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Detroit city workers and retirees carry signs protesting against cuts in their city pensions and health care benefits during a protest against the city Detroit city workers and retirees carry signs protesting against cuts in their city pensions and health care benefits during a protest against the city's municipal bankruptcy filing, outside the Federal courthouse in Detroit, Michigan October 23, 2013. REUTERS/Rebecca Cook  

Pa. Schools Spike Taxes Without Vote To Preserve Pensions

Schools across the state of Pennsylvania are being hit with a major pensions shortfall. Taking the hit are taxpayers, who are being forced to foot the bill with tax increases — that they aren’t allowed to vote on.

As originally reported Thursday at Watchdog.org, a loophole is allowing school districts to evade a 2006 state law designed to prevent runaway increases in property taxes. According to the Taxpayer Relief Act, any property tax increase that goes too far above an inflation-indexed cap must be put in front of voters.

However, the law allows the Pennsylvania Department of Education to grant waivers allowing districts to raise taxes without a vote if the money is needed to pay for debt from school construction, high special education costs, or employee pensions.

Out of 501 public school districts in Pennsylvania, 164 have received waivers allowing them to raise property taxes above the limit without a vote. In 163 of those districts, rising employee pensions were the stated justification for tax increases.

According to the Times Leader, a paper serving Wilkes-Barre, Pennsylvania, the state’s pension shortfall is the fourth-worst in the country, with the 2013 total reaching nearly $20 billion. The state is paying the price for past largesse.

In 2001, the state increased teacher pensions by 25 percent based on optimism about the pension fund’s rate of return that was — it turned out — unwarranted. Now, to support the generous pensions, school districts are having to put up more and more money, with their share of contributions rising from about 12 percent to 17 percent or more.

The school district’s workaround has allowed property tax growth to nearly double income growth in the state. School property taxes have risen 146 percent since 1993, while wages in Pennsylvania have risen by only 80 percent.

The median Pennsylvania teacher makes about $60,000, more than the median Pennsylvanian, and their pensions mean their retirement incomes are higher as well.

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