THE GENERAL ASSEMBLY OF PENNSYLVANIA

HOUSE BILL

INTRODUCED BY DeLUCA, BOYD, BURNS, D. COSTA, HARKINS, HORNAMAN, MAHONEY, MURPHY, MUSTIO, K. SMITH AND VULAKOVICH, APRIL 25, 2011

REFERRED TO COMMITTEE ON FINANCE, APRIL 25, 2011  

AN ACT

Amending the act of June 27, 2006 (1st Sp.Sess., P.L.1873,

No.1), entitled "An act providing for taxation by school

districts, for the State funds formula, for tax relief in

first class cities, for school district choice and voter

participation, for other school district options and for a

task force on school cost reduction; making an appropriation;

prohibiting prior authorized taxation; providing for

installment payment of taxes; restricting the power of

certain school districts to levy, assess and collect taxes;

and making related repeals," in taxation by school districts,

further providing for adoption of preliminary budget

proposals and for public referendum requirements for

increasing certain taxes; and, in tax relief in cities of the

first class, further providing for tax relief; and providing

for fiscal threats or conditions.

The General Assembly of the Commonwealth of Pennsylvania

hereby enacts as follows:

Section 1.  Sections 311(d)(3), 333(a), (b) introductory

paragraph, (c)(3), (e), (f), (g), (h), (i), (j), (k) and (n) and

703(c)(3)(i) of the act of June 27, 2006 (1st Sp.Sess.,

P.L.1873, No.1), known as the Taxpayer Relief Act, are amended

to read:

Section 311.  Adoption of preliminary budget proposals.

* * *

(d)  Resolution.--

* * *

(3)  [A] If a board of school directors [that] adopts a

resolution under this section [shall not be eligible to seek

referendum exceptions under section 333(f), and], section

333(e) shall not apply.

* * *

Section 333.  Public referendum requirements for increasing

certain taxes.

[(a)  Applicability.--The following provisions shall apply to

this section:

(1)  For the 2006-2007 fiscal year, the tax increase

proposed by any board of school directors shall not exceed

the index unless an exception under subsection (f) or (n) is

approved pursuant to subsection (i) or (j), provided that a

board of school directors that did not elect to participate

in the former act of July 5, 2004 (P.L.654, No.72), known as

the Homeowner Tax Relief Act, shall have the authority to

petition the court of common pleas for an additional tax rate

increase if the tax rate increase allowed by the index and

any exception approved pursuant to subsection (i) or (j) is

insufficient to balance the proposed budget. No later than

July 15, 2006, the court shall grant the school district's

request for the tax rate increase upon good cause shown if

the school district proves by clear and convincing evidence

that the tax rate increase authorized under this paragraph is

insufficient to balance the proposed budget. For a board of

school directors subject to this paragraph, the dates by

which the board of school directors, the department and the

court of common pleas shall be required to comply with

section 311 and subsections (e), (i) and (j) shall be 92 days

after the dates set forth in those provisions, except that

the date by which the board of school directors shall be

required to comply with all of the provisions of section

311(c) shall be ten days prior to the date by which the board

of school directors is required to adopt a preliminary

budget. Any exceptions granted to a board of school directors

under section 333 of the former Homeowner Tax Relief Act

shall remain in full force and effect. Notwithstanding the

provisions of this paragraph, a board of school directors

that sought and was granted approval for one or more

exceptions under section 333 of the former Homeowner Tax

Relief Act may apply for any exception under subsections (f)

(v) and (ix) and (n), where the dollar amount of an exception

approved by the department under the former Homeowner Tax

Relief Act is less than the dollar amount of the exception

for which the school district is eligible under this act.

(2)  This section shall apply to each board of school

directors beginning with any proposed tax increase that takes

effect in the 2007-2008 fiscal year and each fiscal year

thereafter.]

(b)  Prohibitions.--[Except as set forth in subsection (i)

and (j), unless] Unless there is compliance with subsection (c),

a board of school directors may not do any of the following:

* * *

(c)  Referendum.--

* * *

(3)  [Except as set forth in subsections (i) and (j), a]

A school district acting pursuant to this subsection shall

submit the referendum question required under this section to

the election officials of each county in which it is situate

no later than 60 days prior to the election immediately

preceding the fiscal year in which the tax increase would

take effect.

* * *

(e)  Tax rate submissions.--A school district that has

adopted a preliminary budget proposal under section 311 that

includes an increase in the rate of any tax levied for the

support of public schools shall submit information on the

increase to the department on a uniform form prepared by the

department. The school district shall submit such information no

later than 85 days prior to the date of the election immediately

preceding the beginning of the school district's fiscal year.

The department shall compare the proposed percentage increase in

the rate of any tax with the index. Within ten days of the

receipt of the information required under this subsection but no

later than 75 days prior to the date of the election immediately

preceding the beginning of the school district's fiscal year,

the department shall inform the school district whether the

proposed tax rate increase is less than or equal to the index.

If the department determines that the proposed percentage

increase in the rate of the tax exceeds the index, the

department shall notify the school district that:

(1)  the proposed tax increase must be reduced to an

amount less than or equal to the index; or

(2)  the proposed tax increase must be approved by the

electorate under subsection (c)(1)[; or

(3)  an exception must be sought under subsections (i)

and (j)].

[(f)  Referendum exceptions.--A school district may, without

seeking voter approval under subsection (c), increase the rate

of a tax levied for the support of the public schools by more

than the index if all of the following apply:

(1)  The revenue raised by the allowable increase under

the index is insufficient to balance the proposed budget due

to one or more of the expenditures listed in paragraph (2).

(2)  The revenue generated by increasing the rate of a

tax by more than the index will be used to pay for any of the

following:

(i)  Costs incurred in responding to or recovering

from an emergency or disaster declared pursuant to 35

Pa.C.S. § 7301 (relating to general authority of

Governor) or 75 Pa.C.S. § 6108 (relating to power of

Governor during emergency).

(ii)  Costs to implement a court order or an

administrative order from a Federal or State agency as

long as the tax increase is rescinded following

fulfillment of the court order or administrative order.

(iii)  Costs associated with the following:

(A)  For a board of school directors that elected

to participate in the former act of July 5, 2004

(P.L.654, No.72), known as the Homeowner Tax Relief

Act, to pay interest and principal on any

indebtedness incurred under 53 Pa.C.S. Pt. VII Subpt.

B (relating to indebtedness and borrowing) prior to

September 4, 2004. In no case may the school district

incur additional debt under this clause except for

the refinancing of existing debt, including the

payment of costs and expenses related to such

refinancing and the establishment of funding of

appropriate debt service reserves. An increase under

this clause shall be rescinded following the final

payment of interest and principal.

(A.1)  For a board of school directors that did

not elect to participate in the former act of July 5,

2004 (P.L.654, No.72), known as the Homeowner Tax

Relief Act, to pay interest and principal on any

indebtedness incurred under 53 Pa.C.S. Pt. VII Subpt.

B prior to the effective date of this act. In no case

may the school district incur additional debt under

this clause except for the refinancing of existing

debt, including the payment of costs and expenses

related to such refinancing and the establishment of

funding of appropriate debt service reserves. An

increase under this clause shall be rescinded

following the final payment of interest and

principal.

(B)  To pay interest and principal on any

electoral debt incurred under 53 Pa.C.S. Pt. VII

Subpt. B. An increase under this clause shall be

rescinded following the final payment of interest and

principal.

(C)  To pay interest and principal on

indebtedness for up to 60% of the construction cost

average on a square-foot basis if all of the

following apply:

(I)  The indebtedness is for a school

construction project under 22 Pa. Code Ch. 21

(relating to school buildings).

(II)  For a board of school directors that

elected to participate in the former Homeowner

Tax Relief Act, the indebtedness to fund

appropriate debt service reserves for the project

is incurred after September 3, 2004.

(II.1)  For a board of school directors that

did not elect to participate in the former

Homeowner Tax Relief Act, the indebtedness to

fund appropriate debt service reserves for the

project is incurred on or after the effective

date of this act.

