EPLC Education Notebook

Friday, November 4, 2005

    Pennsylvania Education Policy Activity

    Special Session on Property Taxes

  • This week, members of the Special Session House and Senate Committees that are vetting property tax reform legislation continued to reinforce their approach that property tax reform and education funding should not be considered in tandem during the Special Session. Representative of this view were comments delivered at Thursday's House Subcommittee on Sales Tax Initiatives meeting. Rep. Rod Wilt said the Special Session should focus on how to raise revenue to replace property taxes. Issues related to how the money will be spent (i.e. how schools will be funded) should be considered during the annual state budget process, said Wilt. Few bills being considered in the Special Session address how dollars would be distributed to schools. Proposals vary widely from legislation that would totally eliminate both school and municipal property taxes for homeowners and businesses to bills that would reduce school property taxes only for homeowners. Below is a review of the Special Session bills reviewed by legislative committees this week.

  • On Wednesday, the Senate Committee on Legislation heard presentations on three property tax reform proposals. Senators David Brightbill, Edwin Erickson and Joe Conti are drafting a proposal to be considered as a package with Senate Stewart Greenleaf's Special Session Senate Bills 15 & 16. The draft proposal would reduce school property taxes ($1.8 billion), reimburse the Sterling Tax ($300 million) and freeze property taxes for certain senior citizens ($57 million), all funded by increasing the state sales and personal income taxes by $2.6 billion. This increase in state sales tax revenues is also supposed to be sufficient to find $353 million for an expansion of the senior citizen property tax and rebate program. State sales and personal income tax increases would be subject to approval by voters in a statewide referendum to be held in March 2006. The proposal would allow school districts to reduce property taxes further by substituting with a local earned income tax (EIT). The EIT would be subject to a local voter referendum. Finally, using Greenleaf's legislation, the plan would expand the state's property tax and rent rebate program. No gaming revenues are used in the proposal. Brightbill said the proposal focuses on reducing, not eliminating, school property taxes to maintain Pennsylvania's historic local control system. "My concern is that if we change the equation to one that is primarily state-based we may then have a whole new host of fiscal, policy and maybe even legal considerations - decisions that may make today's problem look simple," said Brightbill. The Senator said the plan does not preclude shifting to a primarily state-funded education system in the future, but such a move requires further analysis. Reducing school property taxes is a first step that would be monitored to see if the initial impact warrants further expansion or changes in four to five years, said Brightbill. Summaries of the draft proposal and Sen. Greenleaf's legislation are available at the end of this Notebook.

    Senator Jeff Piccola also presented his plan (Special Session Senate Bills 18 & 19) to replace school property taxes with an expanded state sales tax. Piccola's legislation would reduce the sales tax rate to 5.7% and expand the base of goods and services subject to the tax. The Senator said cries that the tax would be regressive on the poor are unfounded. Piccola said that under his plan a family with a household income of $50,000 that currently pays $2,000 in property taxes would have to purchase $35,000 of previously untaxed goods and services in order to be taxed the same amount it would have been under the property tax system. Under Piccola's proposal, the state would provide 86% of the cost of education. The remainder of school budgets would come from federal funds (4%) and local earned income and Act 511 taxes (10%). State funds initially would be distributed to each school district dollar-for-dollar for property tax reduction. Funding schools primarily from a single source will make it easier to deal with the equity issue in the future, said Piccola. The Senator also said putting the state in control of the dollars will make it easier to require future school district spending efficiencies. A summary of Sen. Piccola's proposal is available at the end of this Notebook.

  • The House re-referred Special Session House Bill 1 to the House Finance Committee. The legislation, which represents the Governor's proposal for mandating school district participation in the state's property tax relief program (Act 72 of 2004), was previously passed by the House Appropriations Committee but had not been vetted by the special Finance Committee organized by the House exclusively for the Special Session.

