Buget Secretary Says Faster Property Tax Relief Needed

HARRISBURG – Budget Secretary Michael J. Masch certified that the state’s Property Tax Relief Fund does not have enough revenue to provide tax cuts to homeowners this year if the governor’s proposed 2007-08 budget is not enacted.

“As Governor Rendell said when he introduced his budget in February, our projections show there will not be enough revenue from gaming to reduce property taxes this year,” Masch said. “However, the governor proposed in his 2007-08 budget to increase the sales tax as a way to raise additional revenue and thus accelerate property tax cuts. If his proposal is enacted, all homeowners will see lower property taxes a year sooner than they would have otherwise. And, in two years, property tax relief will double to $1.3 billion.”

The 2006 Taxpayer Relief Act created the Property Tax Relief Fund as a way to use gaming revenue to reduce property taxes for homeowners. The governor’s proposed budget builds on this plan by adding new sales tax revenue to the gaming revenue and distributing it using the same formula approved by the General Assembly last year.

State law requires the budget secretary to certify the projected balance in the Property Tax Relief Fund by April 15 of each year. Masch certified last week that the fund balance is now $115 million. Without any changes in current state law, the fund balance is expected to be $447.2 million by Oct.15. That six-month projection depends on the state Supreme Court’s timely ruling on various gaming licensing appeals before Sept. 30.

Current law permits distribution of property tax relief funds to homeowners only when the Property Tax Relief Fund has a balance of least $570 million.

To provide property tax relief in 2007, the governor proposed raising the state sales tax by one percentage point to 7 percent. Of that additional
revenue, $420 million will be used to lower property taxes this year. If the governor’s proposed budget is enacted by June 30, the increased sales tax revenue, combined with anticipated gaming revenue, would provide nearly $650 million for property tax cuts this year and $661 million next year, according to Masch.

This funding is in addition to the $199 million of enhanced property tax relief that will be distributed to senior citizens this summer through the
Property Tax/Rent Rebate program.

In addition to proposing an increase in the sales tax, Gov. Rendell will ask lawmakers to enact legislation this spring allowing for a second Property Tax Relief Fund revenue certification this year, Masch said in his letter to Zahorchak.

“At that time, with additional sales tax revenue and a timely resolution of the pending licensing appeals, I expect to certify a balance in the fund that will reduce property taxes in 2007,” Masch wrote.

State residents have shown support for the proposed sales tax increase to help reduce local property taxes. A poll conducted by Quinnipiac University in March found Pennsylvania voters backed the plan by a 54 percent to 40 percent margin.

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