Funding Pennsylvania
Public Schools
TM
Introduction
A recent study by the Pennsylvania
School Boards Association determined that many citizens do not
understand how Pennsylvania’s
public schools are funded, particularly the state and federal laws
that govern the funding decisions
made by school boards. The study
found that 53% of Pennsylvania
residents strongly or somewhat
believe that public school funding
is not fair. And though 61%
of those surveyed strongly or
somewhat agree that local public
schools need more funding, a substantial portion of respondents
also indicated dissatisfaction with
school district spending.
This school financing guide is
designed to briefly and easily
explain how public schools are
funded, the need for school
property taxes and the cost of
operating school districts. The
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school districts to raise property
taxes to make up the difference.
goal is to give citizens a better
understanding of how their local
schools are paid for and on
what that money is spent.
Pennsylvania school districts
always had the authority to use
a mix of local taxes to fund
schools. By far, the primary local
revenue source is property
taxes. Property taxes accounted
for 76% of total local school district revenue in 2005-06 and
provided 45% of all revenues
collected by school districts.
How Public Schools
Are Funded
Pennsylvania public schools are
funded primarily by real estate
taxes* and state and federal
funds. For the 2005-06 academic
year, Pennsylvania’s public schools
received most of their revenue
from local property taxes (45%).
The remaining money came from
state funds (35%), other local
50%
40%
45%
35%
30%
20%
14%
10%
4%
0%
RE Tax
Other
Local
State
Federal
sources (14%), federal funds
(4%) and other miscellaneous
revenue (1%). In the early 1970s,
state support for public schools
equaled 50% of school budgets.
However, the reduction in state
subsidy to now only one-third of
school budgets has required
Recently, the state legislature
and the governor have tried to
reduce the property tax burden
on homeowners; however, the
burden actually has
increased. The legislature has repealed or
limited the authority
for school districts to
levy non-real property taxes over the last
15
years. As these
1%
various taxes were
Other
Misc.
repealed or limited, the
result was an increase
in property taxes to provide more
local school funding.
What Are
Property Taxes?
Property taxes are based on the
value of all real property within
*Words in bold are defined in the glossary.
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rolls as the result of new construction. Changes also occur
when property is removed from
the tax rolls. Additionally, property values decrease when a
building is demolished for any
reason or the use of the property is for a tax-exempt, charitable
purpose such as schools, hospitals or churches. When property
owners feel that the assessed
value of the property is too high,
they may appeal the assessed
value to the County Board of
Property Assessment and
Appeal. When a property owner
proves that the value recorded is
higher than it should be, the
County Board of Property
Assessment and Appeal has the
authority to decrease the value.
the borders of a school district.
Property value is the total of the
value of the land and the value of
any buildings on the land. The
County Board of Property Assessment and Appeals has the legal
responsibility for determining the
value of land for taxing purposes.
Taxes are based on assessed
value. In some cases, the
assessed value is equal to the
estimated market value, and in
other cases, it is a portion of the
estimated market value. In either
case, a school district must use
the official recorded assessed
value of a property. While land may
be listed as residential, commercial, industrial, agricultural or any
number of other classes, all property values are combined, and the
millage rate is applied uniformly
to the total value of land within the
school district boundaries.
The Cost of Operating
a School District
Property taxes in a school district increase for several specific
reasons:
A school district uses its revenue
to purchase a variety of goods
and services that produce the
educational programs for their
students. In some cases, a district
also provides a variety of services
for nonpublic school students.
Spending will vary between districts because each district is different. This uniqueness is defined
by community preferences and
student needs within the district.
• a change in the base value
of all property;
• a decrease in the actual collection of revenues; or
• an increased need for revenue.
A change in the base or
assessed value occurs when
properties are added to the tax
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through grade 12. Special education includes costs associated
with providing educational opportunities, other than regular classroom, for any child with special
needs. Special education costs
include both gifted and impaired
students under the Pennsylvania
School Accounting System.
Career-technical education equals
costs for both district career-technical instruction and tuition payments to area career-technical
schools. Other education costs
include the required educational
services of homebound instruction, alternative education for disruptive students, summer school
and driver education.
Two different methods can be
used to describe what a district
purchases. One way is to review
the specific areas of spending
such as salaries, benefits, books
and supplies. Another way is to
examine the function spending
of the district. By doing this, you
can look at the district’s spending in a summary and program
structure. The functions defined
by the school accounting system
are instruction, support, noninstruction, facilities, debt and all
other. Within each of the functions are a number of other categories that provide details of
the types of services each district provides, depending upon
the needs of the students.
