EPLC Education Notebook

Friday, November 18, 2005

    Pennsylvania Education Policy Activity

    Special Session on Property Tax Relief - Senate Actions

  • On Wednesday, the Senate Committee on Legislation moved forward two competing property tax relief proposals - one backed by Governor Ed Rendell ( Special Session Senate Bill 27) and another championed by Senate Majority Leader David Brightbill ( Special Session Senate Bills 15, 16, 28 and 30). Rendell's proposal, introduced by Senator John Wozniak, would tweak the Homeowner Tax Relief Act (Act 72 of 2004) by requiring all school districts to participate in the program that trades state gaming funds for local property tax relief. Additionally, the Governor's plan eliminates the requirement that districts impose a 0.1% earned income tax in order to receive gaming money. The plan put forth by Senate Republicans would repeal Act 72 and use a mix of increased state taxes to fund school property tax relief.

    Among the bills in the Republican package, Senate Bill 30 would provide for property tax relief by increasing the state sales tax and personal income tax. The tax shift would be subject to a statewide voter referendum to be held in March 2006. The referendum would seek a 1 percent increase in the state sales tax and a 0.43 percent increase in the state personal income tax, which would generate $2.6 billion annually to reduce property taxes for all homeowners, freeze property taxes for certain senior citizens, and expand the state's Senior Citizens Rebate and Assistance Act. An amendment added to the bill requires that, when available, gaming revenue be added to the Property Tax Reduction and Senior Citizen Tax Assistance Fund established by SB 30 and used to reimburse school districts for tax freezes and rebates for senior citizens.

    $1.8 billion would be directed to school districts to reduce property taxes dollar for dollar. Districts would receive $1,000 multiplied by the district's 2004-05 average daily membership, unless insufficient revenues are available, in which case payments would be pro-rated. Additionally, school districts must conduct local referendum in 2007 asking voters if they want to reduce property taxes further by increasing the local earned income tax. The bill also includes a back-end referendum that requires voter approval for increases in future school budgets that exceed an inflationary index (SB 30 includes exceptions for which districts would not be subject to referendum and outlines a process for districts to seek tax increases that are denied by local voters in a referendum).

    A summary of Senate Bill 30 (which does NOT reflect the amendments added to the bill) is available at the end of this Notebook.

    Legislation targeting property tax relief to certain citizens also was adopted by the Committee. Senate Bill 15 would freeze the school property taxes of certain eligible senior citizens and reimburse school districts for revenue lost to the freeze. Senate Bill 16 would expand the state's Senior Citizen Property Tax and Rent Rebate Program. Senate Bill 28 would freeze property taxes for low-income Pennsylvanians.

  • On Tuesday, the Senate Committee on Legislation held a public hearing on Special Session Senate Bills 24, 27, 28 and a proposal under development by Senate Education Committee Chair James Rhoades. Summaries of the legislation discussed are available at the end of this Notebook. Testimony also was delivered by representatives of the Pennsylvania Association of School Business Officials (PASBO) and the Pennsylvania Association of School Administrators (PASA).

    PASBO addressed school property taxes generally and specific provisions of Act 72. According to PASBO, compared to other states, Pennsylvania's tax burden is not as onerous as the public perceives. The Tax Foundation ranks the Commonwealth 25th nationally for property tax burden and an "even more modest" 35th nationally for the combined state/local tax burden. PASBO testified that property taxes provide a "consistent, reliable and predictable source of revenue" for school districts that is correlated "fairly strongly" with taxpayers' ability to pay since property value is a measure of wealth. However, PASBO supports an expansion of the state's Property Tax and Rent Rebate Program to assist retired senior citizens and low-income individuals who are truly burdened by property taxes. Additionally, PASBO said suburban Philadelphia relies heavily on the property tax because the Sterling Act (which requires suburbanites who work in Philadelphia to pay a city wage tax) has helped create resistance toward levying a local income tax in that region, shifting the burden to property taxes. On Act 72, PASBO said exceptions to the back-end referendum required on school budgets must be changed to make the referendum workable. Specifically, PASBO addressed modifications to the way a number of current exceptions are calculated and adding an exception that recognizes spending mandated by state and federal statutes that is not offset by a fully-funded state or federal allocation. PASBO also expressed concern over proposals to eliminate the 0.1% local EIT currently required to participate in Act 72 because gaming dollars would be stretched to plug the EIT hole, thus reducing the amount of funds available for property tax relief. Finally, PASBO stated it does not support the complete elimination of property taxes because of concerns about the volatility of replacement revenue sources and the shift to a completely state-controlled school finance system.

