City, state to clash on sales-tax extension?

YONG KIM / STAFF PHOTOGRAPHER Council President Darrell Clarke (center) is pushing a sales-tax plan that the state might not agree with.
YONG KIM / STAFF PHOTOGRAPHER Council President Darrell Clarke (center) is pushing a sales-tax plan that the state might not agree with.
Posted: July 19, 2013

GOV. CORBETT AND the Legislature have done just about all they're going to do to save Philly's cash-poor school district, and that includes dedicated funding from an extension of the 1 percent sales-tax increase.

But, that approach isn't necessarily something with which elected officials locally agree.

The sales tax, which was slated to expire in June, was raised from 7 percent to 8 percent in 2009 to aid the city during the recession. That extra percentage increase brings in about $143 million.

The Legislature recently concluded its budget process. City Council President Darrell Clarke is pushing an alternative plan for fiscal year 2015 that clashes with Corbett's. It seeks to split money generated from an extension of the sales tax between the school district and the city's woefully underfunded pension fund.

"If we continue to have to put general-fund dollars in the pension fund to meet our minimal obligation, we're going to have a real problem in the foreseeable future," Clarke said.

The Daily News reported earlier this month that some city lawmakers were eyeing the tax as a way to fund pensions, which are projected to eat up 17.6 percent of the city's $3.8 billion budget. Clarke said Council was not clued in early that Harrisburg had other plans.

Corbett's recently approved plan allows the school district to borrow $50 million against an extension of the tax, which starting in fiscal-year 2015 will generate $120 million for schools annually. His plan also includes a onetime infusion of $45 million, a forgiven debt that was owed to the federal government and $15.9 million in state aid - a majority of which the district had already included in its budget. The school district requested $120 million from the state and $60 million from the city.

Clarke wants to send $70 million from the sales tax to fund pensions and pay off debt, and send the other $70 million to schools. His plan calls on Harrisburg to make its onetime $45 million grant an annual expenditure, possibly through charter-school reimbursement and counts on passage of state enabling legislation that would allow the city to enact a $2 per pack tax on cigarettes.

The proposed cigarette tax that would have generated $46 million in its first year died following intense lobbying and a lack of cohesive support within the Philly delegation. State Sen. Anthony Williams plans to try his luck again in the fall.

So, does Clarke's proposal stand a chance in the Republican-run Legislature?

House Republican spokesman Steve Miskin said the caucus will only consider new money for Philly schools if the teachers union makes major concessions, as the School Reform Commission has requested. The district is seeking $133 million from its unions, whose contract expires in August.

Meanwhile, Senate Majority Leader Dominic Pileggi "believes President Clarke's plan has merit," but needs to review it in detail, said Erik Arneson, Pileggi's communications and policy director.

Corbett's office did not respond to requests for comment. Mayoral spokesman Mark McDonald said the city needs to "see the school district's current plan to fruition."

David L. Cohen, Comcast executive and chief of staff under Mayor Ed Rendell, who has been working closely with city and state leaders on the school-funding crisis, says passage of the cigarette tax would help to free up sales tax revenue to be used for the pension fund. "This is a plan that makes a lot of sense," he said. "It provides a more balanced approach and is definitely worth pursuing."

- Staff Writer Sean Collins Walsh contributed to this report.


On Twitter: @Jan_Ransom

Blog: ph.ly/PhillyClout

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