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Top House leader balks at plan to use Pa. lottery for tax relief

Apr 25, 2006, 7:27 am

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Pennsylvania Lottery

A top Pennsylvania House leader has doubts about a key element of a property tax relief plan, threatening to complicate a legislative panel's efforts to produce an acceptable compromise.

House Republican leader Sam Smith, of Punxsutawney, said yesterday he didn't like the idea of transferring about $240 million from the state lottery fund to provide property tax and rent rebates this year for senior citizens.

"I am not comfortable with borrowing money from the Lottery Fund this year," he told reporters, adding it could affect efforts to hammer out a new state budget for the fiscal year starting July 1.

A six-member, House-Senate tax panel met briefly yesterday without reaching a solution. It plans to meet today with leaders of both chambers, along with Gov. Ed Rendell, in an effort to find a compromise on property tax relief that will pass both the House and Senate.

Mr. Smith denied criticism that he, as a GOP leader, is trying to prevent Democrat Rendell from getting political credit for lowering property taxes before the November election. "That's utterly ridiculous," Mr. Smith said.

House Democratic Whip Mike Veon, of Beaver Falls, said the panel is about "90 percent there" on a property tax compromise bill, but several important facets remain unresolved.

The panel is trying to increase, from the current $15,000 to either $25,000 or $30,000, the annual income limits for seniors to qualify for property tax and rent rebates. The maximum rebate is now $500 a year, which the panel would like to increase to $650.

But doing so will cost about $200 million, Mr. Veon said. He favors transferring that amount from the Lottery Fund for two years and then repaying the lottery account by using the projected $1 billion in slots revenue.

In addition to that $200 million, an additional sum, of $20 million to $40 million, might be needed to help lower property taxes in three cities — Pittsburgh, Philadelphia and Scranton.

That's because they wouldn't be eligible for one of the tax-relief bill's key provisions — a tax-shifting plan, where school districts could vote on increasing their income taxes and reducing their property taxes. That additional funding would initially come out of the Lottery Fund.

Mr. Rendell said the Lottery Fund can afford such a temporary transfer, since it's now at about $3 billion, compared to $1.9 billion three years ago.

But Mr. Smith expressed reservations, saying the Legislature shouldn't endanger the Lottery Fund's main purpose of providing senior citizen transportation programs and pharmaceutical programs.

Mr. Smith said that working out a solution on property taxes might have to be worked into the larger context of the new state budget, which probably won't be adopted until June 30.

Some legislators have been hoping to have the full House and Senate approve a property tax relief bill before the May 16 primary, as a way of helping incumbents who face challengers.

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