PRINTER'S NO. 971
No. 754 Session of 2003
INTRODUCED BY RHOADES, ERICKSON, MADIGAN, TOMLINSON, M. WHITE
AND KASUNIC, JUNE 17, 2003
REFERRED TO EDUCATION, JUNE 17, 2003
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," providing for revenue sources and
6 taxing authority for funding public schools; establishing the
7 Educational Trust Fund; providing for Fairness in Education
8 Funding State Revenue Report; mandating local tax relief;
9 defining terms for Commonwealth reimbursement of school
10 districts; and providing for fairness in educational funding.
11 The General Assembly of the Commonwealth of Pennsylvania
12 hereby enacts as follows:
13 Section 1. The act of March 10, 1949 (P.L.30, No.14), known
14 as the Public School Code of 1949, is amended by adding sections
15 to read:
16 Section 698. Revenue Sources for Funding of Public
17 Schools.--(1) In addition to the tax imposed under section 302
18 of the act of March 4, 1971 (P.L.6, No.2), known as the "Tax
19 Reform Code of 1971," every resident individual, estate or trust
20 shall be subject to, and shall pay to the Commonwealth for the
21 privilege of receiving each of the classes of income as
1 enumerated in section 303 of the "Tax Reform Code of 1971," a
2 tax upon each dollar of income received by that resident during
3 that resident's taxable year at the rate of two per centum (2%).
4 (2) In addition to the tax imposed under section 302 of the
5 "Tax Reform Code of 1971," every nonresident individual, estate
6 or trust shall be subject to, and shall pay to the Commonwealth
7 for the privilege of receiving each of the classes of income
8 enumerated in section 303 of the "Tax Reform Code of 1971," a
9 tax upon each dollar of income received by that nonresident
10 during that nonresident's taxable year at the rate of two per
11 centum (2%).
12 (3) Revenues generated as a result of the tax levy in
13 clauses (1) and (2) shall be dedicated for the purpose of
14 funding basic education programs pursuant to section 2502.41 and
15 for the purpose of funding the Educational Trust Fund under
16 section 699.
17 (4) The provisions of Article III of the "Tax Reform Code of
18 1971" shall apply to clauses (1) and (2).
19 Section 699. Educational Trust Fund.--(a) The Educational
20 Trust Fund is established as a restricted receipts account in
21 the State Treasury.
22 (b) Beginning July 1, 2004, and each fiscal year thereafter,
23 funds accruing to the Commonwealth under section 698 in excess
24 of the amount required to provide school districts with payments
25 under section 2502.41 shall be deposited in the Educational
26 Trust Fund.
27 (c) The moneys of the Educational Trust Fund and any
28 interest income accruing thereon may be transferred by the
29 Governor to the General Fund in amounts equal to those required
30 to further provide for payments to school districts pursuant to
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1 section 2502.41.
2 (d) The General Assembly may appropriate funds over and
3 above the amounts required pursuant to subsection (c) for the
4 purpose of funding basic education programs only through
5 approval of a separate appropriation bill by a vote of two-
6 thirds of the members elected to the Senate and the House of
7 Representatives. Any funds appropriated according to this
8 subsection which lapse shall be returned to the Educational
9 Trust Fund.
10 Section 699.1. Fairness in Education Funding State Revenue
11 Report.--No later than October 1, 2003, and each year
12 thereafter, the Department of Education, in coordination with
13 the Department of Revenue and Office of the Budget, shall
14 provide the Governor, the State Treasurer, the Appropriations
15 Committee and the Education Committee of the Senate and the
16 Appropriations Committee and the Education Committee of the
17 House of Representatives with a report, to be known as the
18 Fairness in Education Funding State Revenue Report. The report
19 shall summarize revenue forecasts and projected expenditures for
20 the fiscal year following the year in which the report is
21 provided and shall include all of the following information:
22 (1) The basic education funding each school district is
23 estimated to receive for the fiscal year beginning July 1
24 following the year in which the report is provided based on the
25 distribution methodology contained in section 2502.41.
