Controls on Future Tax Increases

Until the Taxpayer Relief Act was signed into law, Pennsylvania was the only state in the nation where school boards had unlimited and final authority over taxing and spending. Now homeowners are protected, as the state limits the property tax increases school boards can approve without voter approval.

The referendum requirements in this law are fair and flexible. They protect homeowners, while at the same time preserving school boards’ ability to fund schools. School boards are still able to raise property taxes each year by at least the rate of inflation – and in many cases more. They can also apply for referendum exceptions for emergencies and educational necessities.

The referendum requirement applies to every school board in the Commonwealth, in order to protect every homeowner in Pennsylvania. If a school board that did not opt in to Act 72 wants to raise taxes above the inflation index for the year, it can apply for referendum exceptions and, if necessary, ask a judge to allow the board to raise taxes further.

The 10 referendum exceptions are:

• Special education costs that increase by more than the index (in Act 72, special education costs had to increase by more than 10% to be eligible);
• Healthcare benefits in contracts in effect on January 1, 2006, that rise faster than the inflation index (in Act 72, healthcare benefits were only included if the contract was in effect before September 2004);
• Increases in retirement payments that rise faster than the index (in Act 72, retirement payments had to increase by more than 7.5% to be eligible);
• Emergencies and disasters;
• Court orders;
• Conditions that pose immediate threat of serious harm or injury;
• Measures to ensure district revenue keeps pace with inflation;
• Measures to ensuring spending per student keeps pace with inflation;
• No Child Left Behind school improvement plans; and
  School construction, including debt on an existing school construction project; construction for academic purposes that costs less than a cost-per-square-foot threshold; and up to $250,000 of construction costs for non-academic construction.
• School districts that opted-in to Act 72 will be able to apply for the expanded referendum exceptions this year. With this added flexibility, they will be able to adopt budgets and keep tax increases below the inflation index and referendum exceptions. One school district has submitted a referendum question to voters – Bristol Township School District – and that question will remain on the ballot for the public to decide.
  
  School districts that did not opt-in to Act 72
  These districts have three options for their 2006-07 budgets: A district can propose a tax increase that falls below the inflation index; If the district wants to increase taxes above the index, they can apply for any of the referendum exceptions that are included in the law; and For this year only, if the district needs to raise taxes even further, they can petition a judge for permission. These school districts will not put a referendum question on the ballot this spring.
  
  The Taxpayer Relief Act also contains a strategy for helping prevent the causes of tax increases.
  The law calls for a Task Force on School Cost Reduction, consisting of appointees by the Governor and the leadership from each party in the Senate and House. Within a year of being formed, the Task Force will make recommendations to the Governor and General Assembly on how to reduce current and future costs that school districts face.