  • The Special Session House Subcommittee on Sales Tax Initiatives held an informational meeting on Special Session House Bill 12 on Thursday. The bill would completely phase-out all property taxes levied by school districts and local governments and replace the revenue by phasing-in increases to the state sales and personal income taxes. Sales and personal income tax revenue would be collected in a School Property Tax Elimination Fund through which the state would make monthly disbursements to school districts. After the property tax phase-out is complete, districts would receive funding from the state equal to the amount the district collected in property taxes during FY 2005-06. School districts could generate additional local revenue by imposing an earned or personal income tax, however, implementing a new tax and tax increases would be subject to voter referendum. If a referendum is denied, the court of common pleas may approve a referendum exception because "there is immediate threat of serious physical harm or injury to the students, staff or residents of the school district." HB 12 also requires the Legislative Budget and Finance Committee (LBFC) to annually review the Governor's budget proposal and make recommendations for efficiencies in programs that receive state funds and to calculate the cost savings from implementing those efficiency improvements. The bill intends that as part of the state budget process an amount equal to the savings estimated by the LBFC would be transferred from the state general fund to the School Property Tax Elimination Fund. Additionally, in any year in which there is surplus revenue in the general fund, 75% of the surplus would be transferred to the School Property Tax Elimination Fund. The Subcommittee on Sales Tax Initiatives, which acts in an advisory capacity to review and recommend legislation, did not make a recommendation on whether the bill should be moved to the full House Finance Committee because bill sponsor Daryl Metcalfe was not available at the meeting to answer questions.

    Special Session House Bill 12 is a tax reform bill that places responsibility for education funding with the state, but does nothing to improve the funding inequities between districts that have repeatedly caused the Commonwealth to be ranked as having one of the worst school finance systems in the country. During the meeting, Rep. Mike Sturla urged his colleagues to consider the potentially harmful impact of considering property tax reform and education funding as unrelated issues. HB 12 would "institutionalize the inequity" that currently exists among school districts, said Sturla. Districts would continue to be funded at the same level, with some spending $4,000 per student and others spending $15,000 per student. The only difference - the majority of funding would now come from the state. The education funding system created by HB 12 would make the state the guarantor of inequity between school districts and send the bulk of state education funds to the Commonwealth's wealthiest districts.

  • The Special Session House Subcommittee on Alternative Revenue Sources held an organizational meeting on Thursday. Five bills have been assigned to the Subcommittee: Special Session House Bills 14, 16, 26 & 27 and Special Session House Resolution 2. The Subcommittee also will receive Special Session House Bills 34, 36, 30 & 48.

  • Links to legislation introduced in the Special Session on Property Taxes are available on EPLC's Education Policy Information Clearinghouse at www.eplc.org/clearinghouse_k12finance.html#legislation.

  • On Wednesday the Special Session House Subcommittee on Local Control Issues held a hearing on back-end referendum. A back-end referendum would make certain school tax increases subject to voter approval. Representatives from the PA State Education Association (PSEA), the PA School Boards Association (PSBA), the PA Association of School Business Officials (PASBO) and two school district superintendents testified on how to improve the referendum requirement, if one is included in special session legislation.

    Jim Testerman, Vice-President of PSEA, said the association vigorously opposes a back-end referendum but the present climate seems to indicate that some form of it will be included as it was in the Homeowner Tax Relief Act (Act 72 of 2004). He suggested that the back-end referendum could be improved by reviewing and revising the referendum exceptions currently included in Act 72. Particularly, the increased costs associated with providing special education should be measured against the same inflationary "index" as other expenditure growth. This inflationary "index" also should be used for school district pension costs.

    Tim Allwein of PSBA said that school board members do not support the referendum concept. Allwein stated that referendum does not solve the problems at the root of the property tax issue and that the charge that school district spending is out of control is not true. Between 1995 and 2002, school district spending increased 36.5%, county expenditures increased 35.2% and the Commonwealth's expenditures increased 37.8%. When compared to neighboring states, Pennsylvania school boards' spending increases are lower than most and, when looking at instructional costs, are the lowest. Allwein said the local taxation system needs to be overhauled and that the state needs to help school boards control costs by removing unnecessary mandates and requirements and by giving districts more options in areas of purchasing, contracting and reporting. The Commonwealth also needs to recognize that it must become a greater partner in the funding of public schools.

