The House and Senate approved different versions of the taxing legislation. The Senate included approval for hotel taxes and economic-development tax breaks in other municipalities that the House did not include.
State Sen. Jake Corman, a Centre County Republican and chairman of the powerful Appropriations Committee, used that back-and-forth Tuesday to insert a few key words in the Senate version, calling for the new cigarette tax to end on June 30, 2019.
The Senate approved that version and sent it back to the House, which is tentatively scheduled to return from summer recess on Aug. 4 to consider it. There is no guarantee that the House will support the Senate version.
The cigarette tax is meant to help close a $93 million budget deficit for the Philadelphia School District.
State Sen. Anthony Hardy Williams of Philadelphia predicts the tax could raise up to $45 million this year and $83 million in its first full year of enforcement.
State Sen. Vincent Hughes of Philadelphia said yesterday that each week of delay would cost the district $1.6 million in taxes.
Corman said the tobacco lobbyists did not influence his decision to add the sunset measure.
Corman added that he inserted the sunset provision because he worried that the tax in Philadelphia would affect other taxes the state collects on cigarettes.
"This is an unprecedented tax," Corman said of the $2 per pack. "This is the biggest onetime cigarette tax in the country."
Corman said Pennsylvania collects about $1 billion each year in other cigarette taxes, with about 20 percent going to Philadelphia. The sunset gives the state a chance to measure the impact of the new tax, he said.
Corman cited concerns that Philadelphia smokers would resort to "underground markets" to avoid the tax, which would increase the cost of a carton of cigarettes by $20. He also said smokers might be lured across state lines for cheaper cigarettes.
Corman compared the cigarette-tax sunset to a temporary 1-cent increase in the sales tax approved for Philadelphia in 2009 by the General Assembly. The state eventually removed the sunset provision for the sales-tax increase, Corman noted.
"If it goes well, much like the sales tax, we'll remove the sunset," Corman said of the new cigarette tax.
The Altria Group's lobbyists, Stanley Rapp of Greenlee Partners and Richard Gmerek of Gmerek Government Relations, referred questions to their client.
Altria's media-affairs office did not respond to a detailed message about the lobbying.
R.J. Reynolds lobbyist Michael Rosenstein did not respond to requests for comment. Bryan Hatchell, director of communications at R.J. Reynolds, declined to comment on the lobbying.
The Altria Group's political-action committee has given Corman $9,500 in campaign contributions since 2009, including $2,000 this year even though he is unopposed in the primary and general election. The company also has given $31,500 since 2009 to the Senate Republican Campaign Committee, which works to keep the GOP in control of the state Senate's chambers.
A political-action committee for R.J. Reynolds gave Corman a $10,000 campaign contribution in March.
Philadelphia schools Superintendent William Hite called the sunset provision problematic to the district's long-term planning, citing a number of onetime revenue fixes that have forced officials to plead for more funding year after year.
"It is concerning when you have a revenue source that is meant to be recurring that then sunsets after a period of time because it doesn't provide you with the ability to plan long term," Hite said yesterday during a conference call with reporters.
"And we, as the school district, have to get out of this one-year cycle of fiscal planning and plan more along the lines of a five-year financial plan that will allow us to predict what is likely to be available four years from now, so that we can plan accordingly."
Without additional revenue, the district would have to slash expenses. Hite said employees would have to be notified of possible layoffs by Aug. 15. Another option to close the deficit would be to shorten the school year.
"I'm saying definitively I'm not going to put 40 children in a class, because they're not going to be safe," he said. "I'm saying definitively I'm not going to further reduce services that are available at schools now."
DN Editorial: Funding for dummies.
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