PRINTER'S NO. 939
No. 780 Session of 2003
INTRODUCED BY MELLOW, O'PAKE, WAGNER, MUSTO, FUMO, KASUNIC,
STOUT, BOSCOLA, COSTA, FERLO, HUGHES, KITCHEN, KUKOVICH,
LAVALLE, LOGAN, SCHWARTZ, STACK, TARTAGLIONE, C. WILLIAMS AND
WOZNIAK, JUNE 6, 2003
REFERRED TO FINANCE, JUNE 6, 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," further providing for distress in
6 school districts of the first class; providing for property
7 tax relief; establishing a Property Tax Relief Trust Fund;
8 further providing for small district assistance; providing
9 for basic education funding for 2002-2003 school year; and
10 prescribing penalties.
11 The General Assembly of the Commonwealth of Pennsylvania
12 hereby enacts as follows:
13 Section 1. Section 696(h)(1) of the act of March 10, 1949
14 (P.L.30, No.14), known as the Public School Code of 1949,
15 amended June 29, 2002 (P.L.524, No.88), is amended to read:
16 Section 696. Distress in School Districts of the First
17 Class.--* * *
18 (h) The School Reform Commission shall be responsible for
19 financial matters related to the distressed school district of
20 the first class and:
21 (1) [All] Except as provided in Article VI-A, all taxes
1 authorized to be levied by a school district of the first class
2 or for a school district of the first class by a city or county
3 of the first class on the date of the declaration of distress
4 shall continue to be authorized and levied in accordance with
5 this act and shall be transmitted to the school district. For
6 the first fiscal year or part thereof and every fiscal year
7 thereafter in which the school district is declared to be
8 distressed, the amount appropriated or paid by the city or
9 county to the school district and the tax authorized by the city
10 or county to be levied for the school district or dedicated to
11 the school district shall be an amount or tax not less than the
12 highest amount paid by the city or county to the school district
13 or authorized by the city or county to be levied for the school
14 district or dedicated to the school district during any of the
15 three full preceding fiscal years. In addition, the city of the
16 first class shall provide to the school district of the first
17 class all other available local non-tax revenue, including
18 grants, subsidies or payments made during the prior year.
19 * * *
20 Section 2. The act is amended by adding an article to read:
21 ARTICLE VI-A
22 PROPERTY TAX RELIEF
23 Section 601-A. Definitions.
24 The following words and phrases when used in this article
25 shall have the meanings given to them in this section unless the
26 context clearly indicates otherwise:
27 "Department." The Department of Education of the
28 Commonwealth.
29 "Eligible entity." A school district, other than a district
30 in a city of the first class, that reduces taxes on homesteads
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1 and, where farmsteads exist, on farmsteads for fiscal year 2004-
2 2005 and maintains those reductions in subsequent years pursuant
3 to this article. In a city of the first class, the term shall
4 mean a school district where the city council reduces the
5 resident and nonresident tax on wages for fiscal year 2003-2004,
6 maintains those reductions in subsequent years pursuant to this
7 article and transfers existing real estate millage from a school
8 district in a city of the first class to the city of the first
9 class in fiscal year 2003-2004 up to the amount required to
10 replace the reduced revenue realized as a result of the wage tax
11 reduction.
12 "Farmstead." All buildings and structures on a farm not less
13 than ten contiguous acres in area located in this Commonwealth
14 that are used primarily to produce or store any farm product
15 produced on the farm for purposes of commercial agricultural
16 production, to house or confine any animal raised or maintained
17 on the farm for the purpose of commercial agricultural
18 production, to store any agricultural supply to be used on the
19 farm in commercial agricultural production or to store any
20 machinery or equipment used on the farm in commercial
21 agricultural production and the land on which such buildings are
22 located. This term shall only apply to farms used as the
23 principal residence and domicile of an owner.
24 "Farmstead exclusion." A tax exclusion applied to lower the
25 assessed value of a farmstead pursuant to section 2(b)(1) of
26 Article VIII of the Constitution of Pennsylvania.
27 "Fund." The Property Tax Relief Trust Fund.
