Ray's Round Up: Budget Debate Continues, Concern over Impact on Services and Schools

This week the Pennsylvania House of Representatives met to debate a revised budget proposal submitted by Governor Wolf.  The budget relied on revenue increases achieved by raising the Personal Income Tax from 3.07% to 3.57% and imposing a 3.5% extraction tax on natural gas.  Under this proposal the Personal Income tax of a person or family making $60,000 would increase by $300 a year.  The direct impact of the shale tax on consumers has been hotly debated and no firm conclusion can be drawn at this point.  In the end, the proposal was defeated by a vote of 73-127.  The next step in this on-going saga is unknown, and service providers and school districts who rely on funding from the state are now contemplating layoffs and closures as they run out of money.

 The failed budget proposal from the Governor contained a new initiative – a dramatic expansion of the property tax/rent relief program.  The current program is funded by lottery revenues and provides partial property tax rebates to low and moderate income seniors.  Currently, the rebate program benefits eligible Pennsylvanians who are:

• age 65 and older
• widows and widowers age 50 and older
• people with disabilities age 18 and older.

 

The income limit is $35,000 a year for homeowners and $15,000 annually for renters, and half of Social Security income is excluded.  The maximum standard rebate is $650, but supplemental rebates for qualifying homeowners can boost rebates to $975.

The Governor proposed to expand the program in two ways – by increasing the income limits to $55,000 and by raising the standard rebate to $2,000.  It was estimated the total cost of this expansion would be $400 million.

It is unclear exactly how the expansion would be funded.  Current lottery revenues could support such an expansion – if the lottery revenues currently used to supplement the Medicaid Long-Term Care program were used instead for the property tax/rent rebate program.  Medicaid long-term care is a mandated program, so such a funding shift would create a gap in the General Fund budget which would need to be filled by revenue from other sources necessitating either more revenue or cuts in other programs.

Although the overall budget proposal failed, the property tax/rent rebate program expansion is now likely to be a part of further budget negotiations based on comments after the vote from elected officials on both sides of the political aisle. Other property tax reduction or elimination proposals have been introduced in the General Assembly, but the on-going debate of how to pay for them continues to prevent action on them.  An expansion of the lottery-funded property tax/rent rebate program is not as comprehensive as broader property tax reform but it does offer an affordable alternative that could help older Pennsylvania impacted by rising property tax rates.

The Pennsylvania State Senate returns to session to take its turn in grappling with the state budget impasse.

 

“Ray’s Round Up” features updates on current state and federal issues by Ray Landis, AARP PA’s Advocacy Manager.