When the state passed Act 71 of 2005 it required Allegheny County, its 128 municipalities, and 43 school districts to follow new requirements for property tax millage rates following a reassessments. A short year later, the state passed Act 1 of 2006, which involved school property tax relief, tax shifts, gaming money, school tax referenda, and requirements for school districts to adjust their millage rates following a reassessment. As a result, the 43 districts in Allegheny County were effectively removed from the Act 71 framework and placed into a framework with the other 457 school districts in Pennsylvania.
So what does Act 1 say for districts following a reassessment? We discussed this in a Brief previously, but basically the district cannot bring in more tax revenue than it would be allowed under the previous year’s Act 1 index-the index that informs the district how high its taxes can increase. Those going above the index have to either seek out an exception from the Department of Education or place the increase on the ballot in front of the voters.
The Department of Education’s 2013-14 report on Act 1 exceptions shows 11 districts have successfully obtained permission to exceed their index for the fiscal year that starts in just a few weeks. That’s not to say they will use them-the Department points out that many times districts obtain but do not utilize exceptions-but they are in the back pocket for those districts. Act 1 was amended in the last several years to reduce the number of allowable exceptions from 10 to 4 (leaving exceptions related to construction, retirement obligations, and special education). All eleven cited pensions as the reason for their petition: three also cited special education expenses.
So what of the remaining 32 districts? If they did not seek an exception that does not mean the school millage won’t rise this year the assessments go into effect. Just that they are staying below the allowable index.
210, 102, 61, 133, and 228. Those numbers represent the total number of school districts that received referendum exceptions in the last five fiscal years under Act 1 of the 2006 special legislative session. Act 1 was set up to give taxpayers some say over school property taxes: each district would have an annual index that would determine how high school taxes could increase before triggering a referendum vote in that district. Nothing prevented a school board from increasing taxes up to the index, and the law built in ten exceptions that, if any were granted, would prevent a higher-than-the-index tax increase from going in front of the voters.
In other words, an out.
Legislation just passed last week that would take away seven of the ten exceptions. Left in place are three: for pensions, special education, and for school construction debt. It should be noted that in the last two fiscal years nearly all of the districts that secured an exception (and it is possible to get more than one in a single year) got one related to pension costs.
Conversely, there have been very few chances for voters anywhere in Pennsylvania to get a school tax increase measure in front of them on the ballot and to give it an up or down vote. Just goes to show how extensive the exception net was cast. Voters did get the chance to decide whether they wanted higher earned income taxes or to create a personal income tax in order to shift even more burden away from property taxes: few districts did so.
Is this the first step toward moving to a referendum with no exceptions? Or possibly one where any school tax increase, no matter how large, is put on the ballot in front of the electorate?
Question: if Mt. Lebanon school district is limited to a 3% tax increase under Act 1 then how is it that taxpayers woke up this morning to find that their school property tax bill is about to increase 10.7%?
Answer: there are so many exceptions built into Act 1 permitting school districts to ignore their "allowable" increase that the "so called" taxpayer protections have more holes than Swiss cheese.
Act 1 was supposed to change the school property tax system by allowing for tax relief from legalized slots and providing taxpayer protections by instituting a tax cap and allowing for voter referenda when the cap was exceeded. But the law also allowed districts the ability to secure exceptions for outstripping the cap without having to put the tax increase before the voters if the approved expenditures fell into one of ten categories, including school construction, health care benefits, special education expenditures, etc.
At the new rate of 26.69 mills Mt. Lebanon won’t have the highest school tax rate in the County, but it approaches the top of the list. But this increase is compounded by the events coming in the near term for the district: a countywide reassessment that will affect under valued homes and a growth in school spending that is currently forecast to increase property taxes (as witnessed by last night’s action) and earned income taxes. In short Mt. Lebanon homes could be facing significant tax hikes in the next four years.