ACT 72 Pa. taxpayers are eager; schools remain reluctant

Only a few local school districts have elected to take part in the tax reduction plan.
Controversy continues to swirl around the Pennsylvania Legislature's effort to shift some local school property tax burden from homeowners/farmers to wage earners and gamblers.
While large numbers of property taxpayers are signing up to participate, school boards are showing reluctance to take advantage of the new law.
As of last week, only two school districts in Lawrence County, New Castle and Ellwood City, and one in Mercer County, Greenville, had agreed to participate in Act 72, the Homeowners' Tax Relief Act, according to the Pennsylvania State Department of Education.
Some revenues from slot machine operations at Pennsylvania racetracks and casinos would be earmarked for property tax relief. Slot operations are expected to begin in 2006.
And while May 30 is the deadline for school districts to "opt in" the tax relief program, only 24 of 501 Pennsylvania school districts have committed so far.
One reason for school boards' reluctance is that there is a price to be paid for allowing their residents to receive some reduction in property taxes. Taking advantage of Act 72 will require school districts to raise their earned income tax by 0.1 percent.
Voter OK
More significantly, the law would require participating districts to get voter approval for increases in tax millage when the increase exceeds an inflationary index. School boards may now raise millage without any voter approval.
The inflationary index would be calculated individually for each district and is based on the statewide average weekly wage and the Employment Cost Index for elementary and secondary schools. The averages are projected to range from 2.5 percent to 4 percent.
An analysis done by Dr. Michael Coulter, associate professor of political science and humanities at Grove City College, shows the new requirement for voter referendum would significantly hamper local school districts, many of which in recent years have routinely exceeded the indexes that would be put into place under the new law. (See chart).
For example, in 2001-02, Mercer County school districts Farrell, Lakeview, Mercer and West Middlesex exceeded the index calculated for those years. The same year in Lawrence County, only New Castle exceeded the index. Figures were difficult to compare for some years because Lawrence County had a reassessment that took effect in 2003 as well as a change in calculation of tax ratios. In addition, in 2002, Mercer County changed its tax ratio calculations.
Exceptions
The law provides 10 exceptions, which -- with the approval of the state education department or a judge -- would exempt districts from a voter referendum when their millage increase exceeds the index.
The list includes costs that the school district cannot control, for example, emergency needs, construction and expenses required to meet federal and state mandates. Coulter termed the exceptions "large enough to drive a truck through."
He said that while the Pennsylvania Association of School Boards is opposing Act 72 and school districts want to "hold out for a better deal from the Legislature," the list of exceptions are "like telling your teenager they have to ask for permission to use the car Friday night after midnight. It sounds reasonable."
Homeowners/farmers in the two counties are indicating more enthusiasm about the plan than school boards, and with good reason. Not only do they get more say on local millage increases, but they could also see individual school property taxes reduced from $174 to $355 a year, if gambling revenues reach $1 billion.
If revenues only reach $500 million, the reduction would range from $112 to $185 among Mercer County and Lawrence County districts.
Taxpayer participation
Mercer County Revenue Director Mickey DeForest has reported that about 80 percent of residential property owners have filed the necessary paperwork to take advantage of the tax reduction once it goes into effect. In Lawrence County, Tax Assessor Mary Bullano reported approximately 67 percent of residential property owners had filed by the March 1 deadline.
No one is sure how much will be raised from gambling revenues but the law provides that no distributions will be made until $900 million has been collected. The increase in the earned income tax will not go into effect in local school districts until the state begins to distribute the gambling revenues to the districts.
And homeowners will see the reduction in the form of a lower tax bill, not in a rebate or refund.
More information about Act 72 is available by clicking on "72" on the Pennsylvania School Boards Association Web site, www.psba.org, or by going to the Pennsylvania State Department of Education Web site, www.pde.state.pa.us, and clicking on "property tax relief."