28 "Homestead." A dwelling in this Commonwealth, the parcel of
29 land on which the dwelling is located and the other improvements
30 located on the parcel, other than any improvements included in a
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1 farmstead, for which any of the following apply:
2 (1) The dwelling is primarily used as the principal
3 residence and domicile of an owner who is a natural person.
4 The homestead for real property qualifying under this
5 paragraph shall not include the land on which the dwelling is
6 located if the land is not owned by a person who owns the
7 dwelling.
8 (2) The dwelling is a unit in a condominium as the term
9 is defined in 68 Pa.C.S. § 3101 (relating to definitions) and
10 the unit is primarily used as the principal residence and
11 domicile of a natural person who is an owner of the unit; or
12 the dwelling is a unit in a cooperative as the term is
13 defined in 68 Pa.C.S. § 4103 (relating to definitions) and
14 the unit is primarily used as the principal residence and
15 domicile of a natural person who is an owner of the unit. The
16 homestead for a unit in a condominium or a cooperative shall
17 be limited to the assessed value of the unit which shall be
18 determined in a manner consistent with the assessment of real
19 property taxes on those units under 68 Pa.C.S. (relating to
20 real and personal property) or as otherwise provided by law.
21 If the unit is not separately assessed for real property
22 taxes, the homestead shall be a pro rata share of the real
23 property.
24 (3) The dwelling does not qualify under paragraphs (1)
25 and (2) and a portion of the dwelling is used as the
26 principal residence and domicile of an owner. The homestead
27 for real property qualifying under this paragraph shall be
28 the portion of the real property that is equal to the portion
29 of the dwelling that is used as the principal residence and
30 domicile of an owner.
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1 "Homestead exclusion." A tax exclusion applied to lower the
2 assessed value of a homestead pursuant to section 2(b)(vi) of
3 Article VIII of the Constitution of Pennsylvania.
4 "Owner." Any owner of a homestead or farmstead who is:
5 (1) an individual domiciled in this Commonwealth;
6 (2) a grantor who has placed the homestead or farmstead
7 in a revocable trust, provided that the grantor is a natural
8 person domiciled in this Commonwealth; or
9 (3) a partner of a family farm partnership or a
10 shareholder of a family farm corporation as the terms are
11 defined in section 1101-C of the act of March 4, 1971 (P.L.6,
12 No.2), known as the Tax Reform Code of 1971, provided that
13 the partner or shareholder is a natural person domiciled in
14 this Commonwealth.
15 Section 602-A. Property Tax Relief Trust Fund.
16 (a) Establishment.--There is hereby established in the State
17 Treasury a special fund to be known as the Property Tax Relief
18 Trust Fund.
19 (b) Source of revenue.--Money shall be deposited into the
20 fund from the following sources:
21 (1) The following percentage of the revenues received
22 from the tax imposed on telephone, telegraph and commercial
23 mobile radio services providers under Article XI of the act
24 of March 4, 1971 (P.L.6, No.2), known as the Tax Reform Code
25 of 1971.
26 (i) in fiscal year 2003-2004, 56.62%;
27 (ii) in fiscal year 2004-2005, 64.66%; and
28 (iii) in fiscal year 2005-2006 and in each fiscal
29 year thereafter, 66.78%.
30 (2) Revenues received from the tax on slot machine
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1 wagering.
2 (3) Revenues received from the increase in the malt
3 beverage tax imposed under Article XX of the Tax Reform Code
4 of 1971 from $0.08 per gallon to $0.25 per gallon.
5 (4) Revenues received from the surcharge on restoration
6 of operating privilege in 75 Pa.C.S. § 1545 (relating to
7 restoration of operating privilege) and the surcharges on
8 traffic and driving under the influence violations in 75
9 Pa.C.S. § 6506 (relating to surcharge).
10 (5) Additional appropriations from the General Fund as
11 may be required pursuant to subsection (c).