Based on a review of 459 of
501 school districts’ annual
financial reports for the 19992000 school year, more than
90% of all district spending is for
instruction and support functions.
Support costs are for activities
and programs directly related to
helping both the teacher and the
student but are not for classroom activity. Support spending
includes guidance, attendance,
psychology services and other
support services designed to
assist students, such as speech
and audiology services, pupil
health services (school nurse)
and school libraries.
Instruction costs are expenditures
for educating all students. Within
the costs are several specific educational programs, including regular education, special education,
career-technical education, other
education, adult education and
support of community colleges.
Regular education includes all
classroom activity for kindergarten
School districts also have
expenditures for administrative
costs. That spending includes
superintendent, principals and
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related central office support;
legal costs; business office and
tax collection activities. Buildings
costs, such as utilities and
cleaning services, as well as
transportation costs, are part of
administrative costs.
showing evidence that enrollment has declined significantly.
Sometimes, school districts
reach a point where having
fewer students means they
have to change the education
program. While local school
boards may increase the number
of teachers at will, reducing the
number of teachers is subject to
possible lawsuits. And, the Pennsylvania School Code prohibits
reducing the number of teachers
for purely financial reasons.
The remaining school district
spending would be for maintaining buildings, paying debt, buying
and fixing buildings and purchasing and repairing equipment.
Salaries typically represent the
largest single item of expenditure
in a school district. Teacher
salaries are subject to collective
bargaining at the school district
level. Created by state legislation
and court cases, salary schedules
for professional staff are based
on educational level and number
of years of service of the individual. Also included in collective
bargaining requirements are
employee benefits.
Other instruction spending by
school districts includes costs
for substitutes, materials and
supplies, as well as textbooks
for classroom use.
As mentioned earlier, a second
way to look at school district
spending is to review the specific
areas of spending such as salaries
and benefits, books and supplies.
Spending by school districts can
be examined by area (such as
salaries) or by function (such as
instruction or special education).
Looking at only one source for
spending can be misleading about
the specific purpose or the anticipated benefit of such spending.
In many cases, when a district
experiences an increase in
student enrollment, it means
the school district must hire
more teachers or add classroom
aides. However, when enrollment drops, the number of
teachers employed by the
district can be reduced only
through arbitration and by
A school district’s main purpose
is to provide public education.
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want additional information, you
can start with the Pennsylvania
School Boards Association Web
site at psba.org/pride-and-promise, where you will find many outstanding resources to help you.
This means that the district
must provide for classes such
as math, reading, physical education and social studies. All of
the specific course requirements are established by the
State Board of Education,
although a school district can
make additional locally determined requirements.
If you have a specific question
regarding school funding, you
can e-mail us at prideandpromise
@psba.org.
Other sources of required
spending come from federal
and state laws. These are
called mandates. Unfunded
mandates are costs that must
be paid by school districts
because the federal and state
laws do not include funding or
provide inadequate funding to
cover additional expenses, such
as special education programs
and cyber-charter schools. Also
outside of the control of the
district is the expense of lawsuits against not only the district itself, but against other districts that may result in requirements and spending for all
school districts.
Glossary
Assessed value: The official
valuation of property for the purpose of taxation. The value is
determined by the County Board
of Assessment Appeals and
Review as a percent of the estimated market value.
Collective bargaining: The
legal requirement for a school
district to negotiate a labor contract with the union(s) representing the district employees,
such as teachers, support personnel and others.
Estimated market value: The
value of taxable real property within
a school district as determined by
the State Tax Equalization Board.
For Further Information
There are many resources available to further explain school
funding in Pennsylvania. If you
Millage rate: The rate of tax
levied on the assessed value of
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real property. One mill equals
$1 per $1,000 of assessed
value.
Real estate taxes: Any tax
levied on real property based on
the value of the property.
Non-real property taxes: Any
tax levied, assessed or collected
that is based on something other
than the value of real estate.
Includes taxes such as earned
income tax, per capita tax and
emergency and municipal services
taxes (local services tax).
Real property: Land and buildings or other structures permanently fixed to the land.
State funds or subsidy: Money
provided to school districts by the
state as determined by the state
during the budget process.
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