(The Center Square) – When it comes to education savings accounts – and the preferential tax treatments they receive – the cities and suburbs outpace Pennsylvania’s rural areas.
Though it’s perhaps unsurprising that small municipalities lag, those savings gaps persist even when income, age, and education levels are equal. Since families in urban parts of the state save more, the benefits are disproportionately concentrated to smaller, wealthier taxpayers.
The Center for Rural Pennsylvania’s report on Pennsylvania’s 529 plans, which gives tax breaks to families who save for two- and four-year degree programs, found that 60% of all contributions from January 2018 to March 2022 were made for accounts in urban counties.
“The data presented in this report yield several important findings,” said Dr. Kyle C. Kopko, Center for Rural Pennsylvania executive director. “Chief among them is the finding that there is a gap in 529 plan contribution levels between rural and urban account holders – even after accounting for a range of statistical factors that may influence contributions.”
According to the report, rural beneficiaries received, on average, $56 less per quarter than their urban counterparts – even after controlling for income, educational attainment, and age.
Urban areas had an average of almost 20 beneficiaries per 1,000 people, compared to less than 10 beneficiaries in rural areas.
By March 2022, Pennsylvania had more than 244,000 beneficiaries of 529 plans, and 84% of them live in urban areas. Altogether, 529 plans hold almost $6 billion in assets, according to the Pennsylvania treasury.
Philadelphia’s suburban counties were 529 plan leaders: Chester (45.2 per 1,000), Montgomery (38.4), Bucks (32), and Delaware (28.5) Counties outpaced all of Pennsylvania except for Cumberland County (30.4). The Pittsburgh area was also strongly represented, with Butler (24.2), Allegheny (21.8), and Washington (21.2) Counties in the top tier.
Montour County (24.6) was the leading rural area with 529 accounts, followed by Butler County.
More education degrees generally led to more savings, the report showed.
“County educational attainment was a major predictor of savings, with counties with a 1% increase in adults with bachelor’s degrees or higher contributing an additional $635 per quarter, on average, to PA 529 accounts,” the report noted.
As adults with a college degree tend to be wealthier, tax benefits flow tend to financially secure families. Those benefits are heavily concentrated, as The Center Square previously reported. Research looking at 529 plans nationally has shown that accounts tend to be held by families with more than $400,000 in net wealth.
At a news conference on Tuesday, Treasurer Stacy Garrity and Sen. Gene Yaw, R-Williamsport, said the program expands opportunities for families living in the farther corners of the state.
Last year, the Treasury Department expanded its outreach through county fairs, senior expos and legislative events. Garrity also updated the program to offer more investment options for families.
She said during Tuesday's news conference that she knows firsthand, as a native of Bradford County, how often students in the state's rural regions are "forgotten."
"I’ve visited every county in Pennsylvania each of the last two years, and I always talk about the benefits of PA 529 and how saving with PA 529 can help families reach their education goals.”
Yaw, who serves as chairman of the Center for Rural Pennsylvania board, didn't dispute the disparity between urban and rural, either, instead noting that increased awareness is necessary to boost the program's reach.
It doesn't mean the program isn't worth the investment, he added. Quite the opposite.
“This report will help raise awareness among rural residents about PA 529 accounts and how these accounts may be useful to them to save for future education and workforce training needs," he said.
Christen Smith contributed to this report.