    PASA also testified to the property tax as an appropriate source of school revenue that is "stable, reliable, independent and broad based." As such, the Association supports efforts to reduce, but not eliminate, property taxes, as well as efforts to make the tax structure more equitable and efforts that more fairly distribute tax burden. The Association supports increasing the state personal income tax and sales tax to provide property tax relief and dedicating revenue from the increases to this relief, with special recognition given to tax fairness for senior citizens and young low-income families. PASA also supports reimbursement to suburban Philadelphia school districts "based on Sterling Tax credits applied against a school district's earned income and net profits tax" to make it viable for those districts to utilize local taxing options beyond the property tax. Additionally, PASA believes all districts should be authorized to levy a mix of local taxes, including an increased earned income tax. For more information about the meeting, contact the office of Committee Chair Noah Wenger at (717) 787-4420.

  • Special Session on Property Tax Relief - House Actions

  • On Monday, the House Appropriations Committee approved Special Session House Bills 39, 40, 41, 42, 43 and 59, which represent the Commonwealth Caucus' Plan for Pennsylvania's Future. The full House may call up the legislation for a vote on Monday, November 21. The Plan would eliminate all school property and local nuisance taxes and fund education through a state sales tax. Districts that wish to raise additional local funds could do so through a personal income tax or an earned income tax, subject to voter approval. The sales tax rate would be reduced to five percent, however, the base of goods and services subject to the tax would be expanded. State sales tax revenue would be collected in a dedicated Education Operating Fund (EOF), from which school districts would be funded. Special Session House Bill 42, which establishes the EOF, was amended to require school districts' ending unreserved, undedicated fund balances to be transferred to the EOF and to require the balance of the state's Property Tax Relief Fund (gaming funds) to be transferred to the EOF. An additional amendment allows school districts to continue to levy a property tax until sufficient sales tax revenue is collected to offset the loss of revenue derived from school property taxes.

    House Bill 42 also requires districts to utilize data-driven decision making technology. The technology would be used to improve instructional approaches, measure academic progress, meet accountability reporting requirements as determined by PDE, evaluate technology progress to drive better decision making, prioritize districts' budgetary decisions, analyze factors that impact student achievement, and document improvement and share information. Districts would be required to report annually to PDE on how the technology is affecting budgetary allocations in order to meet acceptable levels of student performance.

    The last bill in the Commonwealth Caucus package, Special Session House Bill 59, establishes the School Financing Authority, which would be responsible for managing and administering all public school district debt. More information about the Plan is available on the Commonwealth Caucus' web site at www.commonwealthcaucus.org/plan.htm.

  • The House Special Session Subcommittee on Alternative Revenue Sources met Wednesday to review legislation assigned to the Committee. Discussion during the meeting revolved around principles that should be included in property tax relief legislation. Rep. Kerry Benninghoff said the focus should be solely on school property taxes and not municipal property taxes. He also opposed creating another task force to study the issue. As a result, the Subcommittee tabled Special Session House Resolution 2, which would have authorized such a study. The Subcommittee also expressed concern over Special Session House Bill 27, which establishes a pilot program through which senior citizens could work off a portion of their property tax by volunteering in local schools. While members agreed it is a nice idea, they felt the bill was a distraction from developing a more comprehensive plan that is needed at this time.