12 (c) Required deposit.--The fund shall have an amount
13 available for payments on account of the reduction of taxes. The
14 amount available for fiscal year 2003-2004 shall be
15 $1,537,000,000. This amount shall be adjusted each year by the
16 rate of change in the Consumer Price Index for all urban
17 consumers in order to provide an increasing amount available for
18 reduction of taxes pursuant to this article. No adjustment will
19 be made where the rate of change is equal to or less than zero.
20 If sufficient money is not deposited in the fund from subsection
21 (b) in any fiscal year, an amount equal to the amount necessary
22 to reach the required amount in that fiscal year shall be
23 transferred from the General Fund. The Governor shall identify
24 the amount projected to be needed from the General Fund in each
25 annual budget submission to the General Assembly. Such amount is
26 hereby specifically appropriated from the General Fund to the
27 fund.
28 (d) Use of funds.--Money in the fund shall be used to:
29 (1) Provide rebates to owners for property taxes paid on
30 homesteads and farmsteads for school year 2003-2004 in
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1 accordance with the provisions of the article of the Tax
2 Reform Code of 1971, relating to property tax relief rebates.
3 (2) Provide funding in accordance with the provisions of
4 Article XXV to eligible entities, other than eligible
5 entities in cities of the first class, to replace reduced
6 revenues resulting from reductions of taxes on homesteads
7 and, where applicable, on farmsteads paid by owners for
8 fiscal year 2004-2005 and for each fiscal year thereafter.
9 (3) Provide funding in accordance with the provisions of
10 Article XXV to eligible entities in cities of the first class
11 to replace reduced revenues resulting from the transfer of
12 millage to the city of the first class for the purposes of
13 reductions of the resident and nonresident tax on wages for
14 fiscal year 2003-2004 and for each fiscal year thereafter.
15 (4) Provide funding in accordance with the provisions of
16 Article XXV to eligible entities where the amount of funding
17 available from the Commonwealth for tax reductions as a
18 result of the granting of homestead exclusions would exceed
19 the maximum level of exclusions permitted under section
20 2(b)(vi) of Article VIII of the Constitution of Pennsylvania
21 for fiscal year 2004-2005 and for each fiscal year
22 thereafter.
23 (5) Provide funding in accordance with the provisions of
24 Article XXV to eligible entities that currently provide a
25 homestead exclusion or a farmstead exclusion in accordance
26 with 53 Pa.C.S. Pt. VII Subpt. C (relating to taxation and
27 assessments) for fiscal year 2004-2005 and for each fiscal
28 year thereafter.
29 (6) Provide funding for administrative costs incurred by
30 the Department of Revenue for issuing rebates in accordance
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1 with the provisions of the article of the Tax Reform Code of
2 1971, relating to property tax relief rebates, and thereafter
3 to provide funding for administrative costs incurred by the
4 Commonwealth or the counties in performing their duties in
5 connection with subsequent reductions in taxes pursuant to
6 this article.
7 (e) Appropriation.--The money in the fund is hereby
8 appropriated upon approval of the Governor for the purposes set
9 forth in this article.
10 Section 603-A. Property tax relief.
11 (a) School districts.--
12 (1) In order to receive funding from the fund for the
13 school year 2004-2005 and for each year thereafter, each
14 board of school directors shall reduce the amount of taxes
15 levied on a homestead through the use of a homestead
16 exclusion and, where farmsteads exist, on a farmstead through
17 the use of a farmstead exclusion and shall maintain such
18 reductions thereafter.
19 (2) The board of school directors and county boards of
20 assessments shall calculate the amount of the reductions
21 based on the amount available from the Commonwealth for such
22 reductions pursuant to this article and shall convert the
23 reduction into a homestead exclusion which shall be applied
24 equally to all homesteads in the school district and, where
25 applicable, a farmstead exclusion which shall be applied
26 equally to all farmsteads in the school district. The amounts
27 of the homestead exclusion and the farmstead exclusion shall
28 be the same.