26 (2) The actual percentage increase in the median actual
27 instructional expense per average daily membership as defined in
28 section 2501 between the third fiscal year prior to the year in
29 which the report is provided and the second fiscal year prior to
30 the year in which the report is provided.
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1 (3) The total State tax revenues from all sources required
2 to provide school districts with payments under section 2502.41.
3 (4) The estimated State tax revenues that are projected to
4 be generated under section 698(1) and (2).
5 (5) The estimated State tax revenues that are projected to
6 be generated under section 698(1) and (2) and deposited in the
7 Educational Trust Fund established under section 699.
8 Section 699.2. Mandatory Local Tax Relief.--(a) (1) For
9 the fiscal year commencing July 1, 2004, each board of school
10 directors and the city council of a city of the first class
11 shall reduce any local taxes levied for the purpose of funding
12 school district programs by an amount equal to the difference
13 between the amount received from the Commonwealth pursuant to
14 section 2502.41 and the amount received from the Commonwealth
15 pursuant to the distribution methodology in effect two (2) years
16 prior to the year in which payment under section 2502.41 is
17 made. Local taxes shall be reduced in the following manner:
18 (i) Providing a farmstead property exclusion and a homestead
19 property exclusion under 53 Pa.C.S. § 8586 (relating to
20 limitations).
21 (ii) After applying subclause (i), reducing or eliminating
22 any tax authorized or permitted under the act of December 31,
23 1965 (P.L.1257, No.511), known as "The Local Tax Enabling Act"
24 or, in the case of a city of the first class, any tax imposed on
25 the wages of residents and nonresidents under the authority of
26 the act of August 5, 1932 (Sp.Sess., P.L.45, No.45), referred to
27 as the Sterling Act, in amounts equal to the difference between
28 the amount received from the Commonwealth under section 2502.41
29 and the amount of tax reduction provided under subclause (i).
30 (iii) After applying subclause (ii), reducing the rate of
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1 the real property tax.
2 (2) Nothing in this subsection shall be construed to
3 prohibit a board of school directors or a city council of a city
4 of the first class from utilizing local taxes to fund school
5 district programs, provided that the board of school directors
6 or city council has first reduced local taxes as required by
7 clause (1).
8 (b) Except as set forth in subsection (f), unless there is
9 compliance with subsection (c) for the fiscal year commencing
10 July 1, 2004, a board of school directors or city council of a
11 city of the first class may not do any of the following:
12 (1) Increase the rate of a tax levied for the support of the
13 public schools by more than the percentage increase in the
14 Statewide average weekly wage in the preceding year.
15 (2) Levy a tax for the support of the public schools which
16 was not levied as of the effective date of this section.
17 (c) (1) In order to take an action under subsection (b)(1),
18 at the primary election immediately preceding the fiscal year in
19 which the proposed tax increase would take effect:
20 (i) a referendum stating the specific rate or rates of the
21 tax increase must be submitted to the electors residing in the
22 school district; and
23 (ii) a majority of the electors voting on the referendum
24 must approve the increase.
25 (2) In order to take an action under subsection (b)(2), at
26 the primary election immediately preceding the fiscal year in
27 which the proposed tax would take effect:
28 (i) a referendum stating the specific tax and rate to be
29 levied must be submitted to the electors residing in the school
30 district; and
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1 (ii) a majority of the electors voting on the referendum
2 must approve the tax.
3 (d) (1) If there is no approval under subsection
4 (c)(1)(ii), the board of school directors may approve an
5 increase in the tax rate of not more than the percentage
6 increase in the Statewide average weekly wage in the preceding
7 year.
8 (2) If there is no approval under subsection (c)(2)(ii), the
9 board of school directors may not levy the tax.
10 (e) The provisions of subsection (b)(1) shall not apply to
11 an increase in the rate of any tax levied for the support of the
12 public schools which is less than or equal to the percentage
13 increase in the Statewide average weekly wage in the preceding
14 year.
15 (f) The provisions of subsection (b)(1) shall not apply to
16 an increase in the rate of any tax levied for the support of the
17 public schools if the increase is necessary to respond to one or
18 more of the following conditions:
19 (1) To respond to or recover from an emergency or disaster
20 declared pursuant to 35 Pa.C.S. § 7301 (relating to general
21 authority of Governor) or 75 Pa.C.S. § 6108 (relating to power
22 of Governor during emergency), only for the duration of the
23 emergency or disaster and for the costs of the recovery from the
24 emergency or disaster.