    The Subcommittee also tabled Rep. Nicholas Micozzie's Success Schools Budget Proposal (Special Session House Bill 34) because it felt the legislation focuses on developing a new formula for funding schools, while the Subcommittee's focus is on sources of funding. Later, debate between Representatives Mike Sturla and Rod Wilt highlighted other issues surrounding the bill and the special session. Sturla warned his colleagues that failing to consider school funding issues as part of the tax reform debate would institutionalize current inequities among school districts and dig the state into a deeper hole. "I don't know how we do property tax relief without knowing what we're spending it on," said Sturla. Wilt expressed concern that as long as local decision-making is in place, the state will never get to equity because there will always be places that wish to spend more. Sturla agreed with Wilt's concern and said that can be addressed by first determining and providing support for what it costs to fund an adequate education and allowing local taxpayers to go beyond that if they choose. He spoke to the advantages of the Successful Schools approach as a start toward that goal. Wilt agreed that equity needs to be addressed, but felt realistically it can be accomplished only over a period of time.

    Though the legislation was not assigned to their Subcommittee, members also discussed the Commonwealth Caucus' legislation, which may be amended as a vehicle for compromise. Members felt the plan's complete elimination of homestead property taxes was unrealistic and that property tax reduction should be funded through a "cocktail" of taxes, not just the sales tax proposed by the Caucus.

    Bills assigned to the Subcommittee on Alternative Revenue Sources and reviewed at Wednesday's meeting were: Special Session House Bills 14, 16, 26, 27, 34, 36, 38, 48, 53 and House Resolution 2. Links to these and other legislation introduced as part of the Special Session on available on the EPLC web site at www.eplc.org/clearinghouse_k12finance.html#legislation.

  • The four other House Special Session Subcommittees also met this week to review legislation assigned to each Committee. The Subcommittee on Income Tax Initiatives met Wednesday, the Subcommittee on Local Control Initiatives met Monday and Wednesday, the Subcommittee on Property Tax Reform met Monday, and the Subcommittee on Sales Tax Initiatives met Thursday. For more information about Subcommittee meetings, contact the office of House Finance Committee Chairman Dennis Leh at (717) 787-6417.

  • Proposals to Limit State Spending

  • On Tuesday, the Senate Finance Committee amended and passed House Bill 2082, legislation that would limit state spending to an inflationary index. The restriction would be placed in state statute. In any fiscal year, growth in the state budget would be limited to the prior year's General Fund total, adjusted by the lesser of either: 1) the average percentage change in personal income in PA for the preceding three calendar years, or 2) the average percentage change in inflation for the preceding three calendar years plus the average percentage change in population for the past three years. The bill allows the general assembly to spend beyond the limit to respond to a presidentially or gubernatorially declared emergency or by a vote of two-thirds of the members of the House and the Senate upon the request of the Governor for funds that exceed the index. Annually, any surplus revenue would be distributed equally between the Budget Stabilization Reserve Fund (Rainy Day Fund) and the newly established Taxpayer Fairness Fund. Additionally, in years where the Rainy Day Fund exceeds 10% of state General Fund spending, the Rainy Day surplus would be transferred to the Taxpayer Fairness Fund. HB 2082 has been re-referred to Senate Appropriations Committee.

    The Senate amendments bring HB 2082 in line with legislation previously passed by the Senate that would limit state spending both in statue and via a constitutional amendment (Senate Bill 4 and Senate Bill 884). As passed by the House, HB 2082 included different exceptions through which the state could spend beyond the limit. A review of those exceptions is included in the October 28 edition of the Education Notebook at www.eplc.org/notebook/October28,2005.html. House legislation that would limit spending through a constitutional amendment (House Bill 2067) has not passed the lower chamber.

