School bond and tax elections in Pennsylvania

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School bond and tax elections in Pennsylvania happen under two circumstances:
  • To exceed the property tax ceiling.
  • To issue new bonds.

Laws affecting school finance

Pennsylvania Constitution

In Pennsylvania, the Pennsylvania Constitution mandates ballot questions involving taxation. Article VIII, Section 1 of the Pennsylvania Constitution requires ballot measures involving taxes on the clause of uniform taxation.

Local Government Unit Debt Act of 1996

The Pennsylvania Local Government Unit Debt Act of 1996 is the law in Pennsylvania that covers the issuance of bonds for new construction and capital improvements. There is no limit to the amount of debt voters can approve in a bond election if a school district exceeds the debt thresholds without voter approval.

Pennsylvania School Districts are met with three different debt thresholds without facing voter approval which includes debt the school district already has outstanding. The limit for school districts under the Local Government Unit Debt Act of 1996 is one hundred percent of its borrowing base at the minimum, anything over 100 percent must have voter approval. School districts can take up to another additional one hundred percent of lease rental debt in addition to one hundred percent limit if deemed necessary for a school district at any level. In the event of an emergency, school districts can borrow an additional fifty percent of its borrowing base. The total limit on the borrowing base is up to 225 percent of debt without voter approval, this includes new and outstanding debts.[1]

Under the Local Government Unit Debt Act of 1996 school districts are allowed to issue bonds for:

  • Items of construction, acquisition, extraordinary maintenance or repair which have been undertaken by a school district.
  • Preliminary studies, surveying, planning, testing or design work for any undertaking of construction, acquisition, extraordinary maintenance or repair
  • Lands or rights in land to be acquired by a school district.
  • Furnishings, machinery, apparatus or equipment normally classified as capital items, but they must have a useful life span of five years or more if financed separately and not part of a construction/acquisition project.
  • The school district's share of the cost of a project undertaken jointly with one or more other local government units or the Commonwealth or one of its agencies.
  • Countywide revision of assessment of real property owned by a school district.
  • Funding of all or any portion of a reserve fund or a contribution toward a combined reserve fund, pool or other arrangement, relating to self-insurance, which has been established by one or more local government units which is protected under the Pennsylvania Code.
  • Funding of an unfunded actuarial accrued liability or a portion of an unfunded actuarial accrued liability.
  • Funding or refunding of debt incurred for any debt for any of the first eight allowable uses under § 8022 (c) (1)-(8) of the Local Government Unit Debt Act of 1996.
  • Any combination of any or all of the first nine provisions allowable for bonding nuder § 8022 (c) (1)-(9) of the Local Government Unit Debt Act of 1996.
  • Any deficit to be funded by bonds or notes the creation of a revolving fund for specific improvements.
  • Where a school district has adopted a capital budget and has to meet unfunded liabilities and mandates in the budget which are allowed under law.[2]

Special Session Act 1 of 2006

The property tax limitation ceiling is mandated by the Pennsylvania Special Session Act 1 of 2006. There is a formula that is called the Act 1 Index which governs the ceiling. Act 1 index determines the maximum school districts in Pennsylvania can raise taxes without voter approval. The formula is calculated by averaging the percent increases in the Pennsylvania statewide average weekly wage and the Federal employment cost index for elementary/secondary schools. For 2009-2010, no school district could have a base index over 4.1% not counting the market value/personal aid ratio exception.[3] For 2010-2011, the base index is lowered to 2.9%.[4]

The federal employment cost index is calculated for a twelve month period beginning July 1 and ending June 30 for the Employment Cost Index Series for Elementary and Secondary Schools which is reported by the Bureau of Labor Statistics by the United States Department of Labor.[3]

The statewide weekly wage is determined by the Pennsylvania Department of Labor and Industry in the same manner that it determines the average weekly wage known as the Pennsylvania Unemployment Compensation Law; however, the formula calculates the preceding calendar year.[3] The Statewide Average Weekly Wage is calculated from the monthly employment and quarterly wage data reported by school districts covered under the Pennsylvania Unemployment Compensation Law. Pennsylvania school districts must report how many people are employed and unemployed.

