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Pa. Senate may move on school real estate taxes

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By The Associated Press
Tuesday, Oct. 15, 2013, 8:18 p.m.

HARRISBURG — The state Senate is analyzing plans to eliminate or lower school real estate taxes in Pennsylvania, although the Legislature's independent fiscal analysts told senators on Tuesday that one leading plan would leave schools with less money than they otherwise would expect.

School districts would receive nearly $11.8 billion over the next five years — $2.6 billion less than they would expect to receive based on a pattern of past real estate tax increases, the Independent Fiscal Office told Senate Finance Committee members during a hearing.

The plan has another major problem: It was shot down by the House of Representatives, 138-59, during two days of debate this month.

The House vote sent a strong signal to senators, Senate Finance Committee Chairman Michael Brubaker said.

“If we're going to debate this, the members want to see a pathway to the governor's desk,” Brubaker, R-Lancaster, said after the 90-minute hearing.

That plan would increase the personal income tax by 41 percent and boost the state sales tax to 7 percent, a 17 percent bump, while eliminating many existing sales tax exemptions and absorbing money from other real estate tax subsidy programs, including ones funded by slot machine tax revenue.

An identical bill was introduced in the Senate by Sen. David Argall, R-Schuylkill, and is waiting in the Senate Finance Committee. Argall said he would like to see a speedy process in which amendments could be offered to his bill to correct any flaws.

The House ultimately decided on a different plan, and sent it to the Senate. That plan would authorize local school boards to reduce or eliminate school property taxes and shift the revenue source to new taxes on residents and businesses.

Critics of real estate taxes say the rising cost is hurting first-time homebuyers and forcing people, such as the fixed-income elderly, out of their homes.

However, the plan under analysis would mean higher costs for others, such as people who rent rather than own their home, professionals whose services or goods are subject to the sales tax, and people who get a federal income tax exemption on their real estate taxes.

Efforts in previous years to overhaul or eliminate school real estate taxes have failed.

Brubaker could not predict the road ahead for the issue in the Senate. School real estate taxes are not the source of complaints in some areas, and the way the state distributes its public school aid, rather than collects, is also the source of equally strident complaints.

Sen. John Blake, D-Lackawanna, said his 13 school districts rely on local taxpayers for two-thirds of their costs.

“That is upside down, in my opinion, and we need to do something to correct that,” Blake said.

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