(III)  The increase sought under this clause

is rescinded following final payment of interest

and principal.

(IV)  The indebtedness is incurred only after

existing fund balances for school construction

and any undesignated fund balances have been

fully committed to fund the project.

(V)  The indebtedness is for an academic

elementary or academic secondary school building.

For purposes of this subclause, the following

shall not be considered to be an academic

elementary or academic secondary school building:

natatorium, stadium bleachers, athletic field,

athletic field lighting equipment and apparatus

used to promote and conduct interscholastic

athletics.

(VI)  For school districts of the second,

third and fourth class, the project has been

approved by the department under section 731 of

the act of March 10, 1949 (P.L.30, No.14), known

as the Public School Code of 1949. For

nonreimbursable projects in school districts of

the first class A, the plans and specifications

have been approved by the board of school

directors. For reimbursable projects in school

districts of the first class A, the plans and

specifications have been approved by the

department pursuant to 22 Pa. Code Ch. 21.

(D)  To pay interest and principal on

indebtedness for up to $250,000 of the construction

cost of a nonacademic school construction project, as

adjusted annually by the percentage increase in the

average of the Statewide average weekly wage and the

employment cost index. An increase under this clause

shall be rescinded following the final payment of

interest and principal.

(E)  For purposes of this subparagraph, electoral

debt includes the refunding or refinancing of

electoral debt for which an exception is permitted

under clause (B) as long as the refunding or

refinancing incurs no additional debt other than for:

(I)  costs and expenses related to the

refunding or refinancing; and

(II)  funding of appropriate debt service

reserves.

(F)  For purposes of this subparagraph,

indebtedness includes the refunding or refinancing of

indebtedness for which an exception is permitted

under clauses (A), (A.1), (C) and (D) as long as the

refunding or refinancing incurs no additional debt

other than for:

(I)  costs and expenses related to the

refunding or refinancing; and

(II)  funding of appropriate debt service

reserves.

(iv)  Costs to respond to conditions which pose an

immediate threat of serious physical harm or injury to

the students, staff or residents of the school district

but only until the conditions causing the threat have

been fully resolved.

(v)  Costs incurred in providing special education

programs and services to students with disabilities if

the increase in expenditures on special education

programs and services was greater than the index. The

dollar amount of this exception shall be equal to the

portion of the increase that exceeds the index.

(vi)  Costs which:

(A)  were incurred in the implementation of a

school improvement plan required under section

1116(b) of the Elementary and Secondary Education Act

of 1965 (Public Law 89-10, 20 U.S.C. § 6316(b)); and

(B)  were not offset by a State allocation.

(vii)  Costs necessary to maintain:

(A)  per-student local tax revenue, adjusted by

the index, if the percentage growth in average daily

membership between the school year determined under

subsection (j)(4) and the third school year preceding

the school year determined under subsection (j)(4)

exceeds 7.5%; or

(B)  actual instruction expense per average daily

membership, adjusted by the index, if the increase in

actual instruction expense per average daily

membership between the school year determined under

subsection (j)(4) and the school year preceding the

school year determined under subsection (j)(4) is

less than the index.

(viii)  The maintenance of revenues derived from real

property taxes, earned income and net profits taxes,

personal income taxes, basic education funding

allocations and special education funding allocations,

adjusted by the index, for a school district where the

percentage increase in revenues derived from real

property taxes, earned income and net profits taxes,

personal income taxes, basic education funding

allocations and special education funding allocations

between the school year determined under subsection (j)

(4) and the school year preceding the school year

determined under subsection (j)(4) is less than the

index.

(ix)  Costs incurred for providing health care-

related benefits which are directly attributable to a

collective bargaining agreement in effect on January 1,

2006, between the school district and its employees'

organization if the anticipated increase in the cost of

health care-related benefits between the current year and

the upcoming year is greater than the index. The dollar

amount of this exception shall be equal to the portion of

the increase which exceeds the index. This subparagraph

shall not apply to a collective bargaining agreement

renewed, extended or entered into after January 1, 2006.