The monthly employment numbers are summed to get an employment total and the quarterly wages are summed to get total annual wages. The employment total is divided by twelve to get the average monthly employment. The total annual wage is divided by the average monthly employment to yield the statewide annual average wage. Lastly, the statewide annual average wage is divided by fifty-two to get the statewide average weekly wage.[5]

The Special Session Act of 2006 requires a voter referendum if a school district proposes to raise its property ceiling rate or the rate for other school taxes including personal income taxes levied by the school district faster than the property tax ceiling index after accounting for approved referendum exceptions.[6] However, there are exemptions for school districts from the referendums to cover certain circumstances. Under the Special Session Act of 2006, the following reasons school districts can be granted a referendum are for:

  • If the revenue raised by the state-set index is insufficient to balance the proposed budget due to:
  • A state declared emergency authorized by the Governor of Pennsylvania.
  • To comply with a judge's order at the state or federal level. Under this clause new tax collections must stop on the full satisfaction of the order.
  • To pay interest and principal on debts incurred before September 4, 2004.
  • To pay interest on debts for not participating in programs related to thew Pennsylvania Homeowner Tax Relief Act of 2004.
  • To pay interest and principal on debts incurred via voter approval.
  • To pay interest and principal on indebtedness for up to 60% of the construction cost if:
  • An Approved school building project under the Pennsylvania Code.
  • The project was part of the Pennsylvania Homeowner Tax Relief Act of 2004 after September 3, 2004 to fund debt service reserves.
  • The increase sought under this clause is rescinded after full payment of interest and principal.
  • The indebtedness is for an academic elementary or academic secondary school building and not for athletic fields or playgrounds.
  • To pay interest and principal on indebtedness for up to $250,000 on non-academic buildings including athletic fields in which the cap is adjusted annually with the ceiling index.
  • Refinancing voter approved debt.
  • Special Education Costs
  • Compliance with The No Child Left Behind Act of 2001.
  • Healthcare benefits that rise faster than the index in contracts in effect on January 1, 2006
  • Increases in retirement payments that rise faster than the index[7].

School Districts in the cities of Philadelphia, Pittsburgh, and Scranton are exempted from the property tax ceiling index requirements.

Conduct of the bond election, limitations, rules

Authority conducting elections

The respective County Elections Board is responsible for conducting elections.[8][9]

Election dates

School districts can hold an election at any time. In Pennsylvania, all referendums involving bond elections are considered to be special elections. All elections are to be run under the same rules for November elections.[10]

Needed Majority

In Pennsylvania a simple majority is needed to pass a bond or property tax ceiling referendum.[11][12]

Special elections

Under Pennsylvania law, all school bond elections are designated as special elections. School districts are exempt from paying election expenses if the election falls on any of the normal election dates on the Pennsylvania election calendar.[13] Under the Pennsylvania Local Government Unit Debt Act of 1996 if a school district has a bond referendum get defeated, a new election for the same purpose must wait 155 days until re-starting the process to get the same question on the ballot. During that time, no school district can issue bonds or incur additional lease rental debt. The only exceptions allowed under the law if non-electoral or lease rental must be incurred if it is necessary to complete capital projects currently under construction, to finance different portions of a capital budget or any other debt incurred allowed by a judge in a court of law.[14]

Wording of measures

When a ballot measure is put on the ballot at the local level including school districts, it is up to a county elections board to determine the wording of the ballot question. All ballot measures must not exceed 75 words in length. All questions must be followed by the words ‘yes’ and ‘no’ with squares for making cross marks. In cases there is specific wording for the question, the wording must be rigidly adhered to. Any variation from the statutory form of the question will render the election invalid. When there is no specific wording provided by the county, the wording of the ballot question must be the result the legislature intended. Any referendum can be invalidated if the form of the question lacks clarity and if voters think they are confused by the intent of the measure.[15]

Under the Local Government Unit Debt Act of 1996 the only ballot question form allowed by law is:

Shall debt in the sum of (insert amount) dollars for the purpose of financing (insert brief description of project) be (authorized to be incurred as) (transferred from nonelectoral debt to) debt approved by the electors?

Under the Special Session Act of 2006, these forms of ballot questions are allowed that are conformed to PA election laws:

To Raise cap via earned income tax

Do you favor imposing an additional X% earned income tax? The revenue generated from the increased tax rate will be used to reduce taxes on qualified residential properties by (insert amount of reduction). The current earned income tax rate is Z%.

  • YES
  • NO

To Raise cap via personal income tax

Do you favor imposing a personal income tax at X%? The revenue generated from the tax will be used to reduce taxes on qualified residential properties by (insert amount of reduction).

  • YES
  • NO

Tax conversion

Do you favor converting the school district's current earned income tax to a personal income tax at X%? The revenue generated from the personal income tax will be used to reduce taxes on qualified residential properties by (insert amount of reduction) and to replace the revenue from the school district's current earned income tax. The current earned income tax rate is Z%.

