Pennsylvania Act 1 (2006)
From Sunshine Review
Act 1, Taxpayer Relief Act of 2006 allocates a portion of revenues from casino gambling in Pennsylvania to offset reliance on local property taxes to pay for public school education.[1] Act 1 was designed to be revenue-neutral. This means that any gaming revenue received by a local school district can only be used to offset existing property tax revenues, not as an addition to a district's budget.
From a Pennsylvania school district perspective, the most important feature of Act 1 is that it established a ceiling on board-approved property tax increases. Any proposed increase in property taxes above percentage based on a state-mandated formula must be approved by a district's voters in a backend referendum. A back-end referendum is one in which the outcome of the vote applies retroactively to the issue being voted upon.
Prior to passage of Act 1 school boards typically approved preliminary budgets in May and final budgets by June 30. Under Act 1, however, Pennsylvania school districts must either approve their preliminary budgets in December or early January or else adopt a resolution stating that the following year's budget will not require a tax rate increase greater than the allowable index limit determined by the state.
[edit] Act 1 Tax Index Formula
The Act 1 ceiling is based on the average of the state average weekly wage and the federal cost index for elementary and secondary schools, adjusted for a district's local tax base as measured by an indicator called the market value/personal income aid ratio (MV/PI AR).[1]
The Pennsylvania Department of Education (PDE) summarizes the index calculation as follows:
- The base index is calculated by averaging the percent increases in the Pennsylvania statewide average weekly wage and the Federal employment cost index for elementary/secondary schools.
- Additionally, for school districts with a market value/personal income aid ratio (MV/PI AR) greater than 0.4000, the value of their index is adjusted upward by multiplying the base index by the sum of 0.75 and their MV/PI AR. For example, if the base index is 4.1% and the school district's MV/PI AR is 0.6000, the school district's adjusted index is 4.1% x (0.75 + 0.6000) = 5.5%.</nowiki>
For the years 2009-2010 the adjusted index for Pennsylvania districts ranges from 4.1% to 6.7%.link title
[edit] Act 1 impact
The impact of Act 1 on contract negotiations between school districts and unions remains controversial. If school boards agree to contracts whose costs require tax increases above Act 1 ceilings, and if voters refuse to authorize those increases, districts may find themselves saddled with legally binding salary and benefits obligations that they cannot pay for without cutting programs or leaving staff vacancies unfilled. However, initial predictions that Act 1 would lead to shorter contract periods (due to difficulties in predicting future costs and revenues) and to lower pay increases for teachers had not materialized by the end of 2008.