    Jay Himes said PASBO opposes back-end referendum but, understanding the political reality, offered comments not as an endorsement, but in an attempt to make it workable. If school districts can be assured of consistent and predictable state funding and a prohibition on further mandates, a back-end referendum may not create so much opposition, said Himes. Districts are faced with costs increases which are out of their control, such as healthcare, energy and insurance. When revenues are limited expenses must be controlled, however, previous legislation that addressed referendum (Act 72) did not provide options for reducing expenditures. Any revenue control measure needs to have a balanced approach of cost control, said Himes.

    Larry Macaluso, Superintendent of the Red Lion Area School District in York County, said that exceptions to school budget referendum must be based on growing school districts and expenditures out of the school board's control. All increased costs due to enrollment increases, such as additional teachers and support staff, books, supplies and equipment, school construction and special education, must be included as exceptions. Increases in health benefits and retirement contributions over which boards have no control also must be exceptions. Macaluso expressed concern that referendum transfers authority for the school district budget to uninformed taxpayers as opposed to taxpayer-elected, informed school board members.

    Finally, Stewart Weinberg, Superintendent of the Dallastown Area School District in York County, spoke to his experience as a superintendent on Long Island where he was required to submit the school district budget each year for public approval. Annually, two to three months of Weinberg's time was spent lobbying for public approval of the proposed budget. This time and energy would have been much better spent focused on the needs of students. Weinberg said failure to pass school budgets in New York resulted in the elimination of any capital projects and all interscholastic activities. In order for a referendum to be effective, it must leave most of the decision-making power in the hands of those who have committed their lives to being informed about educational issues. Referendum can only be effective when portions, rather than the entire budget, are considered for public review, said Weinberg. Weinberg suggested the legislature consider alternatives such as increasing state funding for growing districts, permitting districts to levy a personal income tax, and senior citizen property tax deferrals. If referendum must happen, Weinberg said exceptions must realistically address growing school districts, rising energy costs, special education, pension and health care costs.

  • A new brief from IssuesPA looks at what it would take to eliminate the school property tax. Read "Replacing School Property Taxes in Pennsylvania: A Reality Check" at www.issuespa.net/articles/14941/.

  • The Education Policy and Leadership Center previously identified Criteria for Evaluating Education Funding Proposals/Budgets that can serve as a guide for assessing proposals made during the Special Session on Property Taxes. Learn more about the eight key questions that the Governor, every legislator, school district officials, parents and taxpayers should ask at www.eplc.org/fundingcriteria.html.

  • Proposals to Limit State Spending

  • The House amended and passed legislation ( House Bill 2082) that would limit state spending to an inflationary index. In any fiscal year, growth in the state budget would be limited to the prior year's General Fund total, adjusted by the average percentage increase in the consumer price index for all urban consumers over the past three years. The legislation includes exceptions through which the state could spend beyond the limit for: spending mandated by federal law, spending that is the result of a court order, required state pension payments, interest owed on state debt, and funding needed to respond to an emergency or disaster declared by either the governor or President (increases in funding for pension payments, debt payments and disaster funding must be approved by a three-fifth vote of members of the House and Senate). Additionally, taxpayers could approve spending beyond the rate of inflation for a specific time period via referendum. Unencumbered surplus operating funds would be refunded to taxpayers annually through a pro rate state income tax credit. HB 2082, which restricts state spending in statute, now moves to the Senate for further consideration. The Senate has passed similar legislation to restrict spending both in statute and through a constitutional amendment (Senate Bills 4 and Senate Bill 884).

  • The proposed "spending cap" legislation seems to be more about Public Relations than a real spending cap. A spending cap enacted as state statute rather than a constitutional amendment could simply be overridden by another law approved by a majority of the House and Senate and signed by the Governor at any time.

  • The Senate passed an amended version of House Bill 515, which would phase-down the state's personal income tax from the current 3.07% to 2.98% over three years. This tax reduction when fully implemented would save individual taxpayers $9 per year for every $10,000 of income. HB 515 has been referred to the House Rules Committee. The House Appropriations Committee has passed similar legislation ( House Bill 1586) that would phase-down the state PIT rate to 2.8% over three years. HB 1586 awaits further consideration by the full House.

