Reassesment, Act I, and Taxes

From the Wilkes Barre Times Leader

Reassessment won’t affect state’s Act 1 tax cut
Gambling revenue will be doled out to Pennsylvania’s school districts based on their economic situations.

By Mark Guydish, Education Reporter, August 10

Amid the confusion and tumult of countywide property reassessment, one question has repeatedly bubbled up: Does it affect Act 1, the 2006 state law that promised to use money from legalized gambling to lower property taxes for homeowners?

Alternatively, some have asked if Act 1 affects reassessment.

The short answer to both is no.

Act 1 property tax relief is doled out as a specific dollar amount to each district, and that amount is determined first and foremost by the amount of money available from gambling revenue. The state has projected there will be as much as $1 billion available a year, but that amount likely won’t be reached until all licensed casinos are open.

The law required a minimum amount of money ($500 million, when first enacted) to be available before any could be spent on tax relief, which is why no one saw a penny in property tax savings until this coming school year, even though the law was signed in 2006. This is the first year the minimum was reached.

Now that enough money is available, the state is using a complex formula to determine how much each school district receives.

In a nutshell, the formula looks at a district’s wealth and tax rates in relation to other districts to determine which districts need more money to level the playing field. That is, a district with booming economic growth is apt to get less Act 1 money than one with declining population and high unemployment.

The district, in turn, distributes its share of the money equally to all eligible homeowners. To be eligible, you had to fill out an application and be approved by the county. Your tax bill and your assessed property value are irrelevant. If you’re eligible and live in a $10,000 hovel, you get as much knocked off your tax bill as the eligible rich guy in a million-dollar mansion.

That will hold true after reassessment. The amount you get will depend on how much money your school district gets from the state, and how many property owners are eligible for the tax exemption.

Act 1 only applies to school district taxes. The property taxes you pay to the county and your municipality are not affected.

One more thing that seems to cause confusion: Reassessment cannot affect your school taxes this autumn.

That’s because school districts budget on a fiscal year that runs July 1 through June 30. If reassessment is done on schedule, the values won’t be certified until November, long after school district property tax bills have been prepared and sent. New reassessed values can’t be used for school district budgets until next year.