Thousands of older Pennsylvanians at risk of losing property tax rebates because of legislative inaction

No one likes paying taxes, but local property taxes in Pennsylvania are especially loathed.

Fewer and fewer older Pennsylvanians are receiving property tax rebates from a popular state program because lawmakers haven't updated the income limits to qualify in over a decade. (Daniel Fishel for Spotlight PA)

Fewer and fewer older Pennsylvanians are receiving property tax rebates from a popular state program because lawmakers haven't updated the income limits to qualify in over a decade. (Daniel Fishel for Spotlight PA)

This story originally appeared on Spotlight PA.

It’s a conversation Diana Raph dreads.

Every year, Raph, a tax preparer in the Lehigh Valley, applies on behalf of dozens of her clients to a state program that helps older Pennsylvanians pay their rent and property taxes.

And every year, she has to tell more and more of them that they no longer qualify, even though little about their financial situation has changed.

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“The hardest thing is trying to say to somebody, ‘I’m really sorry, but you lost your rebate’,” Raph said. “A lot of them get upset, because they’re banking on that.”

No one likes paying taxes, but local property taxes in Pennsylvania are especially loathed. Still, the payments fund vital community services, like public schools, which rely on property taxes more here than in most other states.

Critics contend the system is especially unfair to older residents on fixed incomes, who are at risk of being forced out of their homes by rising costs and taxes. The state’s rebate program, paid for partly with proceeds from the state lottery, is supposed to relieve some of the pressure.

The program received a one-time, $140 million boost this year, paid for with federal pandemic aid. The move was praised by Republicans and Democrats alike as a way to help older Pennsylvanians squeezed by the highest rates of inflation in four decades and soaring prices for groceries, gas, and other essentials.

But the one-off increase glosses over a deeper problem that politicians have largely failed to mention: The number of people getting help from the program keeps shrinking and lawmakers in Harrisburg have dragged their heels on a long-term fix.

As a result, fewer and fewer people are actually benefiting. The number of rebates paid out has dropped by more than 25% over the past decade, according to the state Department of Revenue, which administers the program. That works out to 160,000 fewer households getting help.

There is wide agreement that the main reason for the decline is that state lawmakers haven’t updated the income limits for homeowners to qualify in more than 15 years. For renters, it’s been more than 35 years. As incomes have gradually increased over time, buoyed mostly by inflation, it has become harder to qualify for a rebate.

Making matters worse, almost everyone who gets a state rebate also receives Social Security benefits, which the federal government updates each year to keep up with inflation. The income limits for the state program, however, don’t account for this.

As a result, many people who have been receiving rebates for years find that these small, routine bumps to their Social Security checks nudge their incomes over the limit to qualify.

The stakes are especially high this year because Social Security recipients got the highest cost-of-living adjustment since 1982, which could disqualify scores of people currently receiving rebates when they reapply next year based on their 2022 income.

The income limits for next year should be raised, said state Rep. Stan Saylor (R., York), the chair of the House Appropriations Committee, who will not be returning to Harrisburg after losing a primary challenge in May. “You’ve got to keep up with the rate of inflation there or it’s not a worthwhile program,” he told Spotlight PA.

Without action from lawmakers, more Pennsylvanians will find themselves in the same position as two longtime clients of Raph’s, a married couple in their 90s who received rebates for years. This year, for the first time, an increase in their Social Security payments put them just a few hundred dollars over the limit, Raph said.

That cost them the $250 state property tax rebate, as well as this year’s one-time bonus, roughly another $175. Failing to qualify for the state rebate meant they weren’t eligible for a separate $250 rebate from their local school district either. The rent for their mobile home lot, meanwhile, keeps increasing, Raph said.

A small measure of relief

The Property Tax/Rent Rebate program gives homeowners and renters who are 65 or over, or disabled, a partial refund on rent or property taxes paid the previous year, as long as they meet the income requirements.

For homeowners, who make up roughly two-thirds of rebate recipients, the income cutoff is $35,000. The threshold for renters is much lower, at $15,000. (In either case, only half of someone’s Social Security benefits is counted as income.)

Politicians often say the program helps some of the state’s most vulnerable residents keep their homes. One recipient told Spotlight PA that the rebate was “the difference between me eating and not.”