  • Other House Actions

  • The House passed the following legislation this week (both bills await referral to a Senate Committee):

    House Bill 105: HB 105 was amended to require school districts to follow the Commonwealth Procurement Code.

    House Bill 280: Prohibits school districts from selling unused and unnecessary buildings or land for less than fair market value unless the building or land is donated to a political subdivision or a nonprofit corporation that qualifies as an institution of purely public charity. Also, requires unused buildings that cannot be sold to be demolished within 10 years of becoming unused. HB 280 also changes the Pennsylvania State System of Higher Education's process for disposing of property. The bill requires PASSHE to submit requests to sell, transfer or dispose of property to the majority and minority chairs of the House and Senate Education Committees. Currently, requests are submitted only to the Chief Clerk of the House and the Secretary of the Senate. Resolutions addressing the disposal of PASSHE property must include a description of the property to be sold, transferred or disposed and identify parties involved in the transaction. The bill was changed with an unrelated amendment to make changes to documentation required for home education students.

  • On Wednesday, the House Education Committee passed the following legislation (both bills have been placed on the House Tabled Bills Calendar):

    Senate Bill 151: Adds information to be reported on the State Report Card for schools and school districts. The report card would include information about whether schools and districts met adequate yearly progress and academic performance targets, as well as the number of special education students, limited English proficient students, and students who have been enrolled for less than two years. The report card also would show the percentage of students who attained state academic performance targets excluding the scores of the delineated student groups.

    House Bill 1085: Makes any student who is a Pennsylvania resident and has been accepted into an approved higher education institution eligible for state grants from the Pennsylvania Higher Education Assistance Agency (PHEAA). The original bill spoke specifically to homeschooled students, who have encountered problems receiving PHEAA grants because they do not meet current eligibility requirements of being a graduate of an approved high school or holding a secondary school diploma. HB 1085 was amended to extend grants to any student who is accepted to a higher education institution to address an issue raised by PHEAA related to students with parents in foreign service. Some Pennsylvania residents who complete their secondary education in foreign schools also encounter problems receiving PHEAA grants if their foreign school is not on PHEAA's list of approved high schools.

  • Other Senate Actions

  • The Senate passed legislation that allows associations that represent school retirees to request and receive information about the last district of employment and home address of retired teachers from the Pennsylvania School Employees Retirement System (PSERS). Senate Bill 384 requires that current and future PSERS members be given an opportunity to refuse disclosure of their personal information and makes it a crime to use such personal information for purposes other than promoting membership in an association that represents school retirees. SB 384 awaits referral to a House Committee.

  • On Tuesday, the Senate Veterans Affairs and Emergency Preparedness Committee moved forward legislation that authorizes the Pennsylvania Emergency Management Agency to make grants of up to $350 to school districts for the purchase of CEA Certified Public Alert radio receivers. The radios would broadcast the National Oceanographic and Atmospheric Association (NOAA) All Hazards Radio network, the emergency warning system endorsed by the U.S. Department of Homeland Security. Senate Bill 486 allocates $200,000 for this purpose. SB 486 has been re-referred to the Senate Appropriations Committee.

  • Other Pennsylvania Education Policy Activity

  • The Pennsylvania State Board of Education held public roundtable discussions and public hearings on two issues this week - proposed changes to the regulations that govern teacher certification (Chapter 49) and proposed new regulations governing early childhood education that would affect Chapters 4, 11 and 12. Public comments were gathered in Harrisburg on Tuesday and in Pittsburgh on Wednesday. A third public meeting will be held next week in Allentown. Details about the proposed regulations are available at www.pde.state.pa.us/stateboard_ed/site/default.asp?g=0&pde_internetNav=|. Additionally, proposed changes to Chapter 49 were published in the Pennsylvania Bulletin on October 29 and will undergo a 30-day public comment period from the date of publication. Both the proposed changes to Chapter 49 and information on how to submit comments on the proposal are available at www.pabulletin.com/secure/data/vol35/35-44/1983.html.

  • Proposed regulatory changes to Chapter 4 (Academic Standards and Assessment) and proposed state standards for Career Education and Work will be published in the November 5, 2005 edition of the Pennsylvania Bulletin and will undergo a 30-day public comment period. Proposed changes to Chapter 4 are available at www.pabulletin.com/secure/data/vol35/35-45/2021.html. Proposed changes for Career Education and Work are available at www.pabulletin.com/secure/data/vol35/35-45/2022.html.