(g)  Revenue derived from increase.--Any revenue derived from

an increase in the rate of any tax allowed pursuant to

subsection (f)(2)(iii) shall not exceed the anticipated dollar

amount of the expenditure.

(h)  Limitation on tax rate.--The increase in the rate of any

tax allowed pursuant to an exception under subsection (f)(2)(i),

(ii), (iv), (v), (vi), (vii), (viii) or (ix) or (n) shall not

exceed the rate increase required as determined by a court of

common pleas or the department pursuant to subsection (i) or

(j).

(i)  Court action.--

(1)  Prior to the imposition of a tax increase under

subsection (f)(2)(i), (ii) and (iv) and no later than 75 days

prior to the election immediately preceding the beginning of

the school district's fiscal year, approval by the court of

common pleas in the judicial district in which the

administrative office of the school district is located must

be sought. The board of school directors shall publish in a

newspaper of general circulation and on the district's

publicly accessible Internet site, if one is maintained,

notice of its intent to file a petition under this subsection

at least one week prior to the filing of the petition. The

board of school directors shall also publish in a newspaper

of general circulation and on the district's publicly

accessible Internet site, if one is maintained, notice, as

soon as possible following notification from the court that a

hearing has been scheduled, stating the date, time and place

of the hearing on the petition. The following shall apply to

any proceedings instituted under this subsection:

(i)  The school district must prove by clear and

convincing evidence that it qualifies for each exception

sought.

(ii)  The school district must prove by clear and

convincing evidence the anticipated dollar amount of the

expenditure for each exception sought.

(2)  The court shall rule on the school district's

petition and inform the school district of its decision no

later than 55 days prior to the date of the election

immediately preceding the beginning of the school district's

fiscal year. If the court approves the petition, the court

shall also determine the dollar amount of the expenditure for

which an exception is granted, the tax rate increase required

to fund the exception and the appropriate duration of the

increase. If the court denies the petition, the school

district may submit a referendum question under subsection

(c)(1). The question must be submitted to the election

officials no later than 50 days prior to the date of the

election immediately preceding the beginning of the school

district's fiscal year.

(j)  Department approval.--

(1)  A school district that seeks to increase the rate of

tax due to an expenditure under subsection (f)(2)(iii), (v),

(vi), (vii), (viii) or (ix) or (n) shall obtain the approval

of the department before imposing the tax increase. The

department shall establish procedures for administering the

provisions of this subsection, which may include an

administrative hearing on the school district's submission.

(2)  A school district proceeding under the provisions of

this subsection shall publish in a newspaper of general

circulation and on the district's publicly accessible

Internet site, if one is maintained, notice of its intent to

seek department approval at least one week prior to

submitting its request for approval to the department. If the

department schedules a hearing on the school district's

request, the school district shall publish notice of the

hearing in a newspaper of general circulation and on the

district's publicly accessible Internet site, if one is

maintained, immediately upon receiving the information from

the department. The notice shall include the date, time and

place of the hearing.

(3)  The department shall approve a school district's

request under this subsection if a review of the data under

paragraph (4) demonstrates that:

(i)  the school district qualifies for one or more

exceptions under subsection (f)(2)(iii), (v), (vi),

(vii), (viii) or (ix) or (n); and

(ii)  the sum of the dollar amounts of the exceptions

for which the school district qualifies makes the school

district eligible under subsection (f)(1).

(4)  For the purpose of determining the eligibility of a

school district for an exception under subsection (f)(2)(v),

(vi), (vii) or (viii), the department shall utilize data from

the most recent school years for which annual financial

report data required under section 2553 of the Public School

Code of 1949 has been received. The department shall inform

school districts of the school years determined under this

subsection no later than 30 days prior to the date on which

public inspection of proposed school budgets is required

under section 311(c).

(5)  (i)  The department shall rule on the school

district's request and shall inform the school district of

its decision no later than 55 days prior to the date of the

election immediately preceding the beginning of the school

district's fiscal year.

(ii)  If the department approves the request, the

department shall determine the dollar amount of the

expenditure for which the exception is sought and the tax

rate increase required to fund the exception.

