WARNING TO HOMEOWNERS: These organizations want to undo Act 388 and return us to higher property taxes.

There are organizations at work who want to double your property tax this year. In 2006 Act 388 reduced most property tax for owner occupied residences by 50%. This was done by enacting a 1 cent sales tax dedicated to eliminating the school operating portion of the property tax bill. You might have noticed your property tax bill being cut in half in 2007.

These organizations want to undo Act 388 and return us to higher property taxes.

Act 388 is operating as intended. School districts are being compensated by a formula which reimburses them for: (previous year’s operating expenses plus increases in the Consumer Price Index, population growth and percentage of students below the poverty line). In addition, counties whose school operating budget is below $2.5 million are receiving the difference to bring their payments up to $2.5 million. The 1 cent sales tax is received by the Homestead Exemption Fund which disburses funds to the county school districts according to the formula. Any shortfall in the 1 cent sales tax receipts is being made up from the state’s general fund. So all inflationary items are reimbursed..

Additionally, Act 388 reduced the sales tax on unprepared food to 3% and this sales tax was later reduced to 0% by another act of the legislature. Since that time some counties have added back a tax on unprepared food which varies by county. For example, in Charleston County it is 2%. There is talk in the legislature of restoring the full sales tax on food.

In 2006, when Act 388 was crafted, the 1 cent sales tax more than covered the state’s school operating expenses. Over the recent “great recession” annual sales tax receipts while school operating reimbursements continued to climb according to the reimbursement formula. From 2007 to 2012 school operating reimbursements increased at an average annual rate of 2.29% while sales tax receipts fell. The state general fund made up the shortfall as prescribed by Act 388.  Over the past 7 years sales tax receipts have increased at an annual rate of 4.77%, about the pre-recession rate, and the Homestead Exemption Fund will soon be running a surplus which, by the Act, will be returned to the schools.

Meanwhile, property taxes for the more than 2 million resident homeowners in this state have been reduced by about 50% thanks to Act 388, and the schools have been compensated for their operating expenses adjusted for inflation, population growth, and needy students. If schools want more money for extraordinary projects they should look to the legislature, not to homeowners. Act 388 is working as intended to keep homeowners in their homes while keeping property taxes down to a reasonable rate of increase.

We should not be contemplating changing an Act which is working as planned.