Policy Brief of Specific Implications of HB 39 on School Districts
Mars Research & Retrieval Services
June 15, 2006

The previous conference report measure approved May 1st and 2nd designated as a property tax relief plan for Pennsylvania passed by the majority of the House last night after an emotional debate on the floor.

This is the original measure approved by the Senate in early Spring and is known as House Bill 39. This bill now goes to the Governor’s desk and “will be” signed this morning. Expect this passage to be clearly marketed as a victory for the Governor for delivering upon his campaign promises to provide property tax relief to Pennsylvanians despite its minimal effects.

This bill will require school boards to get voter approval for future property tax increases that exceed inflation, except under certain limited circumstances, also known as back end referendum and backend referendum exceptions. Districts will be required to cap increases in taxes for 2006-2007 to the index which is based on a formula that gives the most to districts with the least wealth and the heaviest property tax burdens and will vary from district to district. For example, both Mars Area and Seneca Valley school districts will be required to cap their millage increases to 3.9% according to the index formula. The index percentage is applicable to the district's millage rate and not its revenue.

The index can be accessed on the PA Dept. of Education website which can be found and accessed on the links page of this website.

Hypothetically, if a district has a property tax rate of 100 mils, under the current index of 3.9%, that district would only be permitted to increase its millage rate to 103.9 mils. School districts that cannot balance their budgets with the restricted tax increase will be allowed to seek one or more back end referendum exceptions and if they still are unable to balance their budget, they are permitted to petition the county courts for permission to enable them additional taxing authority. The county courts would have until July 15th to respond to school district petitions.

Furthermore, school districts would also be required to implement installment payments for taxes and a statewide tax force is established to examine school district costs and offer recommendations on how to reduce or minimize these costs. The requirement for school districts to adopt installment payment schedules will be moved back to June 30, 2007.

Participation by school districts is mandatory statewide. In addition, most school districts would be required to hold referendums next year to find out whether voters want to offset additional property tax cuts of at least 25% by increasing local income taxes. Philadelphia, Pittsburgh, and Scranton will be exempt from the referendum requirements because they already have relatively high wage taxes. This bill repeals Act 72, a similar law that would have divided the slots revenue among the homeowners without regard to age. Most of Pennsylvania's school boards exercised their right under the law to refuse to participate based on the individual local control of that respective district opposing Act 72 for placing limitations on their taxation power amongst other valid and quantitative factors as outlined in the governor's initial plan.

Unlike Act 72, this new bill, would earmark $250 million for special rebates for senior citizens starting next year in 2007. The rebates would be in addition to the property tax reductions for all homeowners that will be available through local school districts using the slots revenue beginning in 2008. The Pennsylvania lottery will be tapped into initially finance a $200 million expansion of the state property tax and rent rebate program for senior citizens allowing an additional 400,000 senior citizens to benefit. The provisions of the legislation addresses Pennsylvanians 65 or older, widows or widowers 50 years or older, and disabled individuals 18 years old or older beginning in 2007. The income eligibility limit for the rebates would increase from $15,000 to $35,000 and the maximum would be increased from $500 to $650 dollars....the costs would eventually be padded by the gaming revenue brought in, limiting the slots money as to how much will be available for other homeowners. The first rebate payments for senior citizens will be based on the 2006 tax payments.

It is crucial for Pennsylvanians to understand, just as with Act 72, this new legislation has nothing to do with providing funding or additional funding for education to school districts across Pennsylvania.....this legislation is all about providing property tax relief to Pennsylvania's taxpayers. Without getting into the politics of the process and keeping focused on the facts, it will be significant for Pennsylvanians to keep this in mind in the coming year, with all the anticipated changes and implications upon school districts across the Commonwealth and then determine for themselves if meaningful property tax relief was achieved and at what cost?

Kimberly D. Geyer, Mars Research & Retrieval Services, June 15, 2006

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