How the GOP tax plan will affect Collier public and private schools

The Republican tax bill signed into law last month contains numerous provisions that will transform the way public and private schools are funded. Because Florida has no income tax, the new legislation will have a unique impact on the state’s education system and the homeowners who fund it. But how the changes manifest in Collier County may be completely different than how they’re felt in other parts of the state. Here’s our breakdown.

Public schools

One significant component of the new tax plan is a $10,000 cap on local property and income tax that can be deducted from federal taxes. The new limit is a major blow to high-income tax states, such as California and New York, and may cause taxpayers in those regions to pressure their legislators to lower taxes. This could be a serious hit to public schools, which are primarily funded by state and local government. 

Because Florida has no income tax, the impact to the Sunshine State will likely be more subdued. Twenty-two percent of Florida taxpayers take local and state deductions, claiming an average deduction of $7,373 – a minuscule amount compared with California where taxpayers seek more than double that, as well as New York where residents claim more than triple that, according to an analysis by Education Week, which pulled 2015 data from the IRS.

However the impact to Floridians will vary greatly by county.

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In Collier County, home to $83 billion worth of taxable property, the school district relies heavily on the 5.122 millage rate it imposes on wealthy homeowners; a cap on property tax deductions could dissuade people from purchasing homes and thus result in a considerable dent to funding.

Of the 56,140 households in Collier County that claimed state and local tax deductions in 2015, taxpayers sought an average deduction of $16,336 — more than double the state average — according to a report from the National Association of Counties, which pulled data from the IRS.

“That’s really high,” said Christopher Westley, an economics professor at Florida Gulf Coast University and the director of the Regional Economic Research Institute. “It sort of makes Collier the California of Florida counties.”

Only properties valued at more than $830,000 would be affected by the $10,000 cap, Westley said. In Collier County about 11 percent of single-family homes, or roughly 10,000, meet or exceed this valuation, according to the Collier property appraiser’s office.

The school district expects total millage proceeds for the 2017-18 fiscal year to reach $436 million, which is nearly half their total annual budget.

Facing an annual loss of thousands of dollars, Collier’s property owners may pressure the School Board to lower the millage rate, thereby shrinking the district’s funding pool. Because taxpayers in the highest income brackets will see a drop in their tax rate from 39 to 37 percent, which would offset their inability to deduct, the pressure will likely come from middle income taxpayers, Westley said.

The National Education Association estimates the deduction cap will result in a $150 billion loss for U.S. public schools over the next 10 years. In Florida, the teachers union estimates public schools will lose more than $2.7 billion and put 3,400 educator jobs at risk.

Florida is already suffering from a major teacher shortage. As of Sept. 1, there were 1,670 teacher openings advertised at Florida public schools, which is an extremely conservative estimate for unfilled teaching positions as many districts, including Miami-Dade, do not advertise their openings.

Just 10 of Collier County’s 56 vacant K-12 teaching positions are advertised online. Like many districts, Collier fills teaching vacancies with long-term substitutes, known as guest teachers. These teachers must have attained an associate’s degree or higher, but are not required to hold a teaching certificate. 

According to CCPS spokesman Greg Turchetta, 42 full-time teaching positions are being filled by long-term guest teachers.

“We are in a state that is struggling to keep teachers anyways, and then to have funding cut, that’s going to be a disaster,” said Sharon Nesvig, spokeswoman for the Florida Education Association.

The consequences will be particularly severe, Nesvig noted, considering the volume of students who’ve evacuated to Florida since Hurricane Maria. 

According to the Florida Department of Education, more than 8,500 students from Puerto Rico and other areas affected by Maria have enrolled in Florida K-12 public schools, raising concerns about straining already depleted resources. More than 2,200 evacuees have landed at Orange County Public Schools, while 44 have come to Collier.

In the long run, however, the new cap may incentivize taxpayers of high-tax states to make Florida their primary residence, thus increasing Florida’s overall tax base.

Private schools

Families will now be able to draw a maximum of $10,000 per year from their federally tax-exempt college savings accounts, known as 529s, to pay for K-12 private school tuition.

Most states offer income tax credits and deductions for 529 contributions to incentivize people to save for college. With the added flexibility granted to 529 accounts, those states could lose considerable tax revenue as more taxpayers, namely private school families, open 529 accounts to avoid income tax.

But because Florida has no income tax, the state will not be faced with this burden.

Amy Feins, director of college counseling at Seacrest Country Day School, a private school in East Naples, said the changes will make private school more affordable.

“This opens up options for families, and we would definitely benefit from that,” she said.

The benefits will likely only extend to wealthier families. According to the most recent report from the Government Accountability Office, just 3 percent of families used college savings accounts in 2010, and those who did earned roughly three times the median income of families without 529 plans.

Shannon Colavecchio, spokeswoman for Florida Prepaid College Board, which administers the plans, said she only anticipates changes to 529 savings plans and not prepaid programs.

Families hoping to dip into their 529 accounts to pay for private school tuition can do so immediately.

Nonprofits

The new legislation doubles the standard tax deduction to $12,000 for individuals and $24,000 for couples. This has caused concern for charities and nonprofits as fewer taxpayers will have incentives to itemize their deductions, thereby eliminating the tax break millions of Americans receive for donating to charity.

Some organizations, such as the United Way, estimate an annual loss of billions in charitable giving.

The effects could be particularly detrimental to Collier nonprofits, which rely on the generosity of wealthy residents.

Susan McManus is the president of Collier’s education foundation Champions for Learning, which offers college and career counseling, supports teachers with classroom grants and provides scholarships for low-income students. She said she was optimistic that donors who are passionate for their cause won’t be deterred by the new regulations.

“Tax incentives are not always the reason people support a mission they care deeply about,” she wrote in an email.

Universities and colleges that rely on charitable contributions for student scholarships and construction projects may also feel the squeeze caused by the increased deductions.

What didn’t pass

Controversial provisions supported by House Republicans that would have significantly increased taxes for graduate students were not included in the Senate’s version of the bill and were ultimately jettisoned from the final tax package. 

One such provision, which sparked nationwide protests, would have taxed graduate students’ tuition waivers as income.

Another education-related provision that was left out of the final bill was the House-proposed elimination of a $250 tax deduction for teacher spending on classroom supplies. The Senate version doubled it to $500, but the final version kept the original deduction. 

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