At the end of the June legislative session, the General Assembly adopted Acts 24 and 25 implementing multiple law changes.  Act 25 amended the Act 1 exception rules and the separate rules on mandatory real estate tax installment payment options.  Act 24 was an omnibus school code amendment addressing many different issues.  The most significant changes for school districts are the Act 25 repeal and amendment of Act 1 exceptions, and the Act 24 implementation of new background check rules.  Following are highlights of several important changes.

Act 1 Exception Changes/Installment Payments.

Act 1 limits annual school district real estate tax increases to the published annual index percentages, subject to certain stated exceptions.  On June 30, 2011, Act 25 was adopted and signed into law.  Act 25 eliminates all referendum exceptions other than the following four:  

  • Grandfathered debt.  
  • Debt approved by voter referendum.  
  • Special education costs, net of state reimbursement, in excess of the index.
  • PSERS cost in excess of the index – with certain new limitations as explained below.  

This means that the following seven previously available Act 1 exceptions are eliminated:

  • Emergency or disaster expense.
  • Court or administrative agency order expense (such as tax assessment reduction).
  • Serious harm or injury threat expense.
  • Construction debt exceptions (for up to 60% of state-wide average school construction cost).
  • No Child Left Behind expense.
  • Maintaining per-student local tax revenue.
  • Maintaining certain tax and subsidy revenue.

Combined with state subsidy reductions, these changes will have significant impacts over future years, including:

  • Continued intense focus on austerity – including staff reductions by attrition or furloughs, and program reductions.
  • Difficult collective bargaining with unions, including compensation freezes, small compensation increases, and greater employee contributions to fringe benefit costs.
  • Fewer construction projects – and new focus on referenda to obtain voter approval for projects.
  • Gradual reduction of school district reserve funds – making districts even more vulnerable to economic slowdowns, unfunded mandates, and national and state political decisions.
  • Increased school district revenue-focused entrepreneurial efforts, such as sale of naming rights and future similar programs.
  • Cost sharing with other districts – through jointly-sponsored programs and joint purchasing programs for goods and services.

As part of school district long term planning and austerity focus, we urge all school districts to refer to the PASBO 500 Cost Reduction Strategies for Local Education Agencies.

PSERS cost exception.  In calculating the  PSERS cost increase exception, the new law freezes the wage base at 2011-12 levels, such that the exception cannot be used to cover increased PSERS costs applicable to any wage base increase – even if the district hires new employees or total salary costs for other reasons exceed the 2011-12 wage base, adjusted for the Act 1 index.  Subject to this rule, the exception amount is the amount by which the increase in PSERS cost between the current year and estimated costs for the next year exceeds the index – and the exception amount is to be determined by PDE. 

Following its normal process, PDE expects to issue in late September the PDE annual publication titled “Referendum Exceptions Submitted to PDE Guidelines.”  As usual, these Guidelines will include examples showing calculations for the various exceptions.  At the same time, PDE will make available on its website an Excel template school districts can use to make preliminary calculations of exception amounts.  The actual forms for submitting exceptions online are made available in February. 

KKAG understands PDE will use substantially the following methodology in calculating the PSERS exception:

  • The PSERS exception amount will be based on comparison of projected budget amounts for wages and PSERS cost – as reflected in the preliminary budget.
  • If the next year preliminary budget estimated PSERS wage base exceeds the PSERS wage base for 2011-12, the exception calculation will be based on PSERS cost applicable to the 2011-12 PSERS wage base.  (For 2012-13, this will be based on the latest available numbers for 2011-12; for future years, this will be based on AFR numbers.)
  • If the next year preliminary budget estimated PSERS wage base is below 2011-12, the exception calculation will be based on the PSERS cost applicable to the preliminary budget estimated PSERS wage base.

Of course, use of the 2011-12 wage base magnifies the impact of any wage base increase, whether or not in excess of the Act 1 index.  The district will have a budget shortfall for any wage and benefit cost increase above the index, and also for the entirety of the PSERS cost applicable to the wage base increase over 2011-12.  This reflects legislative intent to put pressure on, and keep well below the index, any wage and benefit increases.  

Real estate tax installment payment plan.  Act 25 broadened the mandatory real estate tax installment payment options.  Under prior law, allowing installment payments was mandated only for homeowners.  The new law mandates that installment payments also be permitted for “the owner of” any business that has no more than 50 employees.  Accordingly, if a school district’s current real estate tax installment payment plan does not allow installment payment of real estate tax for business properties, the district will need to adopt a revised plan that, at minimum, allows installment payment for owners of any business that has no more than 50 employees.  Although this concept seems simple, the ambiguous Act 25 language raises many challenging questions as to who will qualify and the procedures to determine qualification.  Of course, any change in the plan will also require revision of tax bill forms, related instructions, and software – and communication with the district real estate tax collector if tax is not collected directly by the district.

New Background Check Rules.  

Prior law banned individuals from school district employment for 5 years if convicted of certain specified crimes, such as homicide, kidnapping, rape, and various crimes related to children.  Act 24 adds certain additional crimes to the list, and prohibits employment for 10 years after expiration of sentence of individuals convicted of any felony.  Also, individuals convicted of a misdemeanor of the first degree are ineligible for employment for 5 years after expiration  of the sentence, with the exception that the period is 3 years for individuals convicted more than once for DUI.

Act 24 directs PDE to develop a form for school district employee use to report any arrest or conviction for the specified offenses.  By January 1, 2012, all current employees are required to complete the form.  As to any future arrest or conviction, employees must use the PDE form to notify the school district.

All school districts should amend current background check policies to conform to the new Act 24 requirements. 

No PDE Approval Required for Unreimbursed School Construction Projects.

Act 24 eliminates the requirement for PDE approval of school construction projects for which the district will not receive state reimbursement. 

Continuing Professional Education Moratorium.

Act 24 suspends for two years, until June 30, 2013, the Act 45 and Act 48 mandates for teacher and administrator professional development courses.  However, Act 24 imposes a new requirement that candidates for superintendent, assistant superintendent, and AVTS director complete a school leadership program. 

Other Changes. 

Act 24 makes numerous other changes, including new and more flexible eligibility requirements for superintendent candidates; new types of teaching certificates; and clarified rules on admission of beginning students.  KKAG will be happy to provide additional information upon request.

We hope you find this issue of KKAG’s Education Law Watch helpful and informative.  Please understand that the Law Watch is designed to provide information about current developments and required actions.  It does not constitute legal advice, and school districts should consult a lawyer knowledgeable in this area of the law prior to taking specific actions on the issues addressed. 

If you have any questions regarding any education law matter, including the issues discussed in this newsletter, please do not hesitate to contact us at 717/392-1100, or email us at the following addresses:


Education Law Group

(717) 392-1100


Clarence C. Kegel, Jr.                  

Howard L. Kelin                          

Jeffrey D. Litts                              

Rhonda F. Lord                             

Amy G. Macinanti                

Denise E. Elliott                         

Jason T. Confair