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Finance panel in Chambersburg says no to Act 72

April 14, 2005|by DON AINES

chambersburg@herald-mail.com

CHAMBERSBURG, Pa. - A vote will not be taken until May 25, but the Finance Committee of the Chambersburg School Board recommended Wednesday night that the district not participate in property tax relief through Act 72.

"I think a lot of us were very hopeful when the state passed what we thought was meaningful tax relief," board member David Sciamanna said. "This is not good legislation."

"Real estate taxes go up because state funding has gone down," said board member Lori Leedy, chairwoman of the finance committee. She said the state also imposes unfunded mandates on districts, such as special education and employee pensions, that local districts do not control.

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The restrictions imposed by Act 72 could require the district to cut programs and staff to pay for mandated programs, Leedy said.

Districts have to adopt a resolution by May 30 imposing a new income tax to be eligible for slot machine revenues earmarked for property tax reduction through Act 72.

Districts now collect an earned income tax of 0.5 percent. That would be raised to at least 0.6 percent with the extra money being used to offset property taxes. In November 2005, participating districts would have to hold a referendum that, if approved, could raise the earned income tax more to allow for greater property tax relief, according to the act.

The law also allows districts the choice of replacing the earned income tax with a personal income tax that taxes interest and dividends along with income, but not Social Security or pensions.

The higher income taxes would be combined with gambling revenues to reduce school property taxes, but by when and by how much is still unknown. The law requires the state to collect $900 million in gambling revenues from slot machine operations before any money is distributed for tax relief, according to the act.

Under the formula set by the state, Leedy said Chambersburg ranks near the bottom in the amount of tax relief homeowners would receive.

"We're going to get a lesser share of the tax relief," she said. If the district opts into Act 72, however, renters would receive no homestead exclusion while their income taxes increase.

Districts participating in Act 72 will have to have proposed budgets ready in January rather than June. That is because a budget proposal including a tax increase above an inflation index set by the state has to be approved by voters in the spring primary, usually in May, according to the law.

Leedy noted the state was six months late in passing its budget in 2003-04 and districts were left for that long not knowing what each would receive in state subsidies.

Leedy said the back-end referendum would put budget decisions in the hands of voters instead of elected boards.

"They may not have the knowledge to make the best decisions" if they vote solely on taxes rather than the quality of education and financial responsibility, she said of district residents.

All owner-occupied homes and farms are eligible for tax relief, but the owners have to apply for the exclusion, according to the law. In October and December, school districts in Franklin County mailed out applications for the exclusion to the 52,400 property owners in the county.

The size of the reduction would be the same for every eligible home and farm. The formula determining the size of the reduction, however, will vary from year to year based on gambling revenues, the amount of earned income or personal income tax collected and the number of properties that receive an exclusion.

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