PRINTER'S NO. 312
No. 292 Session of 1977
INTRODUCED BY A. K. HUTCHINSON AND DeMEDIO, FEBRUARY 9, 1977
REFERRED TO COMMITTEE ON EDUCATION, FEBRUARY 9, 1977
AN ACT 1 Amending the act of March 10, 1949 (P.L.30, No.14), entitled "An 2 act relating to the public school system, including certain 3 provisions applicable as well to private and parochial 4 schools; amending, revising, consolidating and changing the 5 laws relating thereto," withdrawing gradually the authority 6 of school districts to levy taxes on real property; 7 authorizing school districts and city councils coterminous 8 with districts of the first class to levy a local school 9 surtax upon personal income; increasing the share of 10 financial participation by the Commonwealth and decreasing 11 the share of school districts and revising State school 12 subsidy formulae accordingly; and requiring a judicial 13 hearing before counties, municipalities and townships may 14 increase real property taxes beyond certain limits. 15 WHEREAS, there now exists a constantly increasing criticism 16 of the fairness and efficiency of real property taxation as the 17 major source of revenues for local educational expenditures; and 18 WHEREAS, there is increasing evidence of unequal distribution 19 of the property tax base among school districts of the 20 Commonwealth; and 21 WHEREAS, the judiciary in other states are now reviewing the 22 constitutional fairness of fiscal policies utilized to finance 23 state educational responsibilities; the Supreme Court of New 24 Jersey, whose Constitution provides in part that "The
1 Legislature shall provide for the maintenance and support of a 2 thorough and efficient system of free public schools for the 3 instruction of all the children in this State between the ages 4 of five and eighteen years" on April 3, 1973 struck down that 5 state's system which provides for state and local financing of 6 their public schools; and in this connection the Pennsylvania 7 Constitution provides in Article III, section 14, that "The 8 General Assembly shall provide for the maintenance and support 9 of a thorough and efficient system of public education to serve 10 the needs of the Commonwealth," a similarity suggesting that the 11 New Jersey Supreme Court rationale might be available to 12 constitute a basis for judicial attack upon the Commonwealth's 13 present method of financing public education; 14 Therefore, the General Assembly now intends to reconsider and 15 revise the fiscal basis for financing the educational needs of 16 its citizens in accordance with responsible criticisms levied 17 against the present financial system and to effectuate 18 comprehensive tax reform by gradually withdrawing the power of 19 school districts to tax real property as hereinafter set forth 20 in this act and its companion acts containing amendments to the 21 "Tax Reform Code of 1971," and the "Public Utility Realty Tax 22 Act." 23 The General Assembly of the Commonwealth of Pennsylvania 24 hereby enacts as follows: 25 Section 1. The act of March 10, 1949 (P.L.30, No.14), known 26 as the "Public School Code of 1949," is amended by adding 27 sections to read: 28 Section 602.1. Real Estate Taxes Levied in Fiscal Year 29 Beginning in 1979 and Thereafter.--For the fiscal year beginning 30 in 1979, the board of school directors of each school district 19770H0292B0312 - 2 -
1 of the second, third and fourth class shall not, and the board 2 of public education in districts of the first class with the 3 authorization of city council shall not, and the board of public 4 education in districts of the first class A shall not levy a tax 5 on the assessed valuation of real property as certified to them 6 at a millage rate which will produce greater revenue for the 7 district for school purposes than eight-tenths of the actual net 8 real property tax revenue produced for the fiscal year last 9 concluded. The "actual net real property tax revenue produced 10 for the fiscal year last concluded," shall be certified to the 11 Department of Education, and shall hereinafter be referred to as 12 the "base period revenues." For the three fiscal years 13 subsequent to the one beginning in 1979, the school directors, 14 members of the board and members of the city council, as 15 aforesaid, shall levy a tax on the assessed valuation of real 16 property at a millage rate which produces no greater revenue for 17 school purposes than the base period revenues multiplied by six- 18 tenths, four-tenths and two-tenths respectively; for the fiscal 19 year beginning in 1983 and thereafter there shall be levied no 20 taxes for school purposes upon the assessed valuation of real 21 property. 22 Section 602.2. Personal Income Surtax Authorization.--The 23 board of school directors of each school district of the second, 24 third and fourth class and the board of public education in 25 school districts of the first class with the authorization of 26 the city council, and the board of public education in the 27 district of the first class A, in addition to any other taxes 28 authorized by law, may provide by ordinance or resolution for 29 the levying of a tax upon the personal income of the residents 30 of its district to be known as the "local school surtax," at a 19770H0292B0312 - 3 -
1 rate not to exceed, for the calendar years: 1979, six-tenths per 2 centum (.6%); 1980, one and two-tenths per centum (1.2%); 1981, 3 one and eight-tenths per centum (1.8%); 1982, two and four- 4 tenths per centum (2.4%); and 1983 and thereafter, three per 5 centum (3%). If for the fiscal year beginning in 1978 and any 6 fiscal year thereafter the school district levied and collected 7 a tax on wages, salaries, commissions and other earned income of 8 individuals as authorized by section 2 of the act of December 9 31, 1965 (P.L.1257, No.511), known as "The Local Tax Enabling 10 Act," and limited by clause (3) of section 8 thereof, then the 11 rate at which it is hereby authorized to levy a tax upon the 12 personal income of the residents of its district shall not 13 exceed two-thirds of the rate provided above for that period. 14 "Personal income" shall mean the total income taxed under 15 Article III of the act, added August 31, 1971 (P.L.362, No.93), 16 known as the "Tax Reform Code of 1971." In the ordinance or 17 resolution levying a personal income tax, the collection agent 18 shall be specifically authorized, which collection agent may be 19 the Department of Revenue as provided in section 343 of the "Tax 20 Reform Code of 1971." 21 If it is determined to levy, relevy, increase or decrease the 22 local school surtax, as authorized herein, the chief 23 administrative officer of the school district shall so certify 24 to the collection agent. The collection agent shall remit to 25 each school district all such taxes collected by it on their 26 behalf within sixty (60) days after receipt of same. 27 Section 2. Clauses (12) and (14) of section 2501 of the act, 28 clause (12) amended June 26, 1974 (P.L.370, No.125), and clause 29 (14) added February 1, 1966 (1965 P.L.1642, No.580), are amended 30 to read: 19770H0292B0312 - 4 -
1 Section 2501. Definitions.--For the purposes of this article 2 the following terms shall have the following meanings: 3 * * * 4 (12) "State's Share of Total Cost." For the school year 5 [1966-1967 and each school year thereafter] 1977-1978 the 6 State's share of total reimbursable cost shall be fifty percent 7 (50%) and for the school years thereafter, the State's share of 8 total reimbursable cost shall be: 9 school year 1978-1979, 56%; 10 1979-1980, 62%; 11 1980-1981, 68%; 12 1981-1982, 74%; 13 1982-1983 and thereafter, 80%. 14 Total reimbursable cost shall be the lesser of actual expense 15 per WADM as defined in clause (11.1) or a maximum amount to be 16 fixed by the General Assembly from time to time to represent the 17 estimated average actual expense per WADM in the year for which 18 the reimbursement is to be payable. For the school year 19 commencing the first day of July, 1973 and each school year 20 thereafter, the maximum amount shall be seven hundred fifty 21 dollars ($750). The Secretary of Education annually shall 22 calculate the State average "actual instruction expense per 23 weighted average daily membership" and shall supply the same to 24 the General Assembly to assist the General Assembly in 25 evaluating the adequacy of such maximum amount. 26 * * * 27 (14) "Aid Ratio" shall represent the Commonwealth's share of 28 reimbursable cost as defined in clause (12). The aid ratio shall 29 be determined in the following manner: [(a) divide the market 30 value per weighted average daily membership of the district by 19770H0292B0312 - 5 -
1 the market value per weighted average daily membership of the 2 State; (b) determine the product of (a) multiplied by district's 3 share of total cost; (c) subtract the resultant product in (b) 4 from one (1.0000) to determine the aid ratio. 5 District MV/WADM 6 Aid Ratio = 1.0000 - ================ X 0.50] 7 State MV/WADM 8 for the school years 1978-1979, .8 (Formula A) + .2 (Formula B); 9 1979-1980, .6 (Formula A) + .4 (Formula B); 10 1980-1981, .4 (Formula A) + .6 (Formula B); 11 1981-1982, .2 (Formula A) + .8 (Formula B); 12 1982-1983 and thereafter, (Formula B); 13 where "Formula A" shall be one (1) minus fifty percent (50%) of 14 the market value per weighted average daily membership of the 15 district divided by the market value per weighted average daily 16 membership of the State, 17 District MV/WADM 18 (Formula A = 1.0000 - ================ X 0.50) 19 State MV/WADM 20 "Formula B" shall be one (1) minus twenty percent (20%) of the 21 personal income per weighted average daily membership of the 22 district divided by the personal income per weighted average 23 daily membership of the State, 24 District PI/WADM 25 (Formula B = 1.0000 - ================ X 0.20) 26 State PI/WADM 27 "Personal Income" shall mean the total income taxed under 28 Article III of the "Tax Reform Code of 1971," as certified for 29 each district each year by the Secretary of Revenue to the 30 Secretary of Education. 19770H0292B0312 - 6 -
1 * * * 2 Section 3. The relief from taxes upon real property granted 3 under this act shall not be eroded by county, municipality and 4 township governments so as to defeat the purpose of this act in 5 providing such relief. Any political subdivision which increases 6 the rate of its real estate taxes by 10% or more subsequent to 7 the enactment of this act shall petition the court of common 8 pleas located in its county for authority to raise such real 9 estate taxes; the said court shall hold a hearing thereon which 10 shall be advertised at least once a week for three weeks prior 11 thereto in a newspaper circulated in the political subdivision 12 and in the legal journal published for the judicial district. 13 Any person objecting to the increase in the rate of real estate 14 tax may file an appearance in the proceeding and appear for the 15 purpose of testifying as to the inappropriateness of said 16 increase in tax in so far as said increase erodes the tax relief 17 made available under this act. 18 Section 4. The authority contained in section 2 of the act 19 of December 31, 1965 (P.L.1257, No.511), known as "The Local Tax 20 Enabling Act" for the levying and collecting of a tax on wages, 21 salaries, commissions and other earned income of individuals is 22 hereby repealed except as to such taxes levied and actually 23 collected by a political subdivision prior to its fiscal year 24 beginning in 1979; any such tax levied and collected in fiscal 25 year 1978 may continue to be levied and collected thereafter by 26 a political subdivision, but the rate actually levied and 27 collected shall not thereafter be increased. It is the intent of 28 the General Assembly that the personal income tax, and where 29 actually levied and collected by a school district, the so- 30 called earned income tax shall become the principal tax base for 19770H0292B0312 - 7 -
1 school districts, while political subdivisions other than school 2 districts shall look primarily to real property as their 3 principal tax base. 4 Section 5. This act shall take effect immediately. A25L25ML/19770H0292B0312 - 8 -