Legislative Testimony

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Testimony-Task Force on School Cost Reduction, Central Dauphin SD

February 2007

John A. Scola, Ed.D
Superintendent of Schools

Good afternoon, ladies and gentlemen. My name is John Scola and I am the Superintendent of Schools for the Central Dauphin School District. I would like to take this opportunity to thank the committee for allowing me to speak today.

The contents of my comments will refer to Central Dauphin School District's implementation of Act 50 of 1998, more recently Act 72 of 2004, and Act 1 of 2006. My purpose in commenting before you today is to relay the District's experiences under local tax reform, and hope that my comments will serve as a means of assistance to you in your quest for information on the topic of school property taxation.

I'll begin with some background information on Central Dauphin School District.

Background. Our District is located in suburban Harrisburg, Pennsylvania, and we are the 14th largest school district in the state. The District encompasses 120 square miles. We have a population of 82,000 residents, a student population of 12,000 and a staff of 1,600. The District's budget is approximately $142 million dollars and is used to run 13 elementary schools and 6 secondary schools. Our aid ratio is .3667.

Act 50. Initially, Central Dauphin was one of three school districts in the Commonwealth who implemented Act 50 of 1998. Act 50 mandated that a Local Tax Study Commission submit a recommendation to the Board by May, 1999 and in compliance with that mandate, the Commission recommended that the School Board place a referendum on the November 2, 1999, ballot seeking voters' approval of local tax reform. In that election the District saw only a 15% voter turnout and Act 50 of 1998 was adopted by a 2-to-1 margin.

I give you this background because it is fair to say that we see history repeating itself with the implementation of Act 1. With Central Dauphin's experience operating under tax reform, the task force will gain a unique look where others school district could be 5 years from now.

Under the tax conversion Central Dauphin experienced cash flow problems, remedied through Tax Revenue Anticipation Notes, a teacher strike, and bond refinancings done to free money for technology upgrades which could not otherwise be afforded. We were not always able to keep up with building maintenance and equipment purchases the way we would have liked. All of these were in direct relation to the growing pains of tax reform.

After five years and much education of staff and community, things have adjusted at Central Dauphin. With the phase in of new EIT collections cash flows have smoothed. Labor relations have smoothed of their own accord. The conversion from Act 50 to Act 72 allowed us to borrow money for much needed equipment purchases and buildings renovation. Without this debt exception to phase in 1 mill of taxes over a 3 year period Central Dauphin may have faced serious consequences.

With that background, I would like to touch on five areas of concern for Central Dauphin and our neighboring districts: revenue, educational partners, collective bargaining, economic growth, and budget timeline. I will begin with a discussion on revenues.

Revenue. Of the revenue received by Central Dauphin, 76% comes from local sources, 22% from State sources and 2% from the federal government. Local sources are funded mainly through real estate taxes, 64%, and earned income taxes, 27%.

State funding provided to Central Dauphin School District has slowly eroded from 26.41% of the total budget in 1997-98 school year to 22.19% in 2007-2008. This, at the same time as reliance on local revenues has had to increase from 70.91% to 76.44% in the same time period. On one hand the state legislators seek to provide property tax relief to citizens, but on the other hand they have cut state funding to the point that school districts have no choice but to rely on property taxes to fund educational programs.

Educational Partners. There is another significant issue to study under Act 1. Obviously the law states that districts are limited to increase millage by the amount of the index. What the law does not contemplate is lack of restrictions on our educational partners. Districts working diligently to constrain programs, and may find that the local community college, vocational technical school, or intermediate unit may ratify a budget at a rate higher than the index. This will require districts to cut their own educational programs in order to subsidize the students at another facility. Steps must be taken to ensure a level playing field for all entities that are 'entitled' to a share of the district's budget.

Charter and cyber-charter schools also have a significant budget impact under Act 1. Central Dauphin has experienced a 15-fold increase in charter and cyber charter school tuition since 1999. In fiscal year 1999 tuitions were approximately $136,000 and for fiscal year 2008 they are budgeted at $2.2 million. Similar to educational partnerships these tuition fees drain much needed resources away from traditional students. Many of the students attending cyber charter schools were once home-schooled students who had no ability to make demands on the district's resources. If Central Dauphin had control over this $2.2 million we could further reduce class size and initiate programs for students in need of remediation or acceleration.

Collective Bargaining. It also appears that districts are going to have to find a way to tie contractual pay raises to the Act 1 index. This could make for very difficult negotiations. The General Assembly has no stipulations in Act 1 to temper local collective bargaining units. Legislators need to amend Act 1 to assist Boards in the collective bargaining process. Local collective bargaining units must realize that local tax relief will have an impact on their future salary and benefit packages.

Economic Growth. Districts experiencing economic growth and development will not have as much difficulty balancing their budgets under the Act 1 index. Theoretically growing districts could see total budget increases which may be higher than the Act 1 index since the index applies only to real estate millage. The problem will be for rural or slower growing districts. These district's total budget increases will more closely mirror the Act 1 index making it harder for them to fund essential programs.

Budget Timeline. Act 1 requires district's to adhere to a very stringent budget timeline. We find ourselves building a budget between October and January each year, instead of the traditional February to May timeline of the past. This new timeline requires us to build budgets without having completed collective bargaining negotiations, without health insurance renewals, and even without a proposal of state subsidies from the Governor. To 'alleviate' us from the problem the State suggests that we have our Board's pass resolutions ensuring that we will not raise taxes above the index; then we may have extra time to complete the budget. If resolutions are passed, Board's could very well find themselves in dire straits if an unforeseen event occurs which would require them to seek additional revenue. If the State is allowed additional time to complete its own budget, should not school district's be afforded the same right?

Conclusion. In conclusion, Act 1 is a step toward eliminating real estate taxes as the main source of local revenue for school districts. However, the General Assembly needs to make modifications to Act 1 to ensure district's have the means necessary to protect the student's educational guarantees. Thank you.