29 (3) The board of school directors shall certify to the
30 department that the exclusions in paragraph (2) have been
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1 enacted.
2 (4) In order for an owner to qualify for an exclusion,
3 the owner shall apply to the county board of assessments on a
4 form specified by the county board of assessments unless the
5 owner applied to the Department of Revenue for a rebate in
6 accordance with the provisions of the article of the act of
7 March 4, 1971 (P.L.6, No.2), known as the Tax Reform Code of
8 1971, relating to property tax relief rebates after 2002. In
9 such event, the owner shall not be required to apply to the
10 county board of assessments for the same property.
11 (5) An exclusion granted to an owner under this section
12 shall continue to apply until the real property for which the
13 exclusion was granted has been transferred or the real
14 property is no longer eligible for an exclusion.
15 (b) Cities of the first class.--
16 (1) In order for an eligible entity in a city of the
17 first class to receive funding from the fund in fiscal year
18 2003-2004 and each year thereafter, cities of the first class
19 shall reduce the rate of tax on wages for both residents' and
20 nonresidents' tax on wages by the same percentage and shall
21 maintain such reductions thereafter. The city shall calculate
22 the amount of the reductions based on the amount available
23 from the Commonwealth for such reductions pursuant to this
24 article. The city shall certify to the department that such
25 tax rate reductions have been enacted. The tax rate
26 reductions implemented by a city of the first class pursuant
27 to this article shall be in addition to the following
28 schedule of wage tax rate reductions:
29 (i) In 2004, 0.8333% for residents and 0.8332% for
30 nonresidents.
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1 (ii) In 2005, 0.8403% for residents and 0.8402% for
2 nonresidents.
3 (iii) In 2006, 0.8475% for residents and 0.8473% for
4 nonresidents.
5 (iv) In 2007, 0.8547% for residents and 0.8545% for
6 nonresidents.
7 (v) In 2008, 0.8621% for residents and 0.8619% for
8 nonresidents.
9 (2) Eligible entities may qualify for any sums remaining
10 in their allocation under this article following the
11 application of the provisions of this section to homesteads
12 to reduce tax rates on all properties located in the
13 applicable school districts. In cases where the amount of
14 exclusions given for homesteads would exceed the level
15 permitted by the homestead exclusion, school districts shall
16 apply the excess allocation to lower millage rates for all
17 properties located within the school district to provide the
18 full level of property tax reductions intended in this
19 article.
20 Section 604-A. Penalties.
21 (a) Summary offense.--An owner who knowingly receives an
22 exclusion for real property that is not eligible for an
23 exclusion commits a summary offense and upon conviction shall be
24 sentenced to pay a fine not exceeding $300. In addition, the
25 owner shall be ordered to repay the amount of the exclusion plus
26 simple interest computed at the rate provided in section 806 of
27 the act of April 9, 1929 (P.L.343, No.176), known as The Fiscal
28 Code, plus a penalty of 10% of the unpaid taxes and interest
29 due.
30 (b) Misdemeanor.--A person who knowingly files a fraudulent
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1 application under this article commits a misdemeanor of the
2 third degree and upon conviction shall be sentenced to pay a
3 fine not exceeding $2,500.
