State tax cuts in Pennsylvania may shift burden to towns and schools

HARRISBURG - Tom Corbett has not wavered. He was swept into the governor's office promising not to raise taxes, and, notwithstanding a projected $4 billion deficit, he will almost surely honor that pledge in his first budget address Tuesday morning.

Does that mean most Pennsylvanians will escape the pain of a tax increase this year?

Perhaps not.

Some experts, school officials, and county commissioners foresee a year of trickle-down taxation - a budgetary Whac-A-Mole effect.

If Corbett, as anticipated, leaves tax rates unchanged and balances the budget in part by cutting aid to schools and municipalities, many of those entities will face grim choices: lay off employees, cut services, or raise local taxes.

It's hardly unique to Pennsylvania. Similar choices confront governors, legislatures, and school boards across the country.

"You see it at every level - from the federal to the state to the locals, the battles are joined on this point," said Jeremy Siegel, professor of finance at the Wharton School of the University of Pennsylvania.

And it isn't new. Though revenue has started inching back up, Pennsylvania heads into the 2011-12 budget year as one of 46 states that have cut services in recent years thanks to dwindling revenue, according to the Center for Budget and Policy Priorities, a Washington-based nonprofit.

All this has the opposition deriding Corbett's no-tax pledge even before seeing his plan. "This isn't a no-tax-increase budget," Miriam Fox, Democratic budget analyst for the state House Appropriations Committee, said last week. "It's a tax-shift budget."

Pennsylvania's 67 counties, which operate social service programs that aid abused children, the mentally ill, the elderly, and veterans, are bracing for deep cuts and possible tax increases of their own.

"We're operating on a shoestring," said Doug Hill, executive director of the County Commissioners Association. "We have sustained nominal increases in some areas, and stagnant funding and cuts elsewhere for close to a decade. At the same time, we have programs that we can't cut, because of federal or state mandates."

No one will feel the pressures more than the state's 500 school districts, most of which have raised taxes more than once in the last five years and now foresee deep cuts in state aid after steady increases under Corbett's predecessor, Ed Rendell.