  • The House Democratic Policy Committee rejected setting caps on state spending at a public hearing held Monday, calling the policies a "Tax Relief Assault Plan" rather than a "Taxpayers Bill of Rights" as hailed by proponents. The Committee heard testimony about the harm similar legislation caused in the state of Colorado. For more information about the House Democrats' position and resources that analyze spending cap policies, see www.pahouse.com/trap/index.htm.

  • Other Pennsylvania Education Policy Activity

  • The Pennsylvania State Board of Education took action on two items and reviewed work in progress at its November 15-16 meetings:

    Higher Education Regulations: The Board adopted proposed regulatory changes to Chapter 36 (Foreign Corporation Standards). The regulations govern for-profit educational institutions that are not Pennsylvania corporations. The proposed changes now begin the regulatory review process for public comment. Revisions to Chapter 36 are part of a set of higher education regulations currently under review by the Board. The Board will continue to develop suggested changes to Chapter 42 (Program Approval). Proposed changes to Chapter 31 (Higher Education Program - General Provisions) were published in the Pennsylvania Bulletin on November 12 and will undergo a 30-day public comment period from the date of publication. A copy of the proposed changes to Chapter 31 is available at www.pabulletin.com/secure/data/vol35/35-46/2084.html.

    Accrediting Agencies: The Board approved the Middle States Association of Colleges and Schools and the Pennsylvania Association of Private Academic Schools to serve as accrediting agencies for pre-K through grade 12. Approval was granted for a five-year period.

    Proposed Changes to Teacher Certification: A special State Board Committee presented recommendations for changing the state's teacher certification system that represent a compromise between changes proposed by the state Department of Education (PDE) and public comments gathered at a series of meetings earlier this month. Previously, PDE proposed establishing two distinct certificates for Early Childhood Education (grades pre-K to 3) and Elementary Education (grades 3 to 6) and requiring all teachers to be dually certified in special education. Under the PDE proposal, special education certification would be awarded for two grade spans: pre-K to 6 and 7 to 12.

    Changes to the certification system are being considered as part of the Board's review of Chapter 49 regulations. At earlier meetings to gather public comment on Chapter 49 and the PDE proposal, stakeholders said the proposal positively would focus teacher preparation curriculum on specific areas of child development, provide training for all teachers in working with special needs students, and improve the marketability of early childhood education majors. However, concern was expressed about the capacity necessary to restructure teacher education programs to meet new preparation requirements and whether new university staff that would be needed are available in the market. Concern also was raised that the PDE proposal addresses new teachers only and does not improve the skills of current teachers in working with special needs students.

    The Board's compromise recommendations would maintain PDE's proposals to split the current elementary certificate into separate credentials for Early Childhood Education and Elementary Education and maintain the proposed split for Special Education credentials to cover two grade spans. However, the Board proposal does away with the requirement that all teachers be dually certified in special education. Rather, all new teachers would be required to take 9 credits on accommodations and adaptations for diverse learners and 3 credits on teaching English language learners as part of their teacher preparation programs. Additionally, as part of the 24 credit hours required for new teachers to move from Level I to Level II certification, teachers must complete 3 credits in special education and 3 credits in English as a Second Language. School districts also would be required to address working with special needs students in their new teacher induction and professional development programs. Information about the Board's compromise proposal, including additional recommendations, will be made available on PDE's web site. More public roundtables on the issue likely will be held in January and February.

    Early Childhood Education Regulations: The Committee on Early Childhood discussed proposed changes to Chapters 4, 11 and 12 that would establish new regulations governing early childhood education. Input from comments gathered at public meetings held in early November has been folded into the proposed regulations, most of which address special needs students. The Committee plans to meet again on December 8.

    Annual Certification Report: PDE's Bureau of Teacher Certification and Preparation released its annual report, which reviews teacher certifications awarded in 2004-05. A review of the report will be included in a future edition of the Education Notebook.