For many people, however, the program functions more as a small measure of relief than a lifeline. Last year, about half of the households that qualified for property tax rebates fell into the highest eligible income bracket, with most receiving the smallest rebate amount of $250.

It’s these families on the cusp of qualifying that are most at risk of losing out.

Failing to update the program’s income limits “automatically disqualifies people who would otherwise qualify,” said Mary Johnson, a policy analyst at The Senior Citizens League, a national advocacy group.

One factor driving the declining number of recipients is the automatic cost-of-living increases to Social Security benefits. These can be a mixed blessing, Johnson said.

Cost-of-living increases are granted only when prices for everyday essentials have already gone up. And recipients don’t actually see all the extra cash in their bank accounts. Rising Medicare premiums, which are automatically deducted from Social Security payments, eat up much of the boost, Johnson said. The extra money can also cause people to lose other benefits, like food stamps, sometimes costing them more than the value of the increase itself.

State officials say Pennsylvania is the only state to dedicate all proceeds from its lottery to services for older adults. (Commonwealth Media Services)

A steady decline

Pennsylvania is the only state to dedicate all proceeds from its lottery to services for older adults, state officials say. On billboards and posters across the state, the lottery’s familiar green logo reminds passersby that it “Benefits Older Pennsylvanians. Every Day.”

From the start, lawmakers tied the push to create a state lottery to easing the property tax burden on older residents. In 1971, when the General Assembly was considering a lottery bill, the state senator pushing the plan told The Philadelphia Inquirer that tying the lottery to a “worthwhile and popular” cause would make it more successful.

Another lawmaker, raising moral objections to gambling, would later say it was wrong to “lure the public with the label, ‘aid to our senior citizens.’”

The year after lawmakers agreed to create the state lottery, property tax rebates went out to more than 265,000 households.

Over the next 15 years, state lawmakers approved several increases to the income limits and rebate amounts. Still, rising property taxes remained a perennial concern in Harrisburg.

In 2005, former Democratic Gov. Ed Rendell convened a special legislative session to address the issue, but lawmakers struggled to agree on sweeping property tax cuts because of the painful tradeoffs involved, like raising sales or income taxes.

“Everybody wants to go to heaven, nobody wants to die,” former state Sen. John Wozniak, a Democrat representing Cambria County, quipped during a debate on the issue in early 2006. “The fairest taxes are the ones that the other guy is paying and the ones that I am not paying.”

Finally, after months of negotiations, the legislature settled on a compromise: the biggest expansion in the rebate program’s history. The agreement more than doubled the income threshold for homeowners and upped rebates for the poorest households by $150.

Between 2006 and 2007, the number of households receiving rebates almost doubled, according to the state Department of Revenue.

In 2010, that number peaked at just over 600,000.

Then it started to shrink, a trend that has continued every year since. Last year, by comparison, fewer than 450,000 households received rebates. That’s a drop of almost 27%.

In 2014, lawmakers addressed the problem with a stopgap measure focused on Social Security cost-of-living increases, ensuring that no one who had already qualified for a rebate would lose out solely because of those raises. The bill, signed into law by former Republican Gov. Tom Corbett, allowed hundreds of people to keep receiving rebates, according to the Department of Revenue, but it expired in 2016 and wasn’t renewed.

State Sen. Michele Brooks (R., Crawford), who sponsored the bill that created the freeze when she was a state representative, said an update is overdue. “We owe it to our seniors to keep them in their homes and in the communities they helped grow and develop,” said Brooks, now the chair of the Senate Health & Human Services Committee.

Many lawmakers hear firsthand about the program’s shortcomings: Their local offices play a vital role in advertising it and helping people apply.

But previous efforts to expand the program, by both Republicans and Democrats, have gone nowhere. Over the past ten years, state legislators have introduced at least two dozen bills that would up the income limits, or reinstate the freeze on people losing their rebates because of Social Security increases, a Spotlight PA review found. None were successful.

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If the income limits had been updated, Tracy Berryman and her husband might have been able to get help. Berryman, 57, said they are both retired and disabled, but their income is roughly $1,000 too high to qualify. They want to keep living in their house of 13 years, on the outskirts of Hollidaysburg, but Berryman worries that if recent local property tax increases continue, they won’t be able to afford it.

