School property taxes, explained

After receiving many questions and concerns relating to school district property taxes, I wanted to take the opportunity to offer some helpful information to explain how school district real estate taxes are determined, provide information on state programs to ease the burden of school district real estate taxes for eligible residents, and highlight legislative proposals.

First and foremost, property taxes fall under the jurisdiction of your local governments, specifically your county, municipality and school district. Property taxes continue to be a primary source of funding for these governments, as this tax is the only tax authorized by law to be levied by all three, where every property owner pays tax to each, unless otherwise exempted. It is important to note that a tax on property is not levied by the Commonwealth, nor is it mandated on local taxing districts; rather, the decision is made separately, and independently, by local elected officials, with the General Assembly establishing certain parameters.

How school taxes are determined

School taxes are one form of property taxes. Schools are currently funded by the federal government, state government and local school district residents and businesses. Local school boards use federal and state funds and then determine their financial needs based on their mandates, local educational priorities, salaries, extra-curricular activities, safety and their school budget. It’s at this point districts work within their current budget or determine needs to increase or decrease the local school tax level.

State funding in our districts continues to be a priority to assist with their budgets. I was a strong advocate and worked to establish a new fair-funding formula, which greatly improved funding to our local districts in 2016. Collectively, school districts in the 189th Legislative District received a total of $185,996,326 in state revenue in 2014-15, the time at which the funding formula was implemented. By 2018-19, that number had risen to $225,624,491, an increase of $39,628,165 or 21.3%. There is still more work to be done; however, please know I do not vote to raise or lower your school tax bill – your school board members make this critical decision. I also continue to review policies that help our schools’ function more efficiently and with reduced costs which help control their overall budget. Communication with your school board members is extremely important, especially now in dealing with education curriculum, priorities, tax bills, etc.

Limitations on increases

While the decision to levy property taxes, and at what rate, resides with local officials and school board members, the General Assembly has enacted measures to ensure any increase is within a reasonable amount. The Act 1 Index is the tool used by the Department of Education (“department”) to determine the amount a school district may increase any tax levied, without an exception granted by the department or by voter approval. This base index is calculated using the statewide average weekly wage and the federal employment cost index for elementary/secondary schools, with an additional adjustment made for certain school districts. For the current 2020-21 year, the base index, as calculated by the department, is 2.6%.

Tax reduction programs

Funded from revenues generated by Pennsylvania casinos, the homestead and farmstead property tax exclusion program reduces the assessed value of your homestead or farmstead (primary residents only) by an equal amount before the property tax is computed. You only need to apply for the Homestead Reduction once – and once applied, this will automatically show on your bille.

One of the biggest concerns surrounding property taxes is the unaffordability of those taxes in certain areas, especially if the homeowner or renter is on a limited income. Taking this into consideration, the state established the Property Tax/Rent Rebate Program, which is funded through the Pennsylvania Lottery.

The program benefits eligible Pennsylvanians who are 65 years or older, widows and widowers 50 years or older, and those 18 years or older with disabilities. The income limit is $35,000 a year for homeowners and $15,000 annually for renters, and half of Social Security income is excluded. The maximum standard rebate is $650, but supplemental rebates for qualifying homeowners can boost rebates to $975.

Based on the eligibility requirements above, if you qualify for this program you have until Dec. 31, 2020, to apply for this rebate. Applicants should be prepared to provide all the necessary income, property tax or rental information required to process claims quickly and accurately. If you are eligible for this program your school district may also offer an additional rebate. If you would like assistance in applying for these programs, my office can help you with your applications at no cost.

County calculations

In general, property tax notices are calculated by multiplying the assessed valuation of your property by the tax rate, otherwise referred to as millage rate, determined by the school district, with an applicable homestead or farmstead exclusion subtracted.

Below, I have provided you with the updated millage rate and formulas to use for the Delaware Valley School District:

Assessed Value x .11385 (Millage) - $377.75 (Homestead) = Taxes Owed

The assessed value is also not calculated by the state but by the county government where you live. School districts create the millage rates while the counties create the property assessed value rate. Any questions or concerns with the above millage rates (or previous millage rates) should be directed to your local school board members. Assessment rate questions should be directed to the Pike County Assessment offices.

Reform initiatives

I would also like to highlight legislation that aims for permanent school tax relief. House Bill 76 The most well-known bill, championed by many legislators, including myself, calling for the total elimination of property taxes is House Bill 76.Through this legislation, school district property taxes would be eventually eliminated, and we would shift to an increased Personal Income Tax (PIT) and an increased and expanded Sales and Use Tax (SUT). The rates of tax would be increased to 4.95% and 7%, respectively, with the new revenues generated replacing dollar-for-dollar the revenues lost by the school property tax elimination.

This bill is one that I proudly support, have signed onto as a co-sponsor and have voted for in the past. Unfortunately, it has failed in receiving adequate votes in the Legislature.

In addition to signing onto this legislation, I have sponsored two pieces of legislation in a bipartisan manner with my colleagues. House Bill 1200 First introduced last legislative session by Reps. Marcia Hahn(R), Pam Snyder (D) and me, our legislation would establish a property tax reform program to enable school districts to exclude up to 100% of a homeowner’s school property tax bill. While there have been many tax shifts and replacement proposals to reduce or eliminate property taxes, we believe implementing a small increase to the Personal Income Tax (PIT) is an approach to relieving the current school property tax burden on homeowners. The PIT represents one of the most stable taxes levied in the Commonwealth and could provide assurance to school districts concerned with the fluctuations that many other funding streams experience as economic conditions change. Implementation of this legislation could provide complete property tax relief to seniors and hard-working homeowners throughout the Commonwealth.

To help school property taxpayers who were impacted by COVID-19, Reps. Todd Stephens (R), Steve Malagari (D) and I introduced House Bill 2460.This bill would extend the discount period during which school property taxpayers may pay their property taxes at the discounted rate by one month and extend the face value period before any penalty would be imposed until Dec. 31. I was pleased this bill was unanimously reported out of the House Finance Committee but unfortunately it did not receive full House consideration.

As I mentioned earlier, communicating and establishing relationships with your local school board members is critical. School board members are elected; however, they are volunteers who have stepped up to make extremely important decisions. I continue to build awareness to their valuable positions and build relationships, which is why I introduced House Bill 703, which would mandate all school board members have individual emails publicly listed on the school district’s website. This legislation was passed by the House and is now before the Senate for consideration.

I hope this recap was helpful to you and offered some answers to your property tax questions, especially those related to school property taxes. I continue to work and be your voice in changing how we generate dollars to fund our schools rather than from the value of your home. Please be a voice and build relationships with your local school board members so they know your struggles, concerns, priorities and needs.

If you have any further questions on this or any other state matters, please do not hesitate to contact my district office at 570-420-8301.