Required notice of bond election

For new construction or capital improvements anywhere from 30 to 90 days.[18] For referendums involving Special Session Act of 2006, 110 days must elapse from the school district approving a resolution to the election.[19] For any referendum, one public hearing at minimum must be held (Section 4, Pennsylvania, Local Tax Enabling Act).

See also

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External links

References

  1. [http://www.pabondlawyer.org/media/downloads/lgud_act.pdf "Pennsylvania Bond Lawyer" Copy of the Local Government Unit Debt Act of 1996(Referenced Statutes § 8022 Sections (A), (B), (D), and (F))
  2. [http://www.pabondlawyer.org/media/downloads/lgud_act.pdf "Pennsylvania Bond Lawyer" Copy of the Local Government Unit Debt Act of 1996(Referenced Statutes § 8022 Sections (C) 1-12, Page 4)
  3. 3.0 3.1 3.2 "Pennsylvania Department of Education" Base Index History
  4. "Pennsylvania Bulletin" Notice of 2010-2011 base index change
  5. "Pennsylvania Work Stats" Pennsylvania Statewide Average Weekly Wage
  6. [http://www2.legis.state.pa.us/WU01/LI/BI/BT/2005/1/HB0039P0093.pdf "Pennsylvania Legislature" Special Session Act of 2006(PA Special Session Act 1 of 2006, Page 9 Section 311 d(1))
  7. [http://www2.legis.state.pa.us/WU01/LI/BI/BT/2005/1/HB0039P0093.pdf "Pennsylvania Legislature" Special Session Act of 2006(PA Special Session Act 1 of 2006, Pages 34-40 Section 333 (d))
  8. [http://www2.legis.state.pa.us/WU01/LI/BI/BT/2005/1/HB0039P0093.pdf "Pennsylvania Legislature" Special Session Act of 2006(PA Special Session Act 1 of 2006, Page 5 Section 302)
  9. [http://www.pabondlawyer.org/media/downloads/lgud_act.pdf "Pennsylvania Bond Lawyer" Copy of the Local Government Unit Debt Act of 1996(Referenced Statutes § 8043 Section (A))
  10. [www.newpa.com/get-local-gov-support/.../download.aspx?id=318 "New PA" Pennsylvania Referendum Handbook](See Page 9)
  11. [http://www2.legis.state.pa.us/WU01/LI/BI/BT/2005/1/HB0039P0093.pdf "Pennsylvania Legislature" Special Session Act of 2006(PA Special Session Act 1 of 2006, Page 24 Section 331.2 (4))
  12. [http://www.pabondlawyer.org/media/downloads/lgud_act.pdf "Pennsylvania Bond Lawyer" Copy of the Local Government Unit Debt Act of 1996(Referenced Statutes § 8043 Sections (D))
  13. [http://www.pabondlawyer.org/media/downloads/lgud_act.pdf "Pennsylvania Bond Lawyer" Copy of the Local Government Unit Debt Act of 1996(Referenced Statutes § 8041 Sections (C))
  14. [http://www.pabondlawyer.org/media/downloads/lgud_act.pdf "Pennsylvania Bond Lawyer" Copy of the Local Government Unit Debt Act of 1996(Referenced Statutes § 8045)
  15. [www.newpa.com/get-local-gov-support/.../download.aspx?id=318 "New PA" Pennsylvania Referendum Handbook](See Page 9)
  16. [http://www.pabondlawyer.org/media/downloads/lgud_act.pdf "Pennsylvania Bond Lawyer" Copy of the Local Government Unit Debt Act of 1996(Referenced Statutes § 8042 Sections (B)(5))
  17. [http://www2.legis.state.pa.us/WU01/LI/BI/BT/2005/1/HB0039P0093.pdf "Pennsylvania Legislature" Special Session Act of 2006(PA Special Session Act 1 of 2006, Page 22 Section 331.2(e) 1, 2, and 3)
  18. [http://www.pabondlawyer.org/media/downloads/lgud_act.pdf "Pennsylvania Bond Lawyer" Copy of Local Government Unit Debt Act of 1996(Page 12, Sec. 8041 (b) Local Government Unit Debt Act of 1996)
  19. [http://www2.legis.state.pa.us/WU01/LI/BI/BT/2005/1/HB0039P0093.pdf "Pennsylvania Legislature" Special Session Act of 2006(PA Special Session Act 1 of 2006, Page 9 Section 311(d))