State College’s proposed 2026 budget includes significant tax increase
The State College borough’s proposed 2026 budget includes an eight mill tax increase to achieve a structurally balanced budget.
The council received its first overview of the proposed budget during a work session Friday afternoon. The proposed total budget includes $73,436,740 in expenditures — $4.4 million less than the 2025 budget — and $64,203,385 in recurring revenues. About $9.2 million is allocated from fund balances.
If the budget is passed, it would be the borough’s first structurally balanced budget in several years, borough manager Tom Fountaine said, which aligns with the borough’s policy. In his budget transmittal letter, he outlined the proposed increases. Of the eight mills, 6.25 mills is for the general fund, 1 mill is for capital projects, and 0.75 mills for regional programs.
According to the borough, that means a typical $300,000 (market value) home would see an increase in 2026 of about $410.26 ($34.19/month); a $400,000 home would see a $547.01 increase ($45.58/month), and a $500,000 home would see a $683.76 increase ($56.98/month).
Those with homestead exclusions would see a reduced increase. A $300,000 (market value) home would see an increase in 2026 of $210.26 ($17.52/month); a $400,000 home a $347.01 increase ($28.92/month) and a $500,000 home a $483.76 increase ($40.31/month).
The increase would bring the borough’s total millage to 30.88 mills. With the increases, the borough would receive an additional $3.79 million for the general fund, $607,021 for the capital fund and $455,266 for regional programs. The budget projects the borough will receive a 3% increase in earned income tax revenue, a decrease in realty transfer tax revenue and flat local services tax revenue.
The borough has used one-time revenue to get a balanced budget for the last few years, which is why they need to have the tax increase in 2026.
“Over the past four years, the Borough has adopted a structurally unbalanced budget, first as part of the COVID recovery, and later due to large, unrestricted fund balances. The unrestricted fund balance was due to the onetime American Rescue Plan Act of 2021 (ARPA) grant funds received by the Borough during 2021-2022,” Fountaine wrote in his letter to council.
The general fund budget includes $40,898,647 in expenditures and $42,007,035 in recurring revenues. Of that, $440,924 is funded from reserves.
Achieving a structurally balanced budget in the borough has been a constant challenge, Fountaine said.
“In State College, it’s a real challenge year in and year out. About 45% of our property is tax-exempt. We receive zero taxes from that. And it continues to be a challenge when we’re trying to balance a budget, in a budget with the level of service that is provided by the borough State College,” Fountaine said during the meeting.
Fountaine outlined several goals and priorities for the budget, including infrastructure projects like the Calder Way improvements and the Parkway multimodal path construction. Many capital projects have been delayed until at least 2027, he said, due to limited funding.
Other highlights include completing the Comprehensive Zoning Revision, ongoing support for affordable housing, preparing to implement the Next Generation Mobility Plan and replacing the Pugh Street Parking Garage, Fountaine wrote.
Employee wage increases and a 9.1% increase in group health insurance have been “major cost drivers” for the proposed 2026 budget, he said.
“This budget is really a very status quo budget. There are no new positions added. There are some major projects, capital wise, that are included in this budget, but is very much a status quo budget from where we have been in previous years,” Fountaine said. “And these increases are a reflection of that inflationary factor, as well as our existing staffing, with, again, no new positions added to this budget.”
State College has implemented a tax increase annually since 2023. The 2025 budget included a three mill increase, the largest increase in the Centre Region.
The council will continue to review the budget and have more discussions about its contents throughout November and December.
Schedule for budget adoption
The council is anticipated to review and adopt the budget on the following timeline:
- Nov. 14: Review the budget for public works and enterprise funds
- Nov. 17: Review the budget for police and planning
- Nov. 25: Review the budget for administration
- Dec. 1: Public hearing and capital fund review
- Dec. 5: Wrap up
- Dec. 8: Wrap up
- Dec. 15: Adoption