  • 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

  • Pennsylvania could save up to $102 million annually in special education costs by providing high-quality pre-kindergarten programs to all four-year olds, according to research conducted by Dr. Clive Belfield, assistant professor of economics, Queens College, City University of New York. Belfield estimates at the potential cost-savings for special education from providing either universal or targeted pre-school programs in new research commissioned by the Pennsylvania Department of Education. Making pre-school universally available to all four-year-olds would cost between $547-$653 million (assuming 50% or 76,000 of the eligible children participate). A universal program would net a 12% reduction in special education costs by reducing the need for future special education referrals; these special education savings would offset the costs of the pre-K programs by 16%-19%. Providing targeted pre-K to the most at-risk students (20% of four-year-olds or 30,640 children) would net an annual $68 million reduction in special education costs. A targeted pre-K program would cost between $221-$263 million, however 26%-31% of the cost of the pre-K program would be offset by future special education savings. While the savings to the special education budget would not cover the full cost of the pre-K program, special education savings are only one benefit of pre-kindergarten education. Other studies have identified the positive effects of pre-school in reducing juvenile crime, reducing high school drop-out rates, and more. Considering the aggregate return of all pre-K benefits would net a higher return for the state. Read "The Cost-Savings to Special Education from Pre-Schooling in Pennsylvania" at www.governor.state.pa.us/governor/lib/governor/belfield_pa_report_final_100505.pdf.

  • Other

  • Register Now! The Education Policy and Leadership Center will host an Education Finance Symposium on November 14-15 at the Wyndham Harrisburg-Hershey. Participants will learn about finance reform efforts in other states, as well as reform proposals currently in the works in Pennsylvania. Registration materials are available at www.eplc.org/financesymposium.html.

  • Vote for School Directors on November 8... In 500 school districts across Pennsylvania voters will have the opportunity to elect school board directors on Tuesday, November 8. More than 2,000 positions are on the ballot across Pennsylvania. School directors are among the most important elected officials in Pennsylvania: they must set local policies to ensure a quality education for every child; they must determine the district budget and tax rates necessary to provide the appropriate educational resources to support effective teaching and learning for every child; and, they are trustees for a public education system that must serve the current and future generations of children. Unfortunately, only a small fraction of eligible voters typically participate in school board elections. Kids can't vote. They depend on you. Please don't let them down. Help elect your local school directors. Vote on Tuesday, November 8.

  • Next week...The Pennsylvania State Board of Education holds a public roundtable discussion and public hearing on proposed changes to Chapter 49 and proposed changes to Chapters 4, 11, and 12 as they pertain to early childhood education on Monday (November 7) in Allentown. Tuesday is Election Day. The Governor's Commission on Training America's Teachers holds a regional meeting in the Philadelphia area on Tuesday; the Commission meets again on Friday in Harrisburg. EPLC hosts a Pennsylvania Education Policy Forum - Capital Breakfast Series on Wednesday in Harrisburg. Robert Nelkin, Executive Director of the Governor's Cabinet for Children and Families, will be the guest speaker. EPLC hosts a Pennsylvania Education Policy Forum - Southeastern Pennsylvania Breakfast Series in Philadelphia on Thursday. Acting Secretary of Education Gerald Zahorchak will be the guest speaker. The House Select Committee on Student Academic Freedom holds two days of public hearings in Pittsburgh on Wednesday and Thursday. The House Consumer Affairs Committee holds an informational meeting on the student loan application process on Wednesday in Harrisburg. Good Schools Pennsylvania hosts its Parent & Community Leadership Assembly on November 11-12 in Reading. 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 2.

Senate Committee on Legislation

Summary of Special Session Proposals Distributed at November 2, 2005 Public Hearing

Summary of Senator Brightbill and Erickson's Proposal

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

  • Provides for a special election to be conducted on 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 costs 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 Citizen Tax Assistance Fund.

  • Revenues from the Property Tax Reduction and Senior Citizen 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 Citizen Tax Allocation 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 that September 1, 2007, a board of 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 the 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.