“It’s either pay my property taxes, or do I not pay this bill or that bill — it’s always something,” she said. Receiving a $250 rebate “would mean an awful lot.”

Today, about half of the funding for the rebate program comes from gaming revenues and half from the state lottery, according to the Department of Revenue.

Advocates for older Pennsylvanians say one reason lawmakers haven’t addressed the program’s decline is that for years, under governors from both parties, the state has relied on the lottery fund to help cover the rising cost of some Medicaid programs.

Every year since 2007, state lawmakers have approved transfers of money out of the lottery fund to help pay for long-term care for low-income older adults — almost $5 billion, in total. That includes a $350 million transfer in this year’s budget.

State officials say the transferred lottery money still goes toward services for older residents. But some advocates argue that other lottery-funded programs — like the rebates — risk being short-changed and should be fully funded before any transfers are made.

“Instead of making hard choices ensuring there were enough revenues in the general fund, they took an easy way out and transferred lottery funds,” said Ray Landis, a former lobbyist for AARP Pennsylvania. The lottery, he added, was created to provide extra benefits to older Pennsylvaians — not to prop up the state budget.

A narrow window to act

Time is running out for lawmakers to act before a major Social Security increase could put a rebate just out of reach for many people currently receiving one.

To keep pace with skyrocketing inflation, the federal Social Security Administration approved a 5.9% increase in benefits for 2022 — the largest boost in almost 40 years.

When Pennsylvanians apply for the rebate program next year, based on this year’s income, state officials expect a lot of people will no longer qualify.

“We have to make this change before the end of the year,” said state Rep. Steve Samuelson (D., Northampton), the minority chair of the House Aging & Older Adult Services Committee, who has long advocated for increasing the income thresholds. “After 15 years, it’s long overdue.”

In the current legislative session, lawmakers have introduced at least six bills that would update the income limits. Five were referred to the state House Finance Committee. State Rep. Michael Peifer (R., Pike), who chairs the committee, did not respond to interview requests.

In a statement, a spokesperson for outgoing Gov. Tom Wolf said the administration is “happy to engage in discussions” to update the income thresholds for the program “to better reflect the current climate in the commonwealth.”

A spokesperson for House Republicans said this year’s one-time bonuses would “provide quick assistance to some of Pennsylvania’s most vulnerable citizens as they struggle to deal with the economic impact of Biden-led inflationary policies,” but did not respond to questions about why efforts to address the program’s dwindling numbers have stalled.

A spokesperson for Senate Republicans did not respond to questions from Spotlight PA. (Republicans hold the majority in both chambers of the state legislature.)

State Rep. Joe Ciresi (D., Montgomery), who has sponsored a bill that would permanently expand the program, said he hopes widespread support for the one-time increase smoothes the way for a broader fix. But it’s unlikely the legislature will get much done before the November elections, he added. And without a concerted push from lawmakers, who have just a few session days left on the calendar after Election Day, the problem probably won’t be addressed before Pennsylvanians start applying for next year’s rebates in January.

Attorney General Josh Shapiro, the Democratic nominee for governor, plans to significantly grow the program, raising the income thresholds to make an estimated 275,000 more Pennsylvanians eligible, and doubling the rebate amounts for many households. The expansion would cost roughly $400 million, according to Shapiro’s campaign, and would need approval from the state legislature.

The Republican nominee, state Sen. Doug Mastriano of Franklin County, praised the one-time increase and has said eliminating property taxes for all homeowners — something the General Assembly has balked at doing in the past — will be his top priority. In a radio interview in March, Mastriano said he would massively cut spending on public education and give the money to students directly, to use at the school of their choice.

Unless something changes, the rebate program will continue to shrink. Next year, roughly 11,000 fewer people will receive rebates than this year, the Department of Revenue estimates.

Pat Leibensperger, who lives in Allentown, received a rent rebate for several years. Leibensperger, 91, said she often put some of the money toward birthday or Christmas gifts for her grandchildren.

She was surprised, then angry, several years ago when she learned she no longer qualified. As far as she can remember, the only change to her income that year was a Social Security cost-of-living increase.

Leibensperger said lawmakers should have updated the income limits to account for the automatic increases. “Our legislators did not follow through and make the necessary adjustments,” she said. “They just let it die.”

Spotlight PA’s Stephen Caruso contributed to this report.

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