State College’s proposed 2026 budget includes a substantial tax increase for property owners.
An eight-mill real estate tax increase is part of a fiscal plan that would deliver the borough’s first structurally balanced budget in five years, Borough Manager Tom Fountaine said during an overview of the proposal at a council work session on Friday afternoon.
State College’s home-rule charter and financial policies require a structurally balanced budget using current revenues to fund current expenditures, but that has not been the case since before the COVID-19 pandemic.
“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,” Fountaine wrote in his budget transmittal letter to council. “The unrestricted fund balance was due to the one-time American Rescue Plan Act of 2021 (ARPA) grant funds received by the Borough during 2021-2022.”
The 35% hike would bring State College’s millage rate, already the highest among Centre County municipalities, to 30.88 mills. The increase would designate 6.25 mills for the general fund, one mill for capital projects and .75 mills for regional programs.
For a home without the homestead exclusion and a market value of $300,000, the real estate tax would increase by $410.26 a year, or $34.19 a month. For a home with a $400,000 value, the increase would be $547.01 a year ($45.58 a month) and for a home with a $500,000 value it would be $683.76 a year ($56.98 a month).
For homes with the homestead exclusion, a $300,000 market value property would see an increase of $210.26 for the year ($17.52 a month), a $400,000 property would increase $347.01 ($28.92 a month) and a $500,000 property would increase $483.76 ($40.31).
The increase would generate an additional $3,793,881 for the general fund, $607,021 for the capital fund and $455,266 for regional programs.
The total proposed budget includes expenditures of $73,436,740 — $4.4 million less than 2025 — and $64,203,385 in projected revenues, with $9.2 million allocated from designated fund balances, as is typical.
The general fund budget, which is a more direct representation of current expenses and income, includes expenditures of $43,654,648 and revenues of $43,213,724. Use of $440,924 in reserves is far less than the millions used in recent years and is within the margin of error for a structurally balanced budget, Fountaine said.
“In State College it’s a real challenge year in and year out,” Fountaine said. “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 and a budget with the level of service that is provided by the Borough of State College.”
The borough anticipates a decrease in realty transfer tax revenues, flat local services tax revenue and a $200,410, or 3% increase in earned income tax revenue (though the earned income tax rate will remain unchanged).
On the expenditure side, the major cost drivers are employee wage increases, a 9.1% increase in group health insurance and inflation.
Fountaine called it a “very much a status-quo budget” with no new employee positions. It does include $13.8 million in capital improvements paid for across various funds and some with state grants. Planned capital improvements include street reconstruction and resurfacing projects, the long-planned Easterly/Westerly Parkway shared-use path, Pugh Street Parking Garage and McAllister Deck repairs, phase two of a traffic signal project, fuel island upgrades and restrooms and other upgrades for Highpoint Park.
Other priorities addressed in the budget are the ongoing Calder Way improvements, completion of the comprehensive zoning revision, ongoing support for affordable housing, funds to assist the State College Redevelopment Authority’s work to support economic and business development, the completion of the Downtown Plan in preparation for the Downtown State College Improvement District renewal and preparing for the implementation of the Next Generation Mobility Plan and the replacement of the Pugh Street garage.
“Due to limited capital funding and insufficient unrestricted fund balance, many capital projects have been delayed until 2027 or later,” Fountaine wrote in the transmittal letter.
Borough Council will continue to review the budget over the next month:
Nov. 10: Parking and Regional Programs
Nov. 14: Public Works and Enterprise Funds
Nov. 17: Police and Planning
Nov. 25: Administration
Dec. 1: Public Hearing and Capital Fund
Dec. 5: Wrap-up
Dec. 8: Wrap-up
Dec. 15: Adoption