  • 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.

  • * 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 15 (Senator Stewart Greenleaf)

  • Enacts the Senior Citizens School Real Property Tax Freeze Act.

  • Requires that school districts grant an annual exemption from increases in school real property taxes for eligible taxpayers because of their age and income level. The exemption only applies to school real property taxes on an eligible taxpayer's homestead.

  • The annual exemption equals the increase in the school property taxes on the eligible taxpayer's homestead. The amount is calculated by subtracting the amount of school real property taxes levied on the homestead in the base year (the tax year immediately preceding the tax year during which an eligible taxpayer becomes 65 years of age) from the amount of school real property taxes on the homestead in the tax year for which a claim for an exemption is filed. The difference of these two amounts equals the exemption.

  • Eligible taxpayers are defined as follows:

    • The taxpayer is at least 65 years of age.

    • The taxpayer has an annual household income not exceeding $40,000.

    • The taxpayer is not delinquent in paying school real property taxes on the homestead.

    • The taxpayer has filed a claim for the exemption, including all necessary and required information, on a standardized form provided by the school district.

  • A homestead under this legislation is defined as real property which qualifies as a homestead under the act of March 11, 1971 (P.L.104, No.3), known as the Senior Citizens Rebate and Assistance Act, except real property which is rented or leased to the eligible taxpayer.

  • The Commonwealth is required to reimburse school districts for revenue lost by the exemption provided for under this legislation. The Department of Education, after receiving appropriate documentation, is required to reimburse school districts for the revenue loss within 60 days of submission of the documentation.

  • This legislation would apply to the tax year beginning July 1, 2006 and each tax year thereafter.

Senate Bill 16 (Senator Stewart Greenleaf)

  • Expands the Senior Citizens Rebate and Assistance Act (Act 3 of 1971), more commonly known as the Property Tax and Rent Rebate Program, by utilizing anticipated slot machine revenues which remain after school districts that have opted in to Act 72 of 2004 receive property tax reduction allocations.

  • Based on $500 million in slot machine revenues remaining, this legislation would:

    • Double the income eligibility requirements for the program from the current $15,000 per household to $30,000.

    • Increase the maximum rebate from $500 to $1,200.

    • Distribute the rebates based on a sliding scale or income as follows, with a claimant receiving no more than the rebate amount listed for his or her income bracket:

      Annual Household Income   Rebate Assistance
      $0 - 7,499   $1,200
      $7,500 - 9,999   $ 900
      $10,000 - 17,999   $ 600
      $18,000 - 23,999   $ 300
      $24,000 - 27,999   $ 240
      $28,000 - 30,000   $ 180

  • As with the current program, those eligible would be:

    • Individuals 65 or older,

    • Widows and widowers 50 and older; and

    • Permanently disabled individuals between the ages of 18 and 65.

  • The average rebate would increase to an estimated $604 compared to an average of $382 in 2003. The Property Tax and Rent Rebate Program has been operating successfully since 1971, so the legislation would not require any new administrative costs.

  • The current Property Tax and Rent Rebate Program, which is supported by State Lottery proceeds, serves approximately 330,000 citizens.

Senate Bill 18 (Senator Jeff Piccola)

  • Amends the Public School Code of 1949 to eliminate the authority for school districts in Pennsylvania to levy, assess and collect a tax on real estate.

  • Makes other technical and editorial changes to effectuate the elimination of the authority for school districts in Pennsylvania to levy, assess and collect a tax on real estate*.

  • This legislation takes effect July 1, 2006.

  • * There appears to be a drafting error on page 10, line 3, where the beginning of a repeal is indicated but no closing bracket has been included at the end of this repeal.

Senate Bill 19 (Senator Jeff Piccola)

  • Amends the Tax Reform Code of 1971 to reduce the sales and use tax rate from the current levy of 6% to 5.7%.

  • Broadens the sales and use tax base to include certain other tangible items such as food and clothing, in addition to certain other services as outlined below.

