Tax cap is the real bone of contention for schools

Comment

June 07, 1998|By BRIAN SULLAM

ALTHOUGH the Anne Arundel County Council has approved the budget for next year, Superintendent Carol S. Parham is not about to abandon her fight to get more money for the school system.

At Wednesday's meeting of the school board, she voiced publicly what she has been saying privately for weeks.

The fiscal 1999 budget, as approved, won't be enough to finance school operations for the entire year. The system will need a transfer to balance its books.

County Executive John G. Gary, on the other hand, insists that the county has increased education spending as much as it can afford.

'Live within restraints'

"I must live within restraints of the county's resources," he has said repeatedly.

Although the executive and superintendent are battling each other, their real beef is with the county tax cap, approved by voters in 1992.

Though the economy has been healthy and tax revenues have increased steadily for the past three years, county government has not been able to fully realize the benefits of the recovery.

That is because of a rigid tax cap formula that allows no flexibility. It dictates that the increase in county property tax collections on the existing tax base -- excluding construction -- cannot be greater than 4.5 percent or the change in the local consumer price index, whichever is less.

When the tax cap was enacted in 1992, inflation was running at 4 percent to 5 percent. Under those conditions, the county could expect its property tax collections to increase by about 4 percent each year, regardless of which factor was used.

Tax cap proponents expected this moderate rate of inflation to persist, guaranteeing reasonable increases in property tax collections for government.

Indeed, the cap performed according to expectations in fiscal years 1996 and 1997. Property tax revenues increased by $14.8 million in 1996 and $11.3 million in 1997.

However, in the fiscal year that begins July 1, the county budget office estimates that property tax collections will increase about $6.1 million, or less than half the increase just three years ago.

Thanks to the property tax cap, we have the bizarre circumstance that the county's increase in tax collections drops off with a robust economy and low inflation.

In other words, the county is being squeezed even though the general populace is prospering.

No one in 1992 foresaw this disinflation. The national consumer price index has tumbled to about 1.5 percent. The year-over-year change in the CPI for the Baltimore-Washington Metropolitan Area was 0.6 percent last January.

Given the tax cap formula, the county is mandated to collect only slightly more than it did last year from property taxes.

Property tax collections for fiscal year 1998 were $306.8 million. Applying the tax cap formula, which allows for a minuscule 0.6 percent increase, the county would be able to realize only $1.8 million in additional property tax revenues.

Two factors determine the amount of property tax collections.

One is the county's tax rate, which is applied on $100 of assessed value. The other is the total value of all assessable property.

Last year, the tax rate was $2.38 per $100 of assessed value. The total assessable base was approximately $13.7 billion.

Considering that Anne Arundel's assessable base has increased 1.5 percent, the tax cap formula required the county to reduce the tax rate by 2 cents to stay within the allowable increase of $1.8 million.

The real effect of this mechanism is to shrink the fiscal pie that finances county government.

It's not surprising that Mr. Gary and Dr. Parham are pitted against one another. Mr. Gary wants to add money to hire police and detention center personnel. He wants to increase spending on services to the county's aging population and for road repair.

Dr. Parham also wants money to improve the performance of the school system and cover personnel costs.

There isn't enough for all. Mr. Gary has decided that the school system won't be receiving as big an increase as Dr. Parham believes it deserves.

As long as the heavy hand of the tax cap prevents the county from realizing the full benefits of rising assessments and low inflation, the school system, representing 43 percent of the budget, will bear the consequences.

Only the beginning

Dr. Parham's red flag is only the beginning. Four years ago, education received 47 percent of the budget. This year, it will receive 43 percent. In future years, the system will probably receive a smaller proportion.

Does Anne Arundel want to follow the example of neighboring Prince George's County, where a tax cap has had a devastating effect on schools, or California, where Proposition 13 transformed the nation's best public school system into one of the worst?

Brian Sullam is The Sun's editorial writer in Anne Arundel County.

Pub Date: 6/07/98

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