House Dems take budget talks in new direction

HARRISBURG - A state budget proposal appeared to unravel Thursday when House Democrats moved to change the mix of tax revenues legislative leaders had agreed to two weeks earlier.

The House Rules Committee approved a tax bill on a party-line vote that would eliminate proposed taxes on small games of chance and stage performances, and set a 34 percent state tax rate for table games at slots casinos, levy a severance tax on natural gas production and impose a tax on cigars and smokeless tobacco.

The tax bill could come up for a floor vote today.

The tax bill would uphold a $27.9 billion spending plan announced by House Democratic leaders, Senate Republican and Democratic leaders and Gov. Ed Rendell on Sept. 18, but it removes two major revenue components - a 20 percent tax on small-games profits by small-games licensees that have liquor licenses, and a sales tax on admission tickets to performing arts venues and music concerts. Rank-and-file Democrats objected strongly to both proposals in caucuses this week. A severance tax and smokeless tobacco tax were not part of the agreement, but they are a popular idea with Northeast Pennsylvania lawmakers.

The provision to levy a 34 percent table games tax and set a $20 million licensing fee should be viewed in comparison with the proposed 20 percent small-games tax, said House Speaker Keith McCall, D-122, Summit Hill.

Senate documents have outlined a table games tax rate ranging from 12 percent to 24 percent.

McCall said his caucus scratched the sales tax on art venues when doubts were raised about whether it would really generate $100 million annually for state coffers.

A proposal to lease state forest land for natural gas drilling will be put in a separate bill, he added.

The House Democrats' move to refashion the agreement injects a new level of uncertainty about when Pennsylvania's fiscal crisis, now entering a fourth month, will end.

"We tried as close as we could to conform to the deal," said House Majority Leader Todd Eachus, D-116, Hazleton.

It's possible the tax bill could end up in a House-Senate conference committee in a couple of days.

A Senate GOP leader said a vote by the House to alter the revenue mix could send

budget negotiations back to the starting point.

"We agreed to a very specific set of revenues," said Senate Majority Leader Dominic Pileggi, R-9, Chester.

Trying to change an agreement negotiated with other caucuses could be a risky political move for Mr. Eachus and Mr. McCall, said Dr. G. Terry Madonna, pollster at Franklin and Marshall College, Lancaster.

"It opens up a Pandora's Box that every time there is a controversial issue they can't hold the caucus together," added Dr. Madonna.

Urging lawmakers to stay in continuous session, Mr. Rendell said that some "social safety net" organizations have closed their doors due to the deadlock and others will follow.

An $11 billion stopgap budget crafted by Mr. Rendell leaves schools, early education programs, day care centers and county-run social service programs without state aid.

Meanwhile, state revenues dropped more than $100 million than anticipated last month bringing more grim tidings.

The