- Associated Press - Sunday, November 22, 2015

HARRISBURG, Pa. (AP) - The Pennsylvania Senate is juggling a long-simmering fight over who pays for public schools just as Gov. Tom Wolf and top lawmakers appear to be struggling to hold together the skeleton of a budget deal that’s five months late.

There’s head-scratching in the Capitol over why Senate Republican leaders chose this moment for the debate. For one thing, some privately worry it could further destabilize already wobbly efforts to negotiate and pass a package of budget-related legislation.

On Saturday night, top House Democrats informed rank-and-file members that Republicans had told Wolf, a Democrat, that there isn’t enough GOP support for a state sales tax increase - from 6 percent to 7.25 percent - to generate $600 million to balance the budget and $1.4 billion in rebates for homeowners who pay school property taxes.

“We are assessing our options and examining whether there are any acceptable alternative revenue sources to balance the budget and provide property tax relief,” they wrote in the email obtained by The Associated Press.

A spokesman for House Majority Leader Dave Reed, R-Indiana, said Sunday that Republicans had told Wolf nothing of the sort, and that the level of GOP support for the idea is contingent on how the property tax rebates are distributed.

In any case, Democratic lawmakers have had their own complaints with the proposed deal, and negotiators have acknowledged it has been difficult to develop a formula to distribute the property tax rebates that would placate lawmakers who might be willing to vote for the tax increase.

For some lawmakers, the complete elimination of school property taxes is the preferred option.

It is no small matter: It would require a $12-plus billion state takeover of public school funding from school boards and perhaps the biggest-ever change in state taxation.

A Monday vote is expected, and it is not yet clear whether it will pass.

“The first thing I’m going to do in my floor speech is to apologize to the taxpayers of Pennsylvania that it’s taken this long to get a vote on the issue,” said Sen. David Argall, R-Schuylkill, the bill’s chief sponsor.

Argall’s measure would end the collection of school property taxes from millions of households and businesses starting July 1, except to pay off school debt. It also would impose another barrier for school boards to raise taxes in the future, requiring them to win voter approval to increase local income taxes if they want to spend above the state’s allotment.

Starting Jan. 1, the personal income tax rate would rise from 3.07 percent to 4.34 percent while more types of food, clothing and shoes would be exposed to a new, higher tax on sales - 7 percent, up from 6 percent.

The sales tax also would be applied to a wider range of services that are currently exempt. Those include basic TV service, tickets to recreational, cultural and sporting events, and some work performed by lawyers, accountants, architects, financial institutions, funeral parlors and salons.

No one would pay school property taxes: landlords, millionaires, the fixed-income elderly, shopping malls and international corporations. Renters would immediately pay higher sales taxes, with no guarantee that their rent would come down proportionally or even immediately.

Beyond the arguments for or against the measure, it is not clear that the bill’s tax changes would seamlessly replace school property taxes.

For instance, it isn’t clear the 138-page bill can raise the precise amount of school property taxes being collected, or even that it is required to raise that amount before it takes effect.

Argall estimates that his bill raises somewhere between $12 billion and $13 billion a year, but the state Legislature’s Independent Fiscal Office projects that total school property tax collections, including rebates, will be more than $14 billion next year.

Its future is uncertain: Wolf has been silent about it, and a similar bill failed in the House two years ago, 138 to 59.

But opponents have swung into action. Fifty organizations - including the Pennsylvania Chamber of Business and Industry, the Pennsylvania Bar Association, the NAACP and a range of education advocacy organizations, food charities and trade associations - circulated a letter opposing it last week.

Food banks saw immediate harm from taxing food at a time when almost 2 million people are served by the state’s charitable food network each year. Most patrons do not owe property taxes yet can barely afford to eat, said Lisa Scales of the Greater Pittsburgh Community Food Bank.

___

Follow Marc Levy on Twitter at www.twitter.com/timelywriter. His work can be found at https://bigstory.ap.org/author/marc-levy


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