Act 1 is legislation passed in June 2006 to help Pennsylvania school districts reduce property taxes by shifting the tax burden and utilizing gaming revenue. Also known as the Pennsylvania Taxpayer Relief Act, it is designed to give voters a say in the school district’s budgeting process. Act 1 replaced an earlier law called Act 72, which was optional for school districts. However, Act 1 is not optional. All districts are required to abide by its regulations, even if they choose not to accept revenue from state-controlled gambling provided through the act.
Along with tax relief, Act 1 was also designed to limit school district spending by requiring districts to keep budgetary increases at or below an annual index set by the state. If a district needs to raise taxes above that index, it is required to ask voters to approve the increase through a separate referendum. Recognizing that in some years school districts may face expenses that are beyond their control or are unforeseen, Act 1 allows school districts to seek exceptions for budgetary increases over the index in certain circumstances. If these exceptions are approved, districts are allowed to increase their budgets over the index without going to referendum.