    PSSA/University Proficiency Exams/College Course Grades: The state's math and reading assessments (PSSA) can be predictors of college-readiness, according to new research commissioned by the state Department of Education. Using private funding left over from its initial PSSA validation study, HumRRO researchers were hired to examine the relationship between PSSA scores, university proficiency exam scores, and college course grades in English and math. (Proficiency exams are used to determine whether an incoming student will be placed in a college-ready level course or a remedial course). Researchers examined the correlations between student-level data for three of Pennsylvania's publicly-funded universities. Results showed that students who performed well on the PSSA performed equally well on college placement exams, meaning the students were ready for college-level work and would not require remediation. Results also found that "neither the PSSA nor the universities' proficiency exams is substantially better than the other at predicting course GPA". The HumRRO study presented to the State Board of Education will be available on the Department of Education's web site shortly.

  • The Governor's Commission on Training America's Teachers held a regional meeting in Pittsburgh on Friday. For more information about the Commission, see www.pateach.org.

  • All legislation from the Pennsylvania General Assembly, including bills cited in this Notebook, can be found at www.legis.state.pa.us/cfdocs/legis/home/session.cfm.

    Research and Reports

  • The National Center for Education Statistics recently released the following reports:

    Participation in Adult Education for Work-Related Reasons: 2002-03

    Child Care and Early Education Arrangements of Infants, Toddlers, and Preschoolers: 2001

  • Appointments and Resignations

  • Lee Burket has taken over as Acting Director of the Bureau of Career and Technical Education at the Pennsylvania Department of Education. Director Robert Barlett recently resigned due to health complications.

  • Teresa Colarusso has joined the Pennsylvania Department of Education as Deputy Director of Government Relations. Colarusso formerly worked in the Pennsylvania Senate.

  • Bill Witmer will join Senator's Bob Thompson's staff as a budget analyst for the Senate Appropriations Committee. Witmer previously served as executive director for the state House Consumer Affairs Committee.

  • Other

  • Next week...SPECIAL SESSION MEETINGS: Two House Special Session Subcommittees meet Monday in Harrisburg - the Subcommittee on Property Tax Reform and the Subcommittee on Local Control Initiatives. Three House Special Session Subcommittees meet Tuesday in Harrisburg - the Subcommittee on Local Control Initiatives, the Subcommittee on Income Tax Initiatives, and the Subcommittee on Alternative Revenue Sources.

    OTHER EVENTS: The Pennsylvania Association for Supervision and Curriculum Development holds its annual conference in Hershey on November 20-22. The House Finance Committee meets Tuesday to consider House Resolution 509. For information on these and other upcoming events, see www.eplc.org/calendar.html.

The next section provides a summary of Special Session proposals discussed by the Senate Committee on Legislation on November 15 and 16, 2005.

Senate Committee on Legislation

Summary of Special Session Proposals Distributed at November November 15 and November 16, 2005
Senate Committee on Legislation Meetings

Senate Bill 30 (Senator Edwin Erickson)


  • Enacts the State and Local funding for Property Tax Relief Act.

  • Provides for a special election to be conducted to March 14, 2006, for the purpose of authorizing an increase in the State personal income tax (PIT) and the State sales and use tax (SUT) in order to provide for:

    • A reduction in school property taxes,

    • An exemption from school property tax increases for certain eligible taxpayers*; and

    • An expansion of eligibility and benefits under the Senior Citizens Rebate and Assistance Act**.

    • A reimbursement to school districts for the cost of the Sterling Tax credit that is applied against a school district's earned income and net profits tax.

  • The referendum question would ask voters if they favor levying an additional 0.43% PIT and an additional 1% SUT in order to reduce school property taxes by $2.1 billion and to freeze property taxes for certain senior citizens and to expand eligibility and benefits under the Property Tax and Rent Rebate Program.

  • If the referendum question is approved, beginning April 1, 2006, a supplemental SUT and PIT would be levied at the rates authorized by the referendum. These dedicated revenues would be deposited into the Property Tax Reduction and Senior Citizens Tax Assistance Fund.

