Chapter 1.4


1.4 - What are the mechanics in developing a school district budget?

The development of a school district budget is a local process, however, the mechanics of budget adoption is provided for within the PA Public School Code. Section 687 of the PA Public School Code and Sections 311 and 312 of Special Session Act 1 of 2006 establish a series of deadlines within the budget adoption process.

Once a board of school directors has determined a budget is ready for adoption, a preliminary budget is made available for “inspection,” meaning the budget is available to the public. The deadline for a preliminary budget is 90 days prior to the next election date in the fiscal year in which the budget is being adopted. This date is the primary election date, usually the third Tuesday in May (except for the quadrennial presidential primary which is the last Tuesday in April). Therefore, in three out of four years, a preliminary budget is due in early February, but in a presidential primary year, the deadline occurs in January, which is before the state budget is announced by the governor, making a state revenue projection for the following fiscal year more difficult for school districts.

One of the underlying goals of Act 1 was to place limits on the annual increases in school property taxes. To accomplish this, Act 1 established the annual base and adjusted indices (Act 1 index) for school district property tax rate increases. School districts needing to raise local revenue above the increase permitted by their adjusted Act 1 index must either: 1) apply for and receive from the Department of Education an approved exception due to mandated costs, or 2) place the rate increase above the index on the ballot for voter referendum.

Under Act 1, school districts have the option to waive the development of a preliminary budget in lieu of adopting a resolution certifying that tax rates will not exceed the school district's adjusted Act 1 Index in the next fiscal year. Each year, a majority of school districts have adopted a resolution not to exceed the Act 1 Index. As a result, they are not required to submit a preliminary budget. The interactive graphic below provides a breakdown of school districts with taxes within the Act 1 Index and those that decided to adopt a preliminary budget, which preserves the right of the district to seek exceptions to exceed their Act 1 Index. For the current fiscal year (2019-20 v), 386 school districts budgets tax rates remained within their Act 1 Index. This is the greatest number of school districts to adopt a resolution to stay within the Index in the history of Act 1.

This means that while property taxes increased in 2019-20 to cover annual growth in mandated costs for special education, charter school tuition, and pensions, fewer school districts exceeded their Act 1 Index through the use of Act 1 exceptions. Despite this significant annual growth in the major areas of mandated costs, the average % change in property tax rates in school districts' 2019-20 budgets was 0.0174 (or 0.0082 of their prior-year total budget), well below the average adjusted Act 1 Index for 2019-20 of 0.0298 (or 0.0033) of prior-year total budget).

Our interactive map below illustrates, for each school district, their adjusted Act 1 index for 2021-22 and the index in relation to their prior-year 2019-20 total budget ("board authority").

A school district that submits a preliminary budget can apply to PDE for an Act 1 exception for two of the largest areas of mandated cost growth - special education and pension. A school district submitting an exception request must follow a specific timeline early in the calendar year. Once a school district knows if PDE has approved a request for Act 1 exceptions, it can move forward and begin to build a budget using some, all or none of the approved exception. If the request is approved by PDE, the school district has several months to work on its final budget, which must be adopted by June 30. The table below illustrates this timeline.

Our interactive Infogram below illustrates the total number of districts and the total amount of PDE approved Act 1 referendum exceptions for mandated costs over time.

Since 2013-14, less than 40% of school districts have applied for Act 1 exceptions, and in 2019-20, less than 20% of school districts applied for Act 1 exceptions. While many school districts apply for Act 1 exceptions, less than 50% of those school districts that are approved for exceptions end up including those tax rate increases in their final budgets. In most cases, school districts apply for exceptions to ensure they have the flexibility to raise additional revenue when anticipating increases in their mandated costs, however, some school districts are able to shift programmatic resources from within the district to alleviate some of the growth in these mandated costs.

Our interactive map below illustrates which schools districts received an Act 1 exception for mandated costs in for their 2019-20 budgets and the magnitude of these exceptions relative to property taxes levied in the prior fiscal year (2018-19).