"What's black and white and read all over?"

Tuesday, May 02, 2006
Posted 10:10 PM by

The price of vice

Where will all the slot machine quarters come from to pay for $1 billion worth of property tax relief annually in Pennsylvania? And what happens when school costs exceed the state's rake?

Is a $200 average reduction in property taxes enough to let your forgive and forget Pennsylvania lawmakers gave themselves a big fat pay raise last and then had to be forced to repeal it?Everybody has a price they say.

Incumbent legislators, many of whom will face both challengers and angry voters at the polls in two weeks, are betting that an average $200 reduction in school property taxes for homeowners in 2008 - funded by the state's share of slot machine revenues - will buy them another term.

This, after the legislators voted themselves a huge pay raise last year and were forced to repeal the pay hike after statewide outrage. Many illegally took their raises early. Some never paid the money back.

I say the lawmakers are betting because the money to pay for those property tax reductions is in no way guaranteed. Nor is there any guarantee that increased school district costs won't eat up the reduction in future years.

But in kind of a bait-and-switch built into the bill state Senators approved 40-9 on Tuesday, local voters will get the chance to decide whether they want to lower their own property taxes by another 25 percent and cap their district spending at a rate close to inflation.

The downside is while property owners would pay less, working renters would pay more by way of a new income tax.

If voters in a school district approve the referendum, any future tax increases by that district would then be limited to a rise in the wages paid to taxpayers. Homeowners would still be paying property taxes, but at the reduced rate.

"I just don't see this as the answer." state Rep. Kerry Benninghoff, R-Centre, said Tuesday, adding the measure relies too heavily on unpredictable gambling revenue and disproportionately punishes the middle-class.

The House of Representatives is expected to vote on the bill Wednesday.

The Pennsylvania School Boards Association also criticized the bill, saying it does not fix the underlying problem of schools being forced to rely too heavily on property taxes.

The pre-election tax package "is politics. It's not policy," Tim Potts, co-founder of the legislative reform group Democracy Rising PA, told the Pittsburgh Tribune-Review.


"Voters clearly are asking for more than a mere shift in their local taxes; they want property tax relief that is meaningful," PSBA President Lou Ann Evans told lawmakers in January. "If they simply wanted to move from one tax to another at the local level, they would have pressed their school boards to opt-in to Act 72."

That act - passed on the same night the slots bill was approved in 2004 - attempted to give school directors the choice of putting a similar referendum on the ballot and offered them the slot machine revenue as a carrot.

Fearing their future taxing power would be sapped, fewer than 100 of the 501 public school systems in the state opted to take the money and put it to a vote.

Lawmakers in other states might consider that an utter failure and call it a day. Not here in Pennsylvania. After months of wrangling, legilators merely re-made the bill, added a little money to seniors as a sweetener and then made it mandatory.

This time, the school districts won't have a choice but to ask their taxpayers what to do.

"This is not the end of the journey, this is the beginning of the journey," Sen. John Wozniak, D-Cambria, said during Senate debate Thursday. "But something had to start somewhere."

Let's start with the slots-funded tax break.

Where will all the quarters come from to pay for $1 billion worth of tax relief annually? And what happens when school costs exceed the state's rake?The state plans to spend about 75 percent of the estimated $1 billion it may rake in annually once all 14 proposed slot machines parlors open for business next year. The rest of the money will go to a special property tax rebate program just for seniors who make less than $35,000 a year.

This tax break solely relies on the fleecing of state residents and tourists in the slots parlors to pay for itself.

For many homeowners it could be just a one shot deal - not an annual reduction.

How long the tax reduction lasts depends on how much more each school district spends in subsequent years and whether those new costs will eat up the money the slots bring in.

Each school district will get a share of the slots largesse, but with a catch - they are required to put a referendum on the May 2007 primary ballot.


The referendum will ask local voters if they want to switch up to 25 percent of their school district's property tax revenue to either an earned income and net profits tax or a personal income tax.

That means retired homeowners would get a continuous break on their taxes largely at the expense of working renters - and in an aging state like Pennsylvania, the burden would continue to grow on the younger folks.

Is it just me, or do you get the feeling slot machines are being jammed down our throats - and they're supposed to be the sweetener before the medicine of tax relief?If the voters approve, the district would then be limited in how much it could raise the new income tax based on the increase in statewide wages as calculated by the state and federal labor departments.

By law, the new tax could only climb as fast as taxpayers might be able to pay it.

The net effect is school districts could not afford large future hikes in teachers' salaries unless taxpayers could afford to pay for the contract.

The bill doesn't say that. But it's pretty obvious that's its intent.

Up to 70 percent of any school district's expenses are personnel and teachers make the most money in total out of all school employees. They also have a politically powerful union.


All of this is ironic, considering Pennsylvania voters never got the chance to say whether they wanted slot machine gambling in the first place.

Instead, key lawmakers - perhaps working in collusion with the state Supreme Court in exchange for an increase in judges' salaries - snuck the huge slots law into a tiny unrelated bill then forced it to the floor without any public debate on the eve of the July 4 holiday weekend in 2004.

Did the state Supreme Court act in collusion with the Legislature to get the slots law passed in exchange for judicial raises?When anti-casino groups sued, the state Supreme Court upheld the slots law despite obvious Constitutional and procedural violations.

As for the current tax "relief" bill, it's a compromise reached by state Reps. Lynn Herman, David Steil, and Michael Veon, and state Senators David "Chip" Brightbill, Eric Erickson and Robert Mellow, after months of debate left the Legislature at an impasse.

The bill spells out precisely what each school district must do if voters approve the refendum, prohibits them from using school funds to campaign for or against the referendum and even sets a fine for the misuse of anyone's income tax records.

Wrongful disclosure and/or publication of such personal information would be punishable by up to a $1,000 fine, a year in jail and the offender "may be removed from office or discharged from employment."

The bill does not say what happens if voters shoot the referendum down.


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