What is Act 1?
Act 1 is a property tax relief bill passed by the Pennsylvania legislature in 2006 and amended in 2011. It greatly expanded rebates and exemptions for senior citizens and provided rebates for other homeowners. It also set a cap on the amount that a school district can raise property taxes without first getting voter approval.
The cap is calculated with an eye toward allowing school districts to cover normal inflationary cost increases. If a school district wishes to raise taxes above that cap, the increase must be voted on in a district-wide referendum. Districts may avoid the referendum if they qualify for one of four exceptions related to increased costs for special education, school construction, employee retirement funds, and certain school debt scenarios.
What are the concerns about property taxes in Pennsylvania?
On a per-person basis, Pennsylvanians pay slightly less in property taxes than the national average. However, school property taxes vary widely among districts, from 0.07 percent of personal income all the way up to 8.2 percent. A study by the Pennsylvania Budget and Policy Center found that 30 of the state’s 500 school districts have property tax rates higher than 4 percent of average personal income.
How did Act 1 impact property taxes?
Act 1 doubled the number of seniors eligible for property tax rebates and increased the number of senior and disabled households that do not pay any property tax.
Other homeowners saw an average rebate for school property taxes of $187, which varied from $52 to $641 among districts. The rebates were funded by tax revenue from casinos, which totaled around $650 million in 2013.
In Philadelphia, Act 1 directed that casino revenues be used to reduce the wage tax, for both residents and commuters, rather than the property tax.
How did Act 1 impact school funding?
Act 1 capped the amount that school districts can raise from additional local property taxes and was amended in 2011 to make the cap stricter.
Pennsylvania school districts rely more heavily on local sources for funding than other states. In 2012-13, local sources provided 58 percent of Pennsylvania’s school district funding (compared to 46 percent nationally), and 88 percent of this local revenue came from property taxes.
In the first six years after former Gov. Ed Rendell signed Act 1 into law, school property tax revenue rose far more slowly than in the previous five years (a $1.2 billion increase compared to $2.3 billion). However, some of the decrease is most likely due to the recession rather than Act 1.