  • Revenues from the Property Tax Reduction and Senior Citizens Tax Assistance Fund:

    • Are allocated to school districts across the Commonwealth by multiplying the school district's 2004-2005 average daily membership (ADM) by $1,000, except where the amount calculated under this formula is greater than the total property taxes collected by the school district in the 2003-2004 fiscal year.

    • Are paid beginning with the fiscal year commencing July 1, 2006, with such payment being made no later than the fourth Thursday in August.

    • Are, in the event that the revenues are insufficient to provide the calculated payment, pro-rated to ensure payment of any available revenues.

  • The Department of Education is required to make annual notifications to school districts of the amount they are eligible to receive (July 1, 2006) and the actual payment they will receive (August 1, 2006 and each August 1 thereafter).

  • School districts are required to use their entire allocation to reduce the property tax rate on all properties subject to the school district's property tax.

  • Revenues from the Property Tax Reduction and Senior Citizens Tax Assistance Fund would also be used to reimburse school districts for the costs of the Sterling Tax credit that is applied against the school district's earned income and net profits tax (EIT) for those individuals who are subject to the Sterling Tax. This amount cannot exceed $300 million.

  • This proposal would also permit school districts - through a public referendum at the municipal election of 2007 - to levy, assess and collect an additional EIT for the purpose of annually funding homestead and farmstead exclusions.

  • No later than September 1, 2007, a board a school directors*** is required to adopt a resolution authorizing a referendum question proposing an increase in the school district's EIT rate that would provide, at a minimum, an exclusion for homestead and farmstead property equal to 50% of the maximum exclusion permitted by the Constitution of Pennsylvania. The proposed rates may be any one of the following:

    • 0.5%

    • 1.0%

    • 1.5%

    • 2.0%

    • 2.5%

  • Where a majority of electors approve the local referendum question, all revenue**** of the new EIT must be used to fund homestead and farmstead exclusions.

  • Act 50 school districts are required to participate in this program, including the required local referendum question.

  • Act 72 of 2004 is repealed in its entirety.

  • The supplemental PIT and SUT does not take effect unless the Secretary of State certifies that the statewide referendum question was approved by a majority of the electorate.

  • This proposal would reenact the backend referendum provisions of Act 72 of 2004 and would impose these restrictions on all school districts.

* The authorization for this is found in Senate Bill 15, Printer's No. 5.

** The authorization for this is found in Senate Bill 16, Printer's No. 6.

*** Does not apply to school districts of the first class and school districts that have eliminated all property taxes through the use of state funds derived from the dedicated PIT and SUT or other sources.

**** The proposed EIT rate can include an increase in revenue of not more than 2% of the estimated revenue from the EIT, which can be used for the operations of the school district.

Senate Bill 24 (Senator Michael Stack)

  • Amends the Homeowner Tax Relief Act (Act 72 of 2004) to further provide for senior citizen property tax reduction programs in cities of the first class.

  • Removes the requirement that a resident of the city of the first class be eligible to receive a property tax rebate pursuant to the Senior Citizens Rebate and Assistance Act and provides that an individual must meet the following criteria in order to be eligible for this program:

    • 65 years of age or older;

    • Is the owner-occupier of a homestead property;

    • Has a household income that does not exceed $50,000 per year; and

    • Is not eligible for the tax relief provided under section 703 of the Homeowner Tax Relief Act (relating to tax relief) because the person is not subject to the wage and net profits tax.

  • Changes the rebate amount for eligible individuals from 50% of the amount the individual is eligible to receive under the Senior Citizen Rebate and Assistance Act to $250.

  • Includes a provision that any individual who is entitled to receive a property tax rebate from the Senior Citizen Rebate and Assistance Act and who qualifies for this program cannot receive a rebate from this program that would, when taken with the Senior Citizens rebate, exceed the actual property taxes paid by the eligible individual.

  • This proposal would take effect in 60 days.

