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