By ADAM CIRUCCI

Special to Tri County

The state House last Wednesday approved a bill that would reduce property taxes with $1 billion in projected revenue from slot-machine gambling.

Gov. Ed Rendell called the measure "a good step for Pennsylvania" on Thur-sday, despite criticism from several lawmakers and gubernatorial challenger Lynn Swann that it wouldn't amount to meaningful property tax reform for those most in need.

"Harrisburg has tried for more than three decades to achieve meaningful property tax relief and now we've done it," said Rendell. "It protects taxpayers in every district from extraordinary property tax increases."

The approval, by a vote of 137 to 61, marks an election-year victory for Ren-dell, who campaigned four years ago on a platform of legalizing and taxing slot-machine gambling to re-duce property taxes state-wide.

"I think people understand that if I could have done property tax by executive order, I would have done it back in January and it would have been more significant," Rendell said. "But they did not elect me king, they elected me governor. The legislature still has to vote on the thing."

The measure was crafted by a special committee of House and Senate members to resolve differences between the two chambers over how much of a property tax cut to provide and how to pay for it. Sup-porters said it represented significant progress toward resolving a decades-long debate about the issue.

"I look on it as not the first step, not the last step, it is the next step," said Rep. David Steil, R-Bucks, who helped design the compromise. "We will take more steps in this chamber, and shame on us if we do not do that."

In September, Rendell called a special session of the Legislature to craft legislation that would replace a failed 2004 law that was intended to distribute future slot-machine gambling revenue to school districts sta-tewide.

But critics of the plan said it provided inadequate tax reductions for all homeowners in their districts and should not rely on gambling revenue that has yet to materialize.

"The people of Penns-ylvania deserve more than a legislature that takes the course of least resistance just so something can get passed. This is nothing more than a political ap-peasement, and we are go-ing to be right back where we started in only a year or two as property taxes continue to rise," state Rep. Curt Schroder, R-155th, of East Brandywine, said in a statement Thursday.

He said the plan simply would not go far enough to help the senior citizens and working families of his district.

"Once people realize that there is no property tax reform, then it's going to come back on our shoulders to do something," said Rep. Gary Haluska, D-Cambria. "We've come up with a big goose egg."

Earlier, House members rejected proposals to augment the tax cuts with a higher state sales tax. The Republican majority had wanted the House to consider separate legislation to further reduce property ta-xes by raising the state's 6 percent sales tax by either 1 percentage point or half a percentage point. Both proposals were voted down on Wednesday.

The House first resumed its debate over property tax cuts last Tuesday, five weeks after the House GOP majority walked out of the Capitol and refused to vote on the Senate plan to finance the reductions with gambling revenue. Repub-licans remained sharply divided over the measure Wednesday as less than half of them voted for it, joined by all but a handful of Democrats.

State Rep. Arthur Her-shey, R-13th, of Cochran-ville said the bill gives taxpayers a say on their school property tax rate increases.

"While House Bill 39 focuses on delivering tax relief to Pennsylvania's senior citizens through an expanded Property Tax/-Rent Rebate Program, it also begins the process of equalizing the power of taxation between school districts and the taxpayers. Under this legislation, taxpayers will have the ability to vote on future property tax increases," he said.

House Majority Leader Sam Smith, R-Jefferson, defended the decision to delay the vote on Wednes-day, saying he had hoped the House could agree on a way to improve the compromise plan.

"A month ago, I was optimistic that between us as a House we would be able to define the middle ground on this issue," Smith said. "I'm a little bit disappointed that we were-n't able to achieve something more and better over the last several weeks."

If the House had ap-proved either sales tax measure, the bill would have been sent to the Sen-ate, which has resisted in-creasing state taxes to offset school property taxes.

"This plan is essentially what the Senate passed in December, and we're glad the House has now taken action on it," said Erik Arneson, chief of staff to Senate Majority Leader David J. Brightbill of Leb-anon County.

Swann, Rendell's Repu-blican challenger in the November election, issued a statement calling the legislation an "election-year Band-Aid."

"I look forward to having a debate about property-tax reform during this campaign," said Swann, who has proposed an overhaul of property taxes in Pennsylvania that would levy taxes based on market value rather than assessments.

The Senate bill would set aside an anticipated $1 billion a year in future gambling revenue for tax cuts for millions of homeowners and for Philadelphia residents who pay a wage tax. It also would expand tax breaks for senior citizens and force school districts to ask voters whether to cut property taxes further by shifting more school funding onto a higher local wage tax.

Benefits would become available starting next year, and would expand in subsequent years as the prospective flow of gambling revenue was supposed to in-crease.

The 3 million homeowners outside of Phila-delphia would receive an average property tax cut of about $200, while tens of thousands of senior citizens would have their property tax bills eliminated.

AP contributed to this story.

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