4 Section 3. Section 2502.13 of the act, amended June 29, 2002
5 (P.L.524, No.88), is amended to read:
6 Section 2502.13. Small District Assistance.--For the 1984-
7 1985 and 1985-1986 school years, the Commonwealth shall pay to
8 each school district which has an average daily membership of
9 one thousand five hundred (1,500) or less and has a market
10 value/income aid ratio of five thousand ten-thousandths (0.5000)
11 or greater, an amount equal to fifty dollars ($50) multiplied by
12 that district's average daily membership. For the 1985-1986
13 school year, no school district shall receive less on account of
14 this section than it did for the 1984-1985 school year. For the
15 school year 1986-1987, the Commonwealth shall pay to each school
16 district which has an average daily membership of one thousand
17 five hundred (1,500) or less and has a market value/income aid
18 ratio of five thousand ten-thousandths (0.5000) or greater, or
19 received payments under this section for the 1985-1986 school
20 year, an amount equal to seventy-five dollars ($75) multiplied
21 by that district's average daily membership. For the school year
22 1987-1988, the Commonwealth shall pay to each school district
23 which has an average daily membership of one thousand five
24 hundred (1,500) or less and a market value/income aid ratio of
25 five thousand ten-thousandths (0.5000) or greater, or received
26 payments under this section for the 1986-1987 school year, an
27 amount equal to eighty-five dollars ($85) multiplied by that
28 district's average daily membership. For the school year 1988-
29 1989, the Commonwealth shall pay to each school district which
30 has an average daily membership of one thousand five hundred
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1 (1,500) or less and a market value/income aid ratio of five
2 thousand ten thousandths (0.5000) or greater, or received
3 payments under this section for the 1987-1988 or 1988-1989
4 school year, an amount equal to one hundred five dollars ($105).
5 For the school year 1989-1990, the Commonwealth shall pay to
6 each school district which has an average daily membership of
7 one thousand five hundred (1,500) or less and a market
8 value/income aid ratio of five thousand ten-thousandths (0.5000)
9 or greater, or received payments under this section for the
10 1987-1988 school year, an amount equal to one hundred fifteen
11 dollars ($115) multiplied by the district's average daily
12 membership as provided for in section 212 of the act of July 1,
13 1990 (P.L.1591, No.7A), known as the "General Appropriation Act
14 of 1990." For the school year 1990-1991, the Commonwealth shall
15 pay to each school district which has an average daily
16 membership of one thousand five hundred (1,500) or less and a
17 market value/income aid ratio of five thousand ten-thousandths
18 (0.5000) or greater, or received payments under this section for
19 the prior school year, an amount equal to one hundred seventy
20 dollars ($170) multiplied by that district's average daily
21 membership. For the school year 1990-1991, each school district
22 with a population per square mile of less than ninety (90),
23 which otherwise meets the average daily membership and market
24 value/income aid ratio requirements of this section, or received
25 payments under this section for the prior school year, shall
26 instead receive an amount equal to one hundred ninety dollars
27 ($190) multiplied by that district's average daily membership.
28 For the 1987-1988 school year through the 1990-1991 school year,
29 no school district shall receive less on account of this section
30 than it did for the prior school year. For the school year 1994-
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1 1995, the Commonwealth shall pay to each school district which
2 has an average daily membership of one thousand five hundred
3 (1,500) or less and a market value/income aid ratio of five
4 thousand ten-thousandths (0.5000) or greater, an amount equal to
5 ninety five dollars ($95) multiplied by that district's average
6 daily membership. For each of the school years 1997-1998 through
7 1999-2000, the Commonwealth shall pay to each school district
8 which has an average daily membership of one thousand five
9 hundred (1,500) or less and a market value/income aid ratio of
10 five thousand ten-thousandths (0.5000) or greater an amount
11 equal to seventy-five dollars ($75) multiplied by that
12 district's average daily membership. For the school years 2000-
13 2001 and 2001-2002, the Commonwealth shall pay to each school
14 district which has an average daily membership of one thousand
15 five hundred (1,500) or less an amount equal to seventy-five
16 dollars ($75) multiplied by that district's average daily
17 membership. For school year 2002-2003, the Commonwealth shall
18 pay to each school district which has a modified average daily
19 membership of one thousand (1,000) or less an amount equal to
20 five thousand four hundred ninety dollars ($5,490) times twenty
21 percent (20%) of the school district's modified average daily
22 membership times its market value/income aid ratio. For the
23 purposes of this section, modified average daily membership is
24 calculated by subtracting the product of one-half (0.5) times
25 the sum of the half-time and full-time kindergarten average
26 daily membership from the school district's average daily
27 membership.
