Three area school districts got the green light to exceed a state limit on property tax increases in their 2013-14 budgets.
If all three districts — Lake-Lehman, Wyoming Area and Tunkhannock Area — raise taxes to the new maximum, property owners would end up paying a total of $573,972 more than if the districts had stuck to the original limits.
It’s important to note that receiving state approval does not determine whether a district will raise taxes, or by how much. It only means the state has approved a district request to exceed this year’s limit by a specific maximum.
The state-imposed annual restrictions on school property tax increases through the law known as Act 1 of 2006, which promised to use money from legalized gambling to reduce property taxes for eligible homeowners. The law set annual limits on how high each district can increase property taxes, calculated through a complex formula that results in what is called the Act 1 Index.
If a district wants to exceed the index, it must either get voter approval in a primary election referendum or appeal to the state for an exception granted for a short list of accepted reasons.
All three argued they need to exceed their Act 1 index to pay for rising pension fund contributions.
Pension contribution rates are set by a state agency and are not within district control. The rate paid by districts is calculated as a percent of teacher pay, and it rises from 12.36 percent this year to 16.93 percent in 2013-14, though the state picks up about half the total contribution.
When the state released this year’s Act 1 Index limits for all districts, Lake-Lehman was capped at a 2.1 percent increase, Tunkhannock at 2.2 percent, and Wyoming Area at 2.3 percent.
According to the state’s annual Report on Referendum Exceptions, Lake-Lehman asked for and received permission to increase taxes in Luzerne County an additional 1.8 percent and in Wyoming County an additional 1.2 percent in order to raise a total of $213,683. Tunkhannock Area asked for and received permission for an additional 0.7 percent increase raising $132,777.
Wyoming Area is the only local district that asked for more than it got. The district requested a chance to raise an additional $263,631 but the state granted an increase of only 1.8 percent, which should generate $227,512 above the original limit.
Statewide, 311 districts passed resolutions to not exceed their Act 1 limits. Another 171 sought exceptions allowing them to exceed the limits, with 89 getting permission for the complete tax increases they sought and 82 getting permission for only part of the tax increases sought.
The report notes that, statewide, districts tend not to raise taxes to the maximum allowed by exceptions. For example, in 2012-13, the state granted exceptions to 197 districts allowing a total increase above the original limits of $159.9 million. Yet in the end, only 105 districts used their exceptions, raising only about $48.2 million more, or 30 percent of what they could have raised through the exceptions.
School districts have until June 30 to decide on tax rates and to pass a final budget.