Tax Cap Exemptions Granted to 164 Pennsylvania School Districts

Tax Cap Exemptions Granted to 164 Pennsylvania School Districts
June 12, 2014

More than one in three school districts in Pennsylvania is raising property taxes without residents’ consent, due to a loophole in a state law.

In 2006, the General Assembly passed the Taxpayer Relief Act, also known as Act 1, requiring the Pennsylvania Department of Education (PDE) to set an inflation index to limit the ability of Pennsylvania’s 500 school districts to increase property tax rates in a given year. If school districts want to go above the cap, the increase is supposed to be put before voters.

A program that gives districts exceptions to voter referendums has weakened the law.

Driven by Pension Costs
To get around the tax cap, school districts can apply for an exception from PDE for excessive special education costs, grandfathered debt from school construction, and retirement contributions.

For 2014-15, 316 school districts adopted resolutions promising not to increase tax rates above the allowable index, while 164 received exceptions.

Of the 164 school districts that were granted exceptions, 163 applied because of pension obligations.

‘Able to Raise at Will’
“School districts have been able to raise property taxes at will to pay for the pension spike,” said David Baldinger, spokesman for the Pennsylvania Coalition of Taxpayers Associations.

Pennridge School District is 30 miles north of Philadelphia. It has a student population of 7,300 and employs about 500 teachers and 450 additional staff. The district applied for a $1.1 million exemption to cover rising pension costs. That translates to a tax increase of 3.6 percent.

A homeowner in that district with a house assessed at the median value of $30,430 would have to pay $3,912 in property taxes, or $105 more than last year.

The Pennridge School Board may use money from its fund balance to decrease that by $33.

Even so, residents of that district will have to pay more next year to cover retirement costs for public employees.

Tax Hikes Exceed Wage Hikes
According to the Pennsylvania Independent Fiscal Office, the growth of school property taxes has been steadily exceeding wage growth since the early 1990s.

Since 1993, school property taxes in the state have increased by 146 percent. The Pennsylvania average weekly wage increased by 80 percent during that same period.

“It’s going to get to the point where homeowners cannot pay the property taxes,” Baldinger said.

Maura Pennington (mpennington@watchdog.org) reports for Watchdog.org, where this article first appeared. Reprinted with permission.