Pennsylvania State University v. Derry Township School District
Court: Supreme Court of Pennsylvania; June 22, 1999; Pennsylvania; State Supreme Court
The court affirmed a Commonwealth Court decision that Milton S. Hershey Medical Center (HMC) is exempt from real estate taxes because its owner, Pennsylvania State University (PSU), is considered an instrumentality of the Commonwealth. Dauphin County and Derry Township School District challenged this status, asserting that HMC should be taxable. HMC, operated by PSU, includes a medical school, dormitories, research facilities, and two hospitals. The dispute arose when local taxing authorities attempted to impose taxes on HMC starting January 1, 1993, issuing tax bills for 1993, 1994, and 1995. Pennsylvania law protects Commonwealth-owned properties from taxation by political subdivisions without specific statutory authority. The court referenced previous cases, noting that while it had not definitively ruled on PSU's status as a Commonwealth agency, significant changes since a prior 1939 ruling had altered PSU's financial and governance structure, leading to the conclusion that PSU is no longer an agency of the Commonwealth. Unlike the fourteen universities within the State System of Higher Education, which are public corporations and government instrumentalities, PSU operates with greater autonomy and was historically established as a state-related institution focused on agricultural education, further emphasizing its distinct status.
The Pennsylvania State College was renamed in 1874 and later to PSU in 1953. Since 1863, the Commonwealth has provided annual funding, totaling approximately $256.8 million in 1994-1995 and $275 million in 1995-1996, and has constructed educational facilities valued in the hundreds of millions of dollars. PSU benefits from a tax exemption on bonds issued by land grant institutions, allowing it to offer lower tuition for Pennsylvania residents. However, funding alone does not classify PSU as an agency or instrumentality of the state, as established in Mooney v. Temple University Bd. of Trustees. While PSU has some governmental characteristics, it does not qualify as a state agency for purposes like the Right to Know Act. The determination of PSU's status depends on various issues, particularly regarding real estate tax immunity, which hinges on whether its property is controlled by the Commonwealth. PSU's board of trustees, composed of 32 members with only 10 being public officials, indicates a lack of majority governmental control. Unlike other state universities with entirely governmental boards, PSU's board allows significant non-governmental influence. Consequently, PSU’s property does not fall under Commonwealth control for tax immunity purposes, leading to a reversal of the Commonwealth Court's decision. A remand is ordered for the court of common pleas to evaluate an alternate tax exemption claim under the General County Assessment Law, as the initial ruling focused solely on immunity. Justice NIGRO concurs with the result, and the case remains unaffected by the 1997 Institutions of Purely Public Charity Act.