(iii)  If the department denies the request, the

school district may submit a referendum question under

subsection (c)(1). The question must be submitted to the

election officials no later than 50 days prior to the

date of the election immediately preceding the beginning

of the school district's fiscal year.

(6)  Within 30 days of the deadline under paragraph (5)

(i), the department shall submit a report to the President

pro tempore of the Senate, the Minority Leader of the Senate,

the Speaker of the House of Representatives and the Minority

Leader of the House of Representatives enumerating the school

districts which sought an exception under this subsection.

The department shall also publish the report on its publicly

accessible Internet site. The report shall include:

(i)  The name of each school district making a

request under this subsection.

(ii)  The specific exceptions requested by each

school district and the dollar amount of the expenditure

for each exception.

(iii)  The department's ruling on the request for the

exception.

(iv)  If the exception was approved, the dollar

amount of the expenditure for which the exception was

sought and the tax rate increase required to fund the

exception.

(v)  A statistical summary of the information in

subparagraphs (ii), (iii) and (iv).

(k)  Objections.--Any person who resides within or pays real

property taxes to the school district filing a petition under

subsection (i) may file with the court written objections to any

petition filed under this section.]

* * *

[(n)  Treatment of certain required payments.--The provisions

of subsections (f) and (j) shall apply to a school district's

share of payments to the Public School Employees' Retirement

System as required under 24 Pa.C.S. § 8327 (relating to payments

by employers) if the increase in the actual dollar amount of

estimated payments between the current year and the upcoming

year is greater than the index. The dollar amount to which

subsection (f) applies shall equal that portion of the increase

which exceeds the product of the index and the actual dollar

value of payments for the current year.]

Section 703.  Tax relief.

* * *

(c)  Exceptions.--The wage and net profits tax rates may only

be raised above the rates specified in subsection (b)(2) if all

of the following apply:

* * *

(3)  The increase is necessary to respond to any of the

following:

(i)  A fiscal threat or condition, as certified by

the city's director of finance, that occurs to the city

as set forth in section [333(f)] 703.1 or an equivalent

fiscal threat that affects the citizens of the city. It

shall be the responsibility of the city's director of

finance with the approval of the Pennsylvania

Intergovernmental Cooperation Authority to ensure that

any additional tax revenue raised is equal to the amount

expended to respond to the fiscal threat or condition. If

the amount of revenue raised through rate adjustment

exceeds the amount necessary to respond, over the course

of the city's approved financial plan to the fiscal

threat, the excess amount shall be used for wage tax and

net profits tax reduction in the immediately succeeding

approved financial plan but only if the tax rate

reduction, expressed as the difference between the two

tax rates, would exceed .0002.

* * *

Section 2.  The act is amended by adding a section to read:

Section 703.1.  Fiscal threats or conditions.

The following list includes fiscal threats or conditions that

may be certified by the city's director of finance under section

703:

(1)  Costs incurred in responding to or recovering from

an emergency or disaster declared pursuant to 35 Pa.C.S. §

7301 (relating to general authority of Governor) or 75

Pa.C.S. § 6108 (relating to power of Governor during

emergency).

(2)  Costs to implement a court order or an

administrative order from a Federal or State agency as long

as the tax increase is rescinded following fulfillment of the

court order or administrative order.

(3)  Costs associated with the following:

(i)  To pay interest and principal on any

indebtedness incurred under 53 Pa.C.S. Pt. VII Subpt. B

(relating to indebtedness and borrowing) prior to

September 4, 2004. In no case may the school district

incur additional debt under this paragraph except for the

refinancing of existing debt, including the payment of

costs and expenses related to such refinancing and the

establishment of funding of appropriate debt service

reserves. An increase under this paragraph shall be

rescinded following the final payment of interest and

principal.

(ii)  To pay interest and principal on any electoral

debt incurred under 53 Pa.C.S. Pt. VII Subpt. B. An

increase under this subparagraph shall be rescinded

following the final payment of interest and principal.

