate schools as deemed in the best interest of students and residents.  

Act 72 was hastily adopted by the Pennsylvania legislature in post-midnight votes just before July 4 adjournment for the 2004 summer.  The final version was developed by a small group of legislators behind closed doors, incorporated significant changes from prior versions, and was introduced in the Senate on July 2, 2004 .  Both Senate and House approved the legislation without time for review – the Senate voted at 2:00 a.m. on Saturday, July 3, and the House voted at 2:00 a.m. on Sunday, July 4.  

Act 72 incorporates some helpful concepts, but is seriously defective legislation – it is poorly drafted with extraordinary complexity, numerous contradictory, illogical, and ambiguous provisions; and with many detriments for District residents and District students.  

The School Board has carefully studied Act 72 over the last 6 months, including attendance at multiple programs explaining the details of Act 72; analysis and reports from the School District Business Administrator, the Intermediate Unit, and legal counsel; study of positive and negative impacts on the District, District residents, employees, and students; and discussion at a taped public meeting held on March 7, 2005 .  

The School Board has provided substantial information to the public concerning Act 72 through public meetings with borough officials, residents, and businesses, televised reports which were broadcast over the local television station on multiple occasions, and newspaper editorials.  Input received by the School Board to date from residents has been mixed, but do indicate that most residents, parents of students, and area businesses wish the District to opt out of Act 72.  

After extensive consideration of all available relevant information, the School Board has determined that the known detriments and unknown facts outweigh the benefits of Act 72, and that it is in the best interest of School District residents to opt out of Act 72.  

Specifically, the School Board has decided to opt out, because:  

• Most importantly, Act 72 will have an adverse impact on students through diminished quality of education.
• Act 72 will have an adverse impact on property values, and the financial health of our town, for the same reason.
• Act 72 is seriously defective legislation.  For example, the “exclusions” are riddled with legal loopholes and are too restrictive to provide meaningful relief at face value.
• Act 72 fails to provide meaningful tax relief.
• Act 72 will increase taxes for many individuals; and will divide the community by creating winners and losers.
• Act 72 involves many significant unknowns, including slot money timing and amount; the  cost to administer Act 72; the potential adverse impact on teachers and staff morale; and the potential adverse impact on desirability of the  School District and on property values.
• Act 72 will create significant extra District costs and resident taxes resulting from the cost to administer Act 72; downgrade of District bonds; and future real estate tax increases required every year without regard to need.
• Act 72 will require a budget process requiring preparation of the budget before adequate information is available, which is extremely contrary to prudent financial management.
• Historically District real estate taxes have been as low as possible, consistent with providing with a quality education and prudent financial management.
• The primary cause of high real estate taxes is a consistent annual reduction by the  Pennsylvania legislature of the share of education costs paid by the state, combined with an increasing number of unfunded mandates imposed on school districts by the federal government and the Pennsylvania legislature.  [This process of declining state funding is continuing for the 2005-06 school year. The Governor’s budget provides an overall increase in basic education funding of 2.5%, which is seriously inadequate, and which is less then the average inflation index of 3% and our adjusted index of 4.1%.  This repeated discrepancy between cost inflation and state funding will again force higher local taxes.]
• Because wealthier districts will opt out, and poorer districts who opt in will likely not be able to sufficiently increase their revenue to support the ever rising cost of an adequate educational program, the spending gap on expenditures per child, which is already a huge problem in Pennsylvania, will become even wider.
• The School District does not wish to encourage gambling.  Available information indicates gambling causes serious social problems, including insufficient family income, increased family debt and bankruptcies, family breakups, suicides, and crime.
• Input from most town residents and business indicates that most tax payers wish the District to opt out.  The local Chamber of Commerce has already passed a resolution against the adoption of Act 72, favoring instead a more equitable solution to the problems of school funding and real estate tax reform. 

It is therefore RESOLVED by the Board of School Directors as follows:  

1.         The School Board declines to levy The Act 72 additional income tax, and determines that Act 72 is not in the best interest of School District residents.  

2.         In order to provide meaningful tax relief, the School Board requests the Governor and the Pennsylvania legislature to take the following actions:  

·        Cease imposing unfunded mandates on Pennsylvania schools, and eliminate current mandates that no longer serve a meaningful purpose.

·        Provide adequate funding for education by restoring the state share of the cost of education to historic levels of 50% or more.

·        Distribute such funding to all school districts using an equitable formula that meaningfully reflects the true cost of a quality education for all of Pennsylvania’s children, including those living in low income areas. 

·        Adopt simple and straightforward tax reform legislation authorizing school districts and municipalities to convert earned income taxes to a personal income tax, and to allocate local taxes between a real estate tax and an income tax as deemed appropriate in the judgment of the school board based on consideration of local demographic and economic factors, fairness, and wishes of residents.  

3.         In order to provide legislation that reflects good public policy and is free of substantial defects, the School Board requests the Governor and the Pennsylvania legislature to avoid hasty enactment of legislation and, in accordance with the Pennsylvania Constitution, follow a more deliberative process, including hearings to gather meaningful input from both school districts and tax payers (residents and businesses), to develop a fair and equitable tax and funding system for public education.

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230 Beech St, Pottstown, PA 19464-0779
Phone: 610-323-8200  -  Fax: 610-326-6540