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PDE’s Role and Responsibilities Under Act
72 of 2004__________________________________
I. Opting In to Property Tax Relief Program
II.Index Calculation
III. Preliminary Budget Adoption
IV. Backend Referendum Exceptions
V. Final Budget Adoption
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I. Opting In to Act 72 of 2004
How to opt in to Act 72
• Resolution by May 30, 2005, must do one of the following:
1. Levy and assess additional 0.1% EIT
2. Ballot question in November 2005
3. Ballot question in November 2007(non-EIT districts only)
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I. Opting In to Act 72 of 2004
• SD must notify PDE of action taken within 5 days of passage
• Form available at PDE website:– www.pde.state.pa.us/proptax
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I. Opting In to Act 72 of 2004
(top half of form)
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II. Index Calculation
• Used to determine maximum budgetary tax increases for each tax levied by SD (without PDE/Court/voter approval)
• How will PDE calculate
– Average of statewide average weekly wage and employment cost index
– For SD with MVPI AR greater than .4000, value is base index multiplied by sum of .75 and MVPI AR
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II. Index Calculation
• What the base index has been:– 2005-06: 3.1% 2004-05: 3.6%– 2003-04: 2.9% 2002-03: 3.5%– 2001-02: 3.5% 2000-01: 3.8%
• Example of SD with .6000 MVPI AR for 2005-06– Base index: 3.1%– 3.1% * (.75 + .6000) = 3.1% * 1.3500 =
4.2%
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II. Index Calculation
Districts in Multiple Counties
• Application of index (proposal not finalized)
– Rebalance last year’s real estate tax rates based on current year market value
– Apply index to rebalanced tax rates to determine allowable tax rates
– PDE will develop a worksheet for SDs to use
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II. Index Calculation
• When and where will it be published
– Annually by September 1
– Pennsylvania Bulletin (base index only)
– PDE website (calculated for all SDs)
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III. 2006-2007 General Fund Budget
(Preliminary)• SD will use standard PDE-2028 package
downloaded from website– www.pde.state.pa.us/PDE-2028
– Available early December 2005
– New page/form in package used to summarize required information for purposes of PDE approval of tax increases
– Submission procedures same as final budget
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III. 2006-2007 General Fund Budget(Preliminary)
2006 Timeline
• January 26: Deadline to have available for public inspection
• February 5: Deadline for public notice of intent to adopt
• February 15: Deadline to adopt (90 days prior to Primary election)
• February 20: Deadline to submit preliminarybudget and proposed tax increases to PDE
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III. 2006-2007 General Fund Budget(Preliminary)
PDE Review• PDE will compare % tax increases to index• PDE will inform SD within 10 days whether
the rate increases are <= index• If any of the proposed tax increases
exceed index, PDE will notify SD that:
– Tax increase must be reduced to index OR
– Tax increase must be approved by voters OR
– Exception must be sought
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IV. Backend Referendum Exceptions
• For tax rate increases above index without voter approval
• Must satisfy both of the following:
– Revenue raised by allowable increase is insufficient to balance budget
– Revenue generated by tax rate increase more than index must be used ONLY for items on exception list
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IV. Backend Referendum Exceptions
• Approval sought from Court of Common Pleas or PDE
• March 2, 2006: Deadline for submission of exception (no later than 75 days prior to Primary election)
• March 22, 2006: Decision on exception request made (no later than 55 days prior to Primary election)
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IV. Backend Referendum Exceptions
• Approval by Court of Common Pleas in judicial district in which administrative office of SD is located:
– (i) costs incurred responding to or recovering from an emergency or disaster as declared by the Governor
– (ii) costs to implement a court order or an administrative order from Fed/State agency – as long as tax increase is rescinded upon fulfillment of order
– (iv) costs to respond to conditions which pose an immediate threat to students, staff or residents of SD – only until conditions resolved
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IV. Backend Referendum Exceptions
• Approval by PDE:
• Four exceptions require use of AFR data
– (v) increase in costs incurred in providing special education programs and services greater than 10% (PDE will define programs & services)
– (vi) costs incurred for implementation of a School Improvement plan that were not offset by a State allocation
– (vii) costs to maintain per-student local tax revenue (if 3-yr ADM increase >7.5%) or AIE per ADM (if < index)
– (viii) maintenance of revenues from local/state sources where the % increase is less than the index
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IV. Backend Referendum Exceptions
• School year data to be used is latest year for which ALL districts submitted AFR
– Timely submission by SDs is CRITICAL
– Local audit completion is key; contracts with CPA firms should require a completion date prior to October 31 submission deadline
• PDE deadline to notify school districts of AFR year for exceptions (December 27, 2005)
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IV. Backend Referendum Exceptions
• Remaining three PDE exceptions– (iii) costs to pay interest/principal on the
following: debt incurred prior to Act 72 effective date; electoral debt; up to 60% of construction cost average if various conditions met
– (ix) costs incurred for providing health care-related benefits attributable to a collective bargaining agreement in effect on Act 72 effective date
– (n) if PSERS payments between current year and upcoming year is greater than 7.5%
• PDE shall approve exception(s) if SD qualifies and sum of dollar amounts of qualified exceptions is sufficient to balance budget
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IV. Backend Referendum Exceptions
• If approved, Court/PDE will determine:
– Expenditure amount for exception granted
– Tax rate increase required to fund exception
– Appropriate duration of tax rate increase
• If exception is denied, SD may submit referendum for voter approval
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• June 10: Deadline to have available for public inspection
• June 20: Deadline for public notice of intent to adopt
• June 30: Deadline to adopt
• July 15: Deadline for PDE to receive
V. 2006-2007 General Fund Budget(Final)
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Non-Act 72 Reminder
Starting with the 2005-06 General Fund Budget, Act 48 of 2003 requires SDs to have an Ending Unreserved Undesignated Fund Balance within the allowed range:
