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Budget & Finance

Majority of Pa. Districts Snub Rendell Tax-Relief Plan

By Catherine Gewertz — June 14, 2005 3 min read

Only 20 percent of Pennsylvania’s school districts have chosen to take part in a plan that uses state gambling money to reduce property taxes. The low level of participation dealt a setback to Gov. Edward G. Rendell’s efforts to fulfill campaign promises.

Act 72, which became law last July, allows districts to use slot-machine proceeds to reduce local property taxes if they raise their earned income taxes by one-tenth of 1 percent and accept certain limits on local tax increases. By the May 30 deadline, only 111 of the state’s 501 districts had accepted the trade-off.

That makes it harder for Gov. Rendell to deliver on two of his major goals: cutting property taxes statewide, and shifting a greater share of education spending to the state. The Democratic governor had urged school boards to join the plan.

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“There is no doubt that there was political damage to the governor,” said G. Terry Madonna, the director of the Center for Politics and Public Affairs at Franklin & Marshall College in Lancaster, Pa. “The question is, will it be sufficient to defeat him [in 2006]?”

In a Keystone Poll, supervised by Mr. Madonna and released last week, only 38 percent of registered voters said Gov. Rendell deserves re-election; 47 percent said it was “time for a change,” and 15 percent didn’t know. The poll of 467 registered voters had a margin of error of plus or minus 4.5 percent.

Thomas J. Gentzel, the executive director of the Pennsylvania School Boards Association, said districts spurned Act 72 for many reasons, including citizens’ opposition to raising the earned-income tax. Some, he said, believed that the projected tax relief—$190 to $330 per household on average, depending on gambling proceeds—might not justify boosting the tax on citizens’ income and having districts ask voters’ permission to raise taxes above an inflation-pegged cap, as required by Act 72.

Some advocates contended that school boards opposed Act 72 primarily because they sought to preserve their unfettered budgetary authority.

“This wasn’t about school boards protecting their power,” Mr. Gentzel said. “It was about doing the right thing, balancing the interests of the taxpayers with the need to provide education for kids.”

The Road Ahead

Gov. Rendell will continue to work with the Republican-controlled legislature to reduce property taxes, said his policy director, Donna Cooper. She said he would support imposing Act 72’s requirements on all districts, a proposal being discussed in the legislature. The Keystone Poll showed voters divided on that idea.

In the meantime, Ms. Cooper said, she worries that education advocates’ focus on Act 72 could distract them from helping push the governor’s fiscal 2006 education budget through the legislature. His proposed 3 percent hike in spending on precollegiate schooling has been questioned because it comes as high health-care costs force the state to consider cutbacks, she said.

The PSBA had contended there were many unanswered questions about Act 72, including whether districts’ share of gaming proceeds would vary depending upon how many districts participated.

Drew Crompton, chief counsel to Sen. Robert C. Jubelirer, a Republican and one of the law’s co-sponsors, said that before any distribution can be made, $400 million in gaming proceeds must be collected for a reserve fund, and another $500 million for the distribution fund.

The 111 districts that chose to participate in Act 72 would share about one-third of the amount in the distribution fund, according to a formula that assumes the participation of all 501 districts and takes into account their relative wealth and tax burdens, Mr. Crompton said. The rest is used for other purposes, including economic-development projects, he said.

Ms. Cooper noted that the law guarantees participating districts a minimum distribution—$190 on average per household if $500 million is collected in the distribution fund. If $1 billion is collected, that projected figure rises to $330.

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