Senate Bill 27 (Senator John Wozniak)

  • Imposes the Homeowner Tax Relief Act (HTRA) on all school districts in Pennsylvania. This means:

    • All school districts will receive funds from Act 71 of 2004 to reduce property taxes, except Philadelphia, which is still required to reduce its resident and non-resident wage tax.

    • All school districts, except Philadelphia, are regulated by the "back-end referendum" provisions of Act 72 of 2004.

  • Removes the requirement that school districts must impose a 0.1% earned income and net profits tax (EIT) in order to receive state funds for property tax reduction. Any district which has already opted in to the HTRA is no longer required to collect it, although it is unclear whether a school district is still permitted to levy, assess and collect this tax.

  • School districts may still reduce property taxes through an increase in the EIT or a local personal income tax through referendum. However, the required "front-end referendums" are removed and the decision to conduct all future "tax shifts" is left to the discretion of the school board.

  • Eliminates the requirement that a minimum amount of homestead and farmstead property tax relief be offered in a school district.

  • Removes the provisions allowing a school district to ask the district's voters if they want to get out of the HTRA after 4 full years of participation (through referendum).

Senate Bill 28 (Senator Patrick Browne)

  • Enacts the Pennsylvania School Property Tax Freeze Act.

  • Provides for property tax "freezes" for eligible claimants. Eligible claimants are those individuals who are an owner of a homestead* and are an eligible claimant for special tax provisions under Article III of the Tax Reform Code of 1971, regardless of whether they had income subject to the tax under Article III of the Tax Reform Code of 1971.

    • According to the statistical information available from the Pennsylvania Department of Revenue for tax year 2003, the total number of tax returns that were eligible for special tax forgiveness was 1,322,951. This figure includes all taxpayers, not just homestead owners, therefore the number of eligible claimants under this proposal would be less.

  • The claimant is required to occupy the homestead during the entire taxable year, occupy the same homestead during the "base year", and have paid school real property taxes levied on the homestead during the taxable year in an amount equal to or greater than the amount of the school property tax increase.

  • There is a $500 limitation per year for each eligible claimant.

  • Sets forth procedures for what occurs should two or more claimants reside at the same homestead.

  • Requires the Department of Revenue to promulgate regulations necessary to implement this proposal and, to the extent possible, administer this program in conjunction with the administration of the special tax provisions provided under Article III of the Tax Reform Code of 1971.

  • This proposal would apply to claims for payment for the taxable year beginning after December 31, 2004, and to each taxable year thereafter.

  • This proposal would take effect immediately.

Proposal by Senator James Rhoades

  • Increases the state personal income tax (PIT) rate to 4.57% in order to provide $3.6 billion in state funds for property tax relief. The effect of this would be to reduce school district property taxes statewide by 45%.

  • Monies generated from the dedicated tax would be deposited into the State Property Tax Reduction Fund, and be allocated to school districts annually to be used for dollar-for-dollar reductions in school district property taxes.

  • Each school district's property tax reduction allocation would be calculated using the property tax reduction index established in Act 72 of 2004. This index is calculated using the following factors:

    • Tax capacity. This measures a school district's relative ability to pay school taxes based on:

      • Personal Income/Average Daily Membership. The total personal income of all taxpayers in the school district as reported to the Department of Revenue, divided by the average daily membership of students enrolled in the school district.

      • Market Value/Income Aid Ratio. The relative market value and income wealth of taxpayers and taxable properties in a school district.

    • Tax burden. The relative burden of school taxes on taxpayers in the school district. This is measured by the school tax ratio - the percentage of the total personal income in the school district that goes for the payment of local school taxes.

    • Tax Effort. The level of school taxes levied in a school district compared to the level of school taxes levied in all other school districts in Pennsylvania. This is measured by the equalized millage rate of a school district.

  • School districts would receive a maximum property tax reduction of 80% and a minimum property tax reduction of 30%.

  • All school districts would be subject to the backend referendum provisions of Act 72 of 2004.

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