Schools Slow to Grab Pennsylvania’s Gambling Money

Ten months ago, Gov. Ed Rendell (D) signed into law an ambitious gambling expansion bill that he projects will reap billions of dollars for lowering property taxes by an average 20 percent.

Legalizing slot machines was a critical achievement, capping a campaign promise he made in the 2002 election and succeeding where a previous governor, Tom Ridge, had failed. But while he succeeded in expanding gambling, Rendell, like past governors, may find that successfully reducing property taxes is easier said than done.

Before event;a single coin has dropped into one of Pennsylvania’s 61,000 newly authorized slot machines – more than any state except Nevada -a court case is creating much uncertainty about the future of the new law. The state Supreme Court has agreed to consider a lawsuit from gambling opponents who argue the General Assembly violated the state Constitution’s ban on changing a bill’s original intent and the requirement that legislation address a single subject. The 145-page slots measure began as a one-page bill allowing state police to fingerprint people seeking horse-racing licenses.

Further distressing the governor is that most of the state’s 501 school districts have yet to adopt the accompanying property-tax reduction program the gambling revenues would fund. In an unusual arrangement, the law gives school districts the option of accepting a share of gambling proceeds in exchange for lowering property taxes, on which public schools largely rely for funding.

Seven districts already have decided not to partake of the gambling largess, while 16 districts including Philadelphia have opted in to the program. The rest of the school districts have until May 30 to decide.

It hasn’t helped the first-term governor that his education secretary, Francis Barnes, refuses to endorse the program.

The response from school districts has so frustrated Rendell that he publicly muses with a sardonic tone on the difficulty in giving away $1 billion, the amount the state eventually expects to collect annually once slot machines are in place in 14 new gambling venues – both casinos and horse racetracks – by 2007 at the latest.

Rendell proposed the gambling expansion to stem the flow of gambling dollars to New Jersey, West Virginia and other states where slots and other forms of wagering are legal. Until now, betting on horses was the only legalized gambling in Pennsylvania. Dedicating the revenue to reducing property taxes helped him sell the plan.

An impending dilemma is what will happen if only a small number of school districts are in the program? Do they split $1 billion? It’s unclear whether such a scenario would undermine the state’s effort to lower and hold down property tax bills across the state.

No one in the Legislature yet has an answer to these and other related questions, but the Rendell administration believes the state can divide that amount among however many districts have opted into the program.

Leaders of the Republican-controlled House and Senate disagree, arguing there’s no redistribution formula in the law. If the administration attempts to redistribute the revenues, the GOP intends to seek court action to stop it, said Drew Crompton, Senate President Pro Tempore Robert Jubelirer’s counsel and one of the drafters of the property tax legislation. At the same time, though, Republican leaders don’t have a plan for what should happen with the revenues.

The governor has suggested that the Legislature might force the property tax plan on school districts.

But Republican leaders appear unlikely to pass legislation within the next three weeks to mandate that school districts join the property-tax reduction program, largely because of a strong belief in local control.

“It’s kind of ludicrous to think we’re going to give you your choice, and now that you haven’t acted the way we wanted you to act, we’re mad at you,” said Steve Miskin, spokesman for House Majority Leader Sam Smith (R). “There’s an issue about whether they want gambling money in their communities.”

Discontent is clearly evident among lawmakers on both sides of the aisle, but the four Republicans who hold the top leadership posts in the Senate and House – three of whom opposed the slots bill – have decided to wait until after May 30 to conduct a post-mortem, if necessary.

“Once the deadline passes, we will respond appropriately and responsibly and not out of a sense of retribution,” the House majority leader said in a memo to caucus members.

In addition, most school districts in the end may opt in, Miskin said.

For the Pennsylvania School Boards Association, which failed to get the courts to delay the May 30 deadline for a year, the chief objection is a provision requiring school districts that accept gambling revenues to seek voter approval before any further increase in property taxes. Republicans had insisted on the referendum requirement to control spending.

This same type of provision was included in a 1998 tax reform program that also was optional and which most school districts also rejected. Only four districts adopted that plan.

To make the program more palatable, the Rendell administration in a compromise with Republicans insisted on including 10 exceptions when school boards could increase property taxes without getting voter approval, such as for emergencies or fast-growing enrollment.

However, some school officials complain the exceptions still are too limiting and don’t take into account costs that districts cannot control, such as special education, state and federal mandates on instruction and services, and health care.

Nonetheless, unlike affluent, fast-growing school districts found in the state’s suburbs, many rural districts are expected to adopt the program because they don’t have a wealthy tax base to which they can routinely turn for more revenue.

For rural districts, “Referendum isn’t the big boogeyman it is in other districts,”Crompton said.

Still, another reason school districts are reluctant to enter the program is that gambling revenues are not expected for at least a year, and even then it will be at least a few years before those revenues reach $ 1 billion because of the time involved in issuing gambling licenses and building slots parlors.

Complicating their decision even more is the uncertainty over how the Supreme Court will rule on the new law.

Peter Durantine is a freelance journalist based in Harrisburg, Pa.