HOUSE AMENDED

THE GENERAL ASSEMBLY OF PENNSYLVANIA

SENATE BILL

INTRODUCED BY SCARNATI, PILEGGI, CORMAN, WAUGH, ROBBINS, ERICKSON, BRUBAKER, FOLMER, ORIE, VOGEL, ARGALL, YAW, ALLOWAY, M. WHITE, D. WHITE, RAFFERTY, GREENLEAF, BAKER, EARLL, PIPPY, MENSCH, WARD, PICCOLA, VANCE, TARTAGLIONE, KASUNIC, BREWSTER, COSTA, BOSCOLA, YUDICHAK, WOZNIAK AND BROWNE, JANUARY 28, 2011

AS AMENDED ON SECOND CONSIDERATION, HOUSE OF REPRESENTATIVES, JUNE 29, 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," further providing for public

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referendum requirements and for installment payment of school

real property taxes.

The General Assembly of the Commonwealth of Pennsylvania

hereby enacts as follows:

Section 1.  Section 1502(d) of the act of June 27, 2006 (1st

<--

Sp.Sess., P.L.1873, No.1), known as the Taxpayer Relief Act, is

amended and the section is amended by adding subsections to

read:

Section 1.  Section 333 of the act of June 27, 2006 (1st

<--

Sp.Sess., P.L.1873, No.1), known as the Taxpayer Relief Act, is

amended to read:

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 there is compliance with subsection (c), a

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

(1)  Increase the rate of a tax levied for the support of

the public schools by more than the index. For purposes of

compliance with this paragraph, a school district which is

situated in more than one county and which levies real estate

taxes under section 672.1 of the act of March 10, 1949

(P.L.30, No.14), known as the Public School Code of 1949,

shall apply the index to each separate rate of real estate

taxes levied.

(2)  Levy a tax for the support of the public schools

which was not levied in the 2005-2006 fiscal year.

(3)  Raise the rate of the earned income and net profits

tax if already imposed under the authority of the Local Tax

Enabling Act except as otherwise provided for under section

331.2 or 332.

(4)  Notwithstanding any other provision of this chapter

to the contrary, the adoption of a referendum under section

331.2 or 332 confers on the board of school directors the

authority to raise income taxes only to the extent contained

in the language of the referendum, and any future increase of

an income tax to be used for the purpose of property tax

reduction shall be submitted to the electors of the school

district at a subsequent municipal election pursuant to the

provisions of section 332.

(c)  Referendum.--

(1)  In order to take an action prohibited under

subsection (b)(1), at the election immediately preceding the

start of the school district fiscal year in which the

proposed tax increase would take effect, a referendum stating

the specific rate or rates of the tax increase must be

submitted to the electors of the school district, and a

majority of the electors voting on the question must approve

the increase.

(2)  In order to take an action under subsection (b)(2),

at the election immediately preceding the start of the school

district fiscal year in which the proposed tax would take

effect, a referendum stating the proposed tax and the rate at

which it will be levied must be submitted to the electors of

the school district, and a majority of the electors voting on

the question must approve the tax.

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

subsection (j), 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.

(4)  The election officials of each county shall, in

consultation with the board of school directors, draft a

nonlegal interpretative statement which shall accompany the

referendum question in accordance with section 201.1 of the

act of June 3, 1937 (P.L.1333, No.320), known as the

Pennsylvania Election Code. The nonlegal interpretative

statement shall include information that references the items

of expenditure for which the tax increase is sought and the

consequence of the referendum being disapproved by the

electorate.

(d)  Failure to approve referendum.--

(1)  If a referendum question submitted under subsection

(c)(1) is not approved, the board of school directors may

approve an increase in the tax rate of not more than the

index.

(2)  If a referendum question submitted under subsection

(c)(2) is not approved, the board of school directors may not

levy the tax.

(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;

(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] subsection (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)] and (A.1) 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, net of State special education

payments, 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)] (f)(2)(v) 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)[,] or 

(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)[,] or (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.]

(l)  Index calculation.--No later than August 15, 2005, and

each August 15 thereafter, the department shall calculate the

index. The department shall publish the index by September 1,

2005, and each September 1 thereafter in the Pennsylvania

Bulletin.

(m)  Election interference prohibited.--

(1)  No public funds may be used to urge any elector to

vote for or against a referendum or be appropriated for

political or campaign purposes.

(2)  This subsection shall not be construed to prohibit

the use of public funds for dissemination of factual

information relative to a referendum appearing on an election

ballot.

(3)  As used in this subsection, the term "public funds"

means any funds appropriated by the General Assembly or by a

political subdivision.

(n)  Treatment of certain required payments.--

(1)  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, as determined

by the department under this section, 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.]

(2)  For purposes of this subsection, the following

apply:

(i)  The school district's share of payments as

required by 24 Pa.C.S. § 8327 for the current year shall

be determined by the department using:

(A)  The lesser of the school district's total

compensation for the current year or the school

district's total compensation for the 2011-2012

school year.

(B)  The employer contribution rate under 24

Pa.C.S. § 8328 (relating to actuarial cost method)

for the current year.

(C)  A State retirement subsidy calculation based

on the school district's total compensation under

clause (A) and the employer contribution rate under

clause (B).

(ii)  The school district's share of payments as

required by 24 Pa.C.S. § 8327 for the upcoming year shall

be determined by the department using all of the

following:

(A)  The lesser of the school district's:

(I)  estimated total compensation for the

upcoming year; or

(II)  total compensation for the 2011-2012

school year.

(B)  The employer contribution rate under 24

Pa.C.S. § 8328 for the upcoming year.

(C)  A State retirement subsidy calculation based

on the school district's total compensation under

clause (A) and the employer contribution rate under

clause (B).

(3)  The dollar amount to which subsection (f) applies

shall be determined as follows:

(i)  Multiply:

(A)  the index; by

(B)  the school district's share of payments for

the current year, as determined by the department

under this subsection.

(ii)  Subtract:

(A)  the product under subparagraph (i); from

(B)  the amount of increase, as determined by the

department under this subsection, in the school

district's share of payments between:

(I)  the current year; and

(II)  the upcoming year. 

(4)  As used in this subsection, the term "compensation"

has the meaning ascribed in 24 Pa.C.S. § 8102 (relating to

definitions).

(o)  Rescission.--

(1)  Any increase in a rate of a tax levied for support

of the public schools imposed prior to or during the

2011-2012 school year under a referendum exception granted,

prior to the effective date of this subsection, under

subsection (f)(2)(i), (ii) or (iii)(C) and (D) shall be

rescinded:

(i)  immediately following fulfillment of the court

order or administrative order that was the basis for the

referendum exception;

(ii)  immediately following the payment of costs to

resolve a condition which posed an immediate threat of

serious physical harm or injury to the students, staff or

residents of the school district that was the basis for

the referendum exception; or

(iii)  following the final payment of interest and

principal related to the indebtedness.

(2)  For the purposes of this subsection, the term "final

payment of interest and principal" does not include a school

district's payment of debt as a result of refunding or

refinancing the debt.

Section 2.  Section 1502(d) of the act is amended and the

section is amended by adding subsections to read:

Section 1502.  Installment payment of school real property

taxes.

* * *

(b.1)  Adoption of resolution for small business.--No later

than June 30, 2012, a board of school directors of a school

district of the second, third or fourth class shall adopt a

resolution which, for calendar year 2012 and each year

thereafter, authorizes the collection and payment of school real

property taxes, excluding any interim or delinquent school

property taxes, in installments from small business owners.

* * *

(c.1)  Contents of resolution for small business.--The

resolution adopted pursuant to subsection (b.1) shall set forth

all of the following:

(1)  Permit taxpayers that own small businesses to be

eligible to pay school real property taxes in installments.

(2)  The same requirements as set forth under subsection

(c)(2), (3) and (4).

(d)  Notice.--A board of school directors of a school

district to which this section applies shall annually set forth

information regarding the payment of school real property taxes

in installments and the dates on which such payments are due or

delinquent on the tax notice sent to a homestead or farmstead

property owner or to a small business owner.

(e)  Definition.--For purposes of this section, "small

business" means a business that is located in this Commonwealth

and has no more than 50 employees.

Section 2.  This act shall take effect in 60 days.

<--

Section 3.  The amendment of section 333 of the act shall

<--

apply to fiscal years of school districts which begin after

January 1, 2012.

Section 4.  This act shall take effect as follows:

(1)  The following provisions shall take effect

immediately:

(i)  The amendment of section 333 of the act.

(ii)  Section 3 of this act.

(iii)  This section.

(2)  The remainder of this act shall take effect in 60

days.