Plans to finance both public education and transit at the local level would be stopped in their tracks under HB 1224 that passed the state Senate Finance Committee yesterday. The bill not only places a hard cap on the local sales tax rate at 2.5 percent but also only allows counties to levy a sales tax increase for either education or transit—not both. This bill joins a slate of other bills that would restrict local control. The full Senate is scheduled to vote on the bill Monday night.
In effect, the bill restricts local governments’ authority to meet local needs and balance their budgets. Importantly, the bill is aimed at shifting the responsibility of funding public education away from the state and towards local governments. The state clearly cannot afford last year’s tax plan and now legislators are proposing budgets that would make serious cuts to public education as a result. Those cuts would have to be absorbed by children in the classroom or addressed at the local level, putting local governments in a tough spot having to choose whether or not to make up the difference via a local tax.
Local governments are dealing with the fallout from last year’s tax plan in other ways too. They no longer have access to the school Capital Building Fund, which received a portion of revenue generated from the state corporate income tax. Schools used this fund to help them meet their education obligations, as my colleague explained last month. The result is a $382 million dent over the next five years. This loss is on top of the looming $63 million-annual dent resulting from elimination of the local privilege tax in 2015. Read More