Times Chronicle & Public Spirit
Property tax relief mechanism eliminated in closed-door state budget negotiations
Lawmaker says the Legislature should be ashamed of itself
A permanent mechanism that was about to pump hundreds of millions of dollars into property tax relief was quietly eradicated during the state budget process, surprising some lawmakers and leaving them feeling blindsided and frustrated.
The money flow in question comes from state taxes on casino table games.
The 2010 law that brought table games to Pennsylvania said revenue from them would — when the state’s fiscal health reached a certain threshold — no longer be put in the state’s General Fund, but would instead be deposited into the Property Tax Relief Fund.
The intent was to help tax-hammered homeowners.
It took 11 years for Pennsylvania to reach the fiscal health threshold: a balance of $750 million in the socalled Rainy Day Fund.
Then — on the verge of several years of Property Tax Relief deposits of $130 million or more from table games — state budget negotiators agreed to repeal the provision and instead to keep putting table games money into the General Fund.
The change got almost no attention late in the week of July 4, when the outcome of the secret negotiations became public.
Lawmakers had to vote on budget-related bills that were hundreds of pages long with almost no time to read them.
“This bill reneges on a promise we made to homeowners over a decade ago,” Democratic state Sen. Lisa Boscola of Northampton
County said on the floor of the Senate on July 7, soon after she learned of the move. “This is promised money — promised money — from property tax relief. This legislation went back on our word. This Legislature should be a little ashamed of themselves.”
Republican Rep. Dawn Keefer of York County said later in an interview, “We are told ‘trust leadership’ but I feel like I was duped.” She called it a bad vote. Other lawmakers indicated the change was little more than semantics.
They said it would not affect property tax relief, in part because a revenue surge and federal aid have put Pennsylvania in a cashrich position with billions of dollars on hand.
Republican Sen. Pat Browne of Lehigh County, who was part of the budget negotiations, said the change was not a surprise.
It was, he said, part of Democratic Gov. Tom Wolf’s February budget proposal, which was public.
The clashing views make it clear struggling property taxpayers can have little certainty about if and when the issue will be addressed on a permanent basis in Harrisburg.
A ranking by the state Independent Fiscal Office showed Monroe County had the worst property tax burden in Pennsylvania. Berks County was ranked fourth among the 67 counties. Northampton was ranked fifth and Lehigh County 10th.
The Property Tax Relief Fund feeds homestead exclusion reductions taxpayers see on their school real estate tax bills.
The anticipation of finally having table games deposits into the fund for several years running was triggered last fall.
State government was flush with billions in federal COVID aid and surging revenue, and the balance in the Rainy Day Fund rocketed from $244 million to $2.9 billion.
Boscola said the Property Tax Relief Fund was to get a $130 million deposit for 2021-22 and a legislative analysis projected deposits of $134 million for 2022-23 and $131 million for 202324.
Wolf’s proposal to repeal the mechanism was broached via brief mentions in his 869-page budget proposal, issued in February. In closed-door budget negotiations that followed, top Republicans agreed with him.
The 300-plus pages of budget-related bills were passed about two weeks ago. The table games-property tax change was on page 43 of a 49-page tax code budget-related bill.
Republican Rep. Frank Ryan of Lebanon County criticized the secrecy and rushed votes.
“If this happened at a publicly traded company, the Securities and Exchange Commission would be having a field day,” Ryan said.
The handling of the table games revenue situation, he said, showed “the controls, and how legislation is done for budgets and fiscal matters in Pennsylvania, is a disaster.”
What’s the effect?
The Morning Call asked budget negotiators from both parties for written evidence of guaranteed replacement sources for potential money transfers lost
through the elimination of the table games language. None was provided. But characterizations by a spokesperson for Wolf, Browne, and Republican Rep. Stan Saylor of York County — also a participant in the negotiations — created assurances the change would have no practical effect.
The Property Tax Relief Fund was set up via a law enacted in 2006 and intended to use gambling money to reduce property taxes for homeowners.
The law uses a statewide relief amount of $750 million as a benchmark for its calculations and requires the fund balance to be certified each year.
On April 15, Budget Secretary Greg Thall issued a letter saying the Education Department had the approval to provide the full $750 million to school districts. The spokesperson for Wolf, Beth Rementer, said the state was able to certify that amount without any transfer of table games money.
Wolf, she said, pushed for the record $850 million in new, K-12 education spending this year in part to help relieve property taxes.
“The governor agrees that Pennsylvanians need and deserve property tax relief,” Rementer said. “Which is why he’s been steadfast on advocating to adequately fund our schools so every student can get a high-quality education, no matter their ZIP code, and to reduce local community reliance on property taxes. The historic education funding secured by the governor in this budget will help give local communities the ability to lower property taxes.”
Browne — referring to the fact that the Rainy Day Fund had not reached $750 million until recently — said table games revenue has gone into the state’s General Fund every year since the debut of the games.
Wolf’s proposal, he said, maintains “the longstanding status quo in the use of the revenue and the future expectation held upon adoption.”
Browne said that in 2010, when the $750 million threshold was enacted, there was practically no expectation that table games revenue would go anywhere except to the General Fund.
In 2010 the state, which with the rest of the country was struggling to emerge from the Great Recession, was starved for revenue.
The practice of putting table games money in the General Fund, Browne said, helps support the historic levels of education funding put in place this year and will help mitigate the need for school property tax increases in the future.
Browne said he favored keeping table games money in the General Fund to strengthen equity in public education finance, which he said was done by driving additional state dollars through the Basic Education Funding Commission formula and a Level Up supplement.
That, Browne said, was more effective at minimizing the change of property tax increases in financially challenged districts than sending more money to the district via the 1970 sdeveloped aid ratio-based property tax relief allocation formula.
A spokesman for Saylor, Neal Lesher, said the recent change in law was, in reality, preserving the status quo.
In a separate move that came out of the budget negotiations, a one-time dollop of $140 million in federal relief money was added to the Property Tax Rent Rebate program.
That program is available only to those with incomes of $35,000 or less, a small segment of the public.
Highlighting the difference, Keefer said the rebate program is for a select group of people and doesn’t help a broad swath of taxpayers she called working poor.