25 (2) To implement a court order or an administrative order
26 from a Federal or State agency that requires the expenditure of
27 funds that exceed current available revenues, provided that the
28 rate increase is rescinded following fulfillment of the court
29 order or administrative order.
30 (3) (i) Pay interest and principal on any indebtedness
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1 incurred subsequent to the effective date of this section for
2 the purpose of financing projects pursuant to 53 Pa.C.S. Pt. VII
3 Subpt. B (relating to indebtedness and borrowing) or for the
4 refinancing of existing debt, including the payment of costs and
5 expenses related to such refinancing and the establishment or
6 funding of appropriate debt service reserves. The increase shall
7 be rescinded following the final payment of interest and
8 principal.
9 (ii) The exception provided under this clause may not be
10 applied in lieu of a referendum under subsection (c) to pay for
11 costs which could not be financed by the issuance of debt.
12 (4) To respond to conditions that pose an immediate threat
13 of serious physical harm or injury to the students, staff or
14 residents of the school district, but only until the conditions
15 causing the threat have been fully resolved.
16 (5) Special purpose tax levies approved by the electorate.
17 (6) Meet extraordinary, additional expenses relating to the
18 provision of services to exceptional children as required by
19 Federal and State laws and regulations, including expenses for
20 the addition of classes, personnel and special purpose equipment
21 and the placement of exceptional children in special schools or
22 residential programs.
23 (7) (i) Maintain the actual instructional expense per
24 average daily membership in amounts equal to the actual
25 instructional expense per average daily membership in effect for
26 the preceding school year.
27 (ii) This clause shall apply only if the Commonwealth fails
28 to provide the basic education funding in the amount referenced
29 in the report required under section 699.1 of this act.
30 (g) As used in this section, the term "Statewide average
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1 weekly wage" means the amount determined annually for each
2 calendar year by the Department of Labor and Industry under
3 section 105.1 of the act of June 2, 1915 (P.L.736, No.338),
4 known as the "Workers' Compensation Act."
5 Section 2. Section 2501(11.1) of the act, added February 1,
6 1966 (1965 P.L.1642, No.580), is amended and the section is
7 amended by adding clauses to read:
8 Section 2501. Definitions.--For the purposes of this article
9 the following terms shall have the following meanings:
10 * * *
11 (11.1) "Actual Instruction Expense per Weighted Average
12 Daily Membership." For the school year 1966-1967, and each
13 school year thereafter, the Superintendent of Public Instruction
14 shall calculate for each school district the actual instruction
15 expense per weighted average daily membership for each district
16 pupil. The actual instruction expense shall include all General
17 Fund expenses of the district except those for health services,
18 transportation, debt service, capital outlay, home-bound
19 instruction, and outgoing transfers to community colleges and
20 technical institutes. From this cost shall be deducted the
21 amount received from the State for driver's education; special
22 class operation; vocational curriculums; area vocational
23 technical schools; payments of tuition by district patrons,
24 parents, the State and Federal government; and all moneys
25 received from the State or Federal government [under Public Laws
26 89-10 (Elementary and Secondary Education Act), 88-452 (Economic
27 Opportunity Act), and 87-415 (Manpower Training and Development
28 Act) and] for projects under section 2508.3 of this act. The
29 actual instruction expense so determined, when divided by the
30 weighted average daily membership for the district shall be the
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1 actual instruction expense per weighted average daily
2 membership.
3 * * *
4 (24) "Actual Instructional Expense Per Average Daily
5 Membership." The actual instructional expense shall include all
6 General Fund expenses of the school district except those for
7 health services, transportation, debt service, capital outlay,
8 home-bound instruction and outgoing transfers to community
9 colleges and technical institutes. From this cost shall be
10 deducted the amount received by the school district from the
11 Commonwealth for driver's education, special class operation,
12 vocational curriculums, area vocational-technical schools,
13 payments of tuition by district patrons, parents, the Federal
14 and State Government and all moneys received from the Federal
15 and State Government and for projects under section 2508.3 of
16 this act. The actual instructional expense so determined, when
17 divided by the average daily membership for the school district,
18 shall be the actual instructional expense per average daily
19 membership (AIE/ADM).