(iii)  To pay interest and principal on indebtedness

for up to 60% of the construction cost average on a

square-foot basis if all of the following apply:

(A)  The indebtedness is for a school

construction project under 22 Pa. Code Ch. 21

(relating to school buildings).

(B)  The indebtedness to fund appropriate debt

service reserves for the project is incurred after

September 3, 2004.

(C)  The increase sought under this subparagraph

is rescinded following final payment of interest and

principal.

(D)  The indebtedness is incurred only after

existing fund balances for school construction and

any undesignated fund balances have been fully

committed to fund the project.

(E)  The indebtedness is for an academic

elementary or academic secondary school building. For

purposes of this subparagraph, the following shall

not be considered to be an academic elementary or

academic secondary school building: natatorium,

stadium bleachers, athletic field, athletic field

lighting equipment and apparatus used to promote and

conduct interscholastic athletics.

(iv)  To pay interest and principal on indebtedness

for up to $250,000 of the construction cost of a

nonacademic school construction project, as adjusted

annually by the percentage increase in the average of the

Statewide average weekly wage and the employment cost

index. An increase under this paragraph shall be

rescinded following the final payment of interest and

principal.

(v)  For purposes of this paragraph, electoral debt

includes the refunding or refinancing of electoral debt

for which an exception is permitted under paragraph (2)

as long as the refunding or refinancing incurs no

additional debt other than for:

(A)  costs and expenses related to the refunding

or refinancing; and

(B)  funding of appropriate debt service

reserves.

(vi)  For purposes of this subparagraph, indebtedness

includes the refunding or refinancing of indebtedness for

which an exception is permitted under paragraphs (1), (3)

and (4) as long as the refunding or refinancing incurs no

additional debt other than for:

(A)  costs and expenses related to the refunding

or refinancing; and

(B)  funding of appropriate debt service

reserves.

(4)  Costs to respond to conditions which pose an

immediate threat of serious physical harm or injury to the

students, staff or residents of the school district but only

until the conditions causing the threat have been fully

resolved.

(5)  Costs incurred in providing special education

programs and services to students with disabilities if the

increase in expenditures on special education programs and

services was greater than the index. The dollar amount of

this exception shall be equal to the portion of the increase

that exceeds the index.

(6)  Costs which:

(i)  were incurred in the implementation of a school

improvement plan required under section 1116(b) of the

Elementary and Secondary Education Act of 1965 (Public

Law 89-10, 20 U.S.C. § 6316(b)); and

(ii)  were not offset by a State allocation.

(7)  Costs necessary to maintain:

(i)  per-student local tax revenue, adjusted by the

index, if the percentage growth in average daily

membership between the last school year for which annual

financial data has been reported under section 2553 of

the act of March 10, 1949 (P.L.30, No.14), known as the

Public School Code of 1949, and the third school year

preceding that school year exceeds 7.5%; or

(ii)  actual instruction expense per average daily

membership, adjusted by the index, if the increase in

actual instruction expense per average daily membership

between the last school year for which annual financial

data has been reported under section 2553 of the Public

School Code of 1949 and the school year preceding that

school year is less than the index.

(8)  The maintenance of revenues derived from real

property taxes, earned income and net profits taxes, personal

income taxes, basic education funding allocations and special

education funding allocations, adjusted by the index, where

the percentage increase in revenues derived from real

property taxes, earned income and net profits taxes, personal

income taxes, basic education funding allocations and special

education funding allocations between the last school year

for which annual financial data has been reported under

section 2553 of the Public School Code of 1949 and the school

year preceding that school year is less than the index.

(9)  Costs incurred for providing health care-related

benefits which are directly attributable to a collective

bargaining agreement in effect on January 1, 2006, between

the school district and its employees' organization if the

anticipated increase in the cost of health care-related

benefits between the current year and the upcoming year is

greater than the index. The dollar amount of this exception

shall be equal to the portion of the increase which exceeds

the index. This paragraph shall not apply to a collective

bargaining agreement renewed, extended or entered into after

January 1, 2006.

Section 3.  This act shall take effect July 1, 2011, or in 60

days, whichever is later.