HARRISBURG — School property tax relief is at center stage of a top-level effort to end the five-month state budget stalemate.
A proposal to use new state sales tax revenue to provide property tax cuts for homeowners is part of an emerging compromise framework for a budget deal announced last week by Democratic Gov. Tom Wolf and legislative leaders of both parties.
The framework provides for increasing the state sales tax rate to 7.25 percent from 6 percent and putting the additional revenue into a new fund for property tax relief. Meanwhile, the state’s share of revenue from slot machines at the casinos that now goes for property tax relief would be diverted into a special fund to pay down Pennsylvania’s public pension debt.
The net effect could be an additional $1.4 billion annually for property tax relief.
Some estimates put a potential property tax cut in the 15 percent range, but Wolf spokesman Jeff Sheridan isn’t acknowledging that.
“All details are being worked out,” he said.
The fund switch is seen by observers as accomplishing these goals: The sales tax hike would generate more revenue each year for property tax cuts than slot machine revenue currently does. More than $783 million in slots revenue went for property tax cuts of about $200 per household this year.
Diverting slot machine revenue to a dedicated fund for pension debt would please Wall Street bond-rating agencies. They have downgraded Pennsylvania’s credit rating in recent years due in part to the mounting debt.
The House and Senate are in session this week, but it’s uncertain when the estimated 30 to 40 bills that could be part of a budget package will be agreed to, written and ready for a vote.
Boosting school funding by $350 million and changing pension benefits for future state government and school district employees and the state liquor store system are part of the framework, too. It’s one of the biggest public policy undertakings in Harrisburg in decades.
Key details about those proposals and how new revenue would be distributed statewide for school funding and property tax relief have yet to be made public or provided to rank-and-file lawmakers.
“This is all murky,” Terry Madonna, Ph.D., pollster at Franklin & Marshall College, said. “We’re speculating from a framework.”
Adding to the drama, the Senate could vote this week on a bill to replace school property taxes with revenue from a combination of state sales and income tax hikes.
The bill sponsor, Sen. David Argall, R-29, said this would be the first time the Senate has voted on the bill since its introduction several years ago.
He has said that property tax cuts as envisioned in the framework can be undone if school boards approve future property tax hikes.
A bill co-sponsor, Sen. John Yudichak, D-14, Plymouth Township, said supporters want a floor vote on the property tax elimination bill first before they consider anything else.
Yudichak said he has concerns about the property tax proposal outlined in the framework. Few consider the current method for distributing property tax relief with slots revenue a success, he added.
There is speculation the framework will close current exceptions available to school districts to avoid public referendums on property tax increases.
Imposing mandatory back-end referendums would have a devastating impact on school districts’ control of their budgets and ability to provide quality education, said the Campaign for Fair Education Funding, a coalition of education groups, including teachers unions and school administration associations.