28 Section 4. The act is amended by adding a section to read:
29 Section 2502.41. Basic Education Funding for 2002-2003
30 School Year.--(a) For the 2002-2003 school year, the
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1 Commonwealth shall calculate an amount for each school district
2 which shall be used for property tax reduction in 2003-2004
3 pursuant to the article of this act relating to property tax
4 relief, except that in school districts of the first class the
5 amount shall be used for resident and nonresident wage tax
6 reduction in 2003-2004. The amount available for tax reduction
7 in each school district shall equal the foundation funding,
8 adjusted for minimum and maximum property tax reduction
9 percentages, minus the basic education funding allocation for
10 the 2001-2002 school year pursuant to sections 2502.13 and
11 2502.40. The amount of funds identified for property tax and
12 wage tax reduction shall be placed in the Property Tax Relief
13 Trust Fund. The foundation funding shall consist of:
14 (1) A base supplement calculated by multiplying the
15 foundation grant amount of five thousand four hundred ninety
16 dollars ($5,490) times the school district's 2002-2003 times its
17 2003-2004 market value/income aid ratio. The modified average
18 daily membership shall be calculated by subtracting one-half
19 (0.5) times the sum of the half-time and full-time kindergarten
20 average daily membership from the school district's average
21 daily membership.
22 (2) A limited English proficiency supplement calculated by
23 multiplying the foundation grant amount of five thousand four
24 hundred ninety dollars ($5,490) times twenty-five percent (25%)
25 of the school district's 2002-2003 number of limited English
26 proficiency students times its 2003-2004 market value/income aid
27 ratio.
28 (3) A poverty supplement calculated for qualifying school
29 districts as follows:
30 (i) If its 2001 personal income per modified average daily
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1 membership is equal to or less than eighty-five thousand dollars
2 ($85,000), multiply six hundred fifteen dollars ($615) times its
3 modified average daily membership.
4 (ii) If its 2001 personal income per modified average daily
5 membership is greater than eighty-five thousand dollars
6 ($85,000) and equal to or less than one hundred thousand dollars
7 ($100,000), multiply one hundred fifty dollars ($150) times its
8 modified average daily membership.
9 (iii) If its 2001 personal income per modified average daily
10 membership is greater than one hundred thousand dollars
11 ($100,000) and equal to or less than one hundred fifteen
12 thousand dollars ($115,000), multiply seventy-five dollars ($75)
13 times its modified average daily membership.
14 (4) An amount as necessary so that the sum of the amounts
15 under section 2502.13 and clauses (1), (2) and (3) and this
16 clause shall equal the amount received in its 2001-2002 basic
17 education funding allocation pursuant to sections 2502.13 and
18 2502.40.
19 (5) An amount for small district assistance for the 2002-
20 2003 school year pursuant to section 2502.13.
21 (b) Adjustments for minimum and maximum property tax
22 reductions pursuant to the article of this act dealing with
23 property tax relief shall be calculated as follows:
24 (1) If the school district's 2003-2004 market value/income
25 aid ratio is equal to or greater than four thousand five hundred
26 ten thousandths (0.4500) an amount shall be provided as
27 necessary such that the amount available for property tax
28 reduction shall not be less than thirty percent (30%) of the
29 residential property taxes. For the purpose of this section, the
30 residential property taxes shall be calculated by multiplying
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1 the total property tax amount as reported by the school district
2 on its 2001-2002 annual financial report by the percent of
3 assessed valuations attributable to residential properties as
4 certified by the State Tax Equalization Board.
5 (2) If the school district's 2003-2004 market value/income
6 aid ratio is less than four thousand five hundred ten
7 thousandths (0.4500) an amount shall be provided as necessary
8 such that the amount available for property tax reduction is not
9 less than fifteen percent (15%) of the property taxes.
10 (3) If the amount available for property tax reduction is
11 greater than sixty percent (60%) of the property taxes, the
12 amount available shall be adjusted so that the property tax
13 reduction equals sixty percent (60%).
14 Section 5. This act shall take effect July 1, 2003, or
15 immediately, whichever is later.
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