  • Maintains various sales and use tax exemptions, including:

    • Agriculture

    • Charitable organizations

    • Contract farming

    • Dental visits and services

    • Physician visits and services

    • Flags

    • Food stamp purchases

    • Gasoline and motor fuels

    • Governmental units

    • Health services

    • Hospital visits

    • Isolated sales

    • Manufacturing

    • Motor vehicles (out-of-state purchases)

    • Nonprescription medical supplies, such as: artificial limbs, eyes, hearing devices, braces and supports, certain eyeglasses, crutches, false teeth, iron lungs, kidney machines, stair lift devices, and wheelchairs

    • Nonprofit educational institutions

    • Prescription drugs

    • Public transportation

    • Religious organizations

    • Rental properties

    • Veteran's organizations

    • Volunteer Fireman's organizations

    • Youth sports programs

  • Eliminates certain sales and use tax exemptions, including:

    • Disposal diapers; pre-moistened wipes; incontinence products; colostomy deodorants; toilet paper; sanitary napkins; tampons or similar items used for feminine hygiene; toothpaste; toothbrushes; dental floss.

    • Steam, natural and manufactured and bottled gas, fuel oil, electricity or intrastate subscriber line charges, basic local telephone service or telegraph service when purchased directly by the user for residential use; charges for telephone calls paid for by inserting money into a telephone accepting direct deposits.

    • Wrapping paper, wrapping twine, bags, cartons, tape, rope, labels, non-returnable containers and all other wrapping supplies.

    • Vessels designed for commercial use of registered tonnage of fifty tons or more.

    • Tangible personal property or services used or consumed in building, rebuilding, repairing and making additions to or replacements in and upon vessels designed for commercial use of registered tonnage of fifty tons or more.

    • Tangible personal property or services to be used or consumed for ship cleaning or maintenance or as fuel, supplies, ships' equipment, ships' stores or sea stores on vessels designed for commercial use of registered tonnage of fifty tons or more.

    • Coal.

    • Water.

    • All vesture, wearing apparel, raiments, garments, footwear and other articles of clothing.

    • Religious publications sold by religious groups and Bibles and religious articles.

    • Food and beverages for human consumption.

    • Newspapers.

    • Caskets and burial vaults for human remains and markers and tombstones for human graves.

    • Textbooks for use in schools, colleges and universities, either public or private.

    • Motion picture film rented or licensed from a distributor for the purpose of commercial exhibition.

    • Mail order catalogs and direct mail advertising literature or materials, including electoral literature or materials, such as envelopes, address labels, and one-time license to use a list of names and mailing addresses for each delivery of direct mail advertising.

    • Rail transportation equipment used in the movement of personalty.

    • Horses, if at the time of purchase, the seller is directed to ship of deliver the horse to an out-of-State location.

    • Fish feed purchased by on behalf of sportsmen's clubs, fish cooperatives or nurseries approved by the Pennsylvania Fish Commission.

    • Supplies and materials to tourist promotion agencies which receive funding from the Commonwealth.

    • Brook trout, brown trout or rainbow trout.

    • Buses to be used exclusively for the transportation of children for school purposes.

    • Firewood.

    • Materials used in the construction and erection of objects purchased by not-for-profit organizations for the purposes of commemoration and memorialization of historical events.

    • The net purchase price of the sale at retail or use of electric vehicles, hybrid electric vehicles and zero emission vehicles.

    • Power units for electric, hybrid electric and zero emission vehicles.

    • Subscriptions for magazines.

    • Interior office building cleaning services.

    • Candy or gum.

    • The sale at retail to or use by a producer of commercial motion pictures of any tangible personal property used in the production of the commercial motion picture.

    • Horses to be used exclusively for commercial racing activities and the sale at retail and use of feed, bedding, grooming, supplies, riding tack, farrier services, portable stalls and sulkies for horses used exclusively for commercial racing activities.

    • Food and nonalcoholic beverages by an airline which will transfer the food or nonalcoholic beverages to passengers in connection with the rendering of the airline service.

    • Separately stated fees paid pursuant to 13 Pa.C.S. 9525 (relating to fees).

    • Intrastate telecommunications services.

  • The legislation provides that the new sales and use tax rate and the changes to the exemptions take effect to sales and uses occurring or commencing 120 days after the effective date of the act, which is immediately.

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