State College reduces proposed tax hike. Some say there’s still a ‘major problem’
AI-generated summary reviewed by our newsroom.
- Council reduces 2026 property tax proposal to two mills, cuts capital work.
- Budget remains structurally unbalanced; borough relies on one-time funds and reserves.
- Council seeks new revenue tools and legislature help.
The State College borough council is looking at a new proposed 2026 budget with a two mill tax increase, or 8.7% — a major reduction compared to the previously proposed 8 mills, or 35%.
After weeks of reviewing the proposed budget and grappling with a hefty proposed tax increase, the council directed the manager and staff last week to prepare a budget with a two mill increase instead. The borough will have to use money from the fund balance as well as $2.8 million from real estate transfer tax revenue it unexpectedly received this month. The borough will also defer $1.2 million in street reconstruction projects in the capital budget.
Still, the proposed budget is structurally unbalanced, as it has been for years. The borough adopted a structurally balanced policy in 2016 that says recurring revenues will be covered by recurring expenditures, which has not been the case. The borough has been relying on one-time funds from the federal government from during the COVID-19 pandemic to balance the budget.
“As a result of these modifications to the General Fund budget, the final budget will result in revenue of $39,571,598 and expenditures of $43,654,648, and will remain structurally unbalanced in 2026,” the agenda outlines.
With the proposed two mill increase a typical $300,000 (market value) home would see an increase in 2026 of about $102.56 ($8.55/month); a $400,000 home would see a $136.75 increase ($11.40/month), and a $500,000 home would see a $170.94 increase ($14.25/month). Those with homestead exclusions would see a reduced increase. A $300,000 (market value) home would see an increase in 2026 of $52.56 ($4.38/month); a $400,000 home would see an $86.75 increase ($7.23/month) and a $500,000 home would see a $120.94 increase ($10.08/month).
The proposed 2026 budget for all funds, after interfund transfers, is $72,236,740. See the fund budgets below:
- General Fund: $43,654,648
- Centre Tax Agency: $1,260,145
- Insurance Reserves: $604,005
- Bus Terminal Fund: $112,598
- Bellaire Court Fund: $233,023
- Parking Fund: $5,849,093
- Compost Operations Fund: $926,305
- Sanitary Sewer Fund: $9,196,881
- Refuse Collection Fund: $5,658,275
- Capital Fund: $7,961,689
- Asset Replacement Fund: $1,125,275
- Fleet Services: $723,142
- Highway Aid Fund: $2,077,100
- Interfund Transfers: ($7,145,439)
Council has mixed feelings on the new budget
Some council members were still apprehensive about the budget. Although residents have expressed concern about the previously proposed eight mill tax increase, Council member John Hayes said they’re not addressing the problem by only increasing taxes by two mills.
Since 2021, the borough has been using one-time money from the American Rescue Plan Act for recurring expenses, Dwight Miller, finance director for the borough, previously said. The 2025 budget used $2.5 million of one time funds to balance it, which equals about four mills. The budget has not been structurally balanced for at least the last five years, and the proposed eight mill tax increase would achieve that.
With that in mind, Hayes said he was uncomfortable with the budget reduction.
“I understand the 35% seems extremely dramatic, but that is a percentage increase on an assessed value that is not actually considering the base rate that people are actually paying. We’re talking about a few hundred dollars a year for houses that have increased by $100,000 in the last five years since we last had a structurally balanced budget,” Hayes said.
“This borough’s residents value the services that we provide, but those services cost money. So before we vote next Monday, I’m going to have to think long and hard if I’m willing to kick the can down the road one more year to pay for those services when this is a structurally unbalanced budget.”
Others said they would vote in favor of the current proposal, like Council member Kevin Kassab, but said the council needs to be reviewing the budget earlier in the year so they have time to fully assess the situation.
“We continue to ask staff to work miracles into making this budget work, and we’re running out of options. So I do ask that this council for the ‘27 budget really look at honestly, hard, hard calls of what we can cut. Clearly we don’t want to touch staffing. Our staff is amazing. They do a great job. Actually, most of staff is doing two and three jobs,” Kassab said. “I support this to get us through this, but I don’t want to ignore that there is a major problem and that we can’t continue to borrow this money from the fund balance moving forward.”
The council had a similar plea for more time reviewing the budget last year, when they approved a three mill tax increase.
Council member Gopal Balachandran said he was a “no” vote on the budget and he would like to see a four mill tax increase, an option the borough manager presented last week. He said the current borough budget calls for 60 sworn police officers, and there are currently 57 officers. The borough will be hiring three officers at the end of the year, a move Balachandran said was “unwise.”
“Right now we have an opportunity where, just like it’s in other departments throughout the borough, where they have unfilled positions that are simply not being filled, I think the same course of action needs to be dealt with in the police department, which is that we should budget for 57 officers, do not hire any additional personnel,” he said. “This way we’ve at least started to make the effort and started to make the calls that are going to try and rein in the spending, which is mostly going to occur on the personnel side.”
The outgoing police chief last week strongly urged the council to keep the department at 60 officers.
Council President Evan Myers, who previously said he would not support a budget with an eight mill tax increase, said Monday he was supportive of the new proposed budget. He said the borough and community needs to ask the state legislature to allow the borough to enact other types of taxes. The borough is limited in how they can generate revenue, leaving it to rely on property taxes and earned income taxes.
“For example, if someone lives in the borough and is not a wage earner, but yet earns hundreds of thousands of dollars from investments, they don’t pay a penny of tax to the borough of State College. They do to the state, and they do to the federal government. I’m not advocating that we go crazy charging taxes, but we are very limited in what we can do,” Myers said. “So until, as was mentioned, the legislature gives us more flexibility, we are hamstrung about certain things, and we do need to have a concerted effort to put pressure on the legislature to enable us to do that.”
Hayes encouraged people to contact local representatives, like state Senator Cris Dush, and Representatives Paul Takac and Scott Conklin, to pass legislation that would allow the borough to tax out-off-town visitors, like a restaurant or beverage tax.
A meeting to adopt the proposed 2026 budget is scheduled for 7 p.m. Dec. 15.