20 (25) "Median Actual Instructional Expense Per Average Daily
21 Membership." The median actual instructional expense per
22 average daily membership shall be the product of arraying the
23 actual instructional expense per average daily membership for
24 each school district in this Commonwealth from the highest to
25 lowest and selecting the actual instructional expense per
26 average daily membership that would be the mid-point of all of
27 the students of the State for which fifty percent (50%) of the
28 school districts' average daily membership would be below and
29 fifty percent (50%) of the school districts' average daily
30 membership would be above. For the school year 2004-2005 and
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1 each school year thereafter, the calculated median actual
2 instructional expense per average daily membership shall be the
3 median actual instructional expense per average daily membership
4 for the fiscal year two (2) years prior to the year in which
5 payments under section 2502.41 are made.
6 (26) "Personal Income Factor." Each school district shall
7 be assigned a personal income factor assigned by the Department
8 of Education to each school district based on the result of a
9 calculation to determine personal income valuation per average
10 daily membership. Based on this calculation, each school
11 district shall be assigned a personal income factor pursuant to
12 the following table:
13 Personal Income per Average Daily Membership Personal Income Factor
14 Greater than $142,273 0
15 $109,787 - $142,273 100
16 $90,947 - $109,786 200
17 $78,444 - $90,946 300
18 $68,195 - $78,443 600
19 $0 - $68,194 900
20 Section 3. The act is amended by adding a section to read:
21 Section 2502.41. Fairness in Education Funding System for
22 Education.--(a) For the school year 2003-2004, and each school
23 year thereafter, the Secretary of Education shall calculate:
24 (1) The actual instructional expense per average daily
25 membership as defined in section 2501(24) for each school
26 district.
27 (2) The median actual instructional expense per average
28 daily membership as defined under section 2501(25).
29 (3) The personal income per average daily membership for
30 each school district and assign each school district a personal
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1 income factor as defined under section 2501(26).
2 (b) For the school year 2003-2004, and each school year
3 thereafter, the Commonwealth shall pay to each school district a
4 basic education funding allocation which shall consist of the
5 following:
6 (1) A base supplement calculated by multiplying the median
7 actual instructional expense per average daily membership by
8 eighty percent (80%) and multiplying that product by the school
9 district's average daily membership.
10 (2) (i) An equity supplement, if the school district
11 provides local tax effort equal to or greater than an amount
12 calculated by multiplying the median actual instructional
13 expense per average daily membership by twenty percent (20%),
14 multiplying this product by the difference between 1.0 and the
15 school district's market value/income aid ratio, and multiplying
16 this product by the school district's average daily membership.
17 (ii) The equity supplement shall be calculated by
18 multiplying the median actual instructional expense per average
19 daily membership by twenty percent (20%), multiplying this
20 product by the school district's market value/income aid ratio,
21 and multiplying this product by the school district's average
22 daily membership.
23 (3) (i) A personal income factor supplement, if the school
24 district has personal income per average daily membership of one
25 hundred forty-two thousand two hundred seventy-three dollars
26 ($142,273) or less as calculated by the Department of Education.
27 (ii) The personal income factor supplement is calculated by
28 multiplying the personal income factor assigned to the school
29 district by the school district's average daily membership.
30 (c) Each school district shall annually report to the
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1 Secretary of Education the amount of its total local tax effort
2 for the purpose of calculating the local tax effort required to
3 qualify for the equity supplement under subsection (b)(2). The
4 reports shall be filed with the secretary no later than February
5 1 of the school year prior to the year in which payments are to
6 be made. Failure to file the report as required in this
7 subsection shall make a school district ineligible for the
8 equity supplement.
9 Section 4. The additional tax imposed by section 698(1) and
10 (2) of the act shall apply to taxable years beginning after
11 December 31, 2002.
12 Section 5. This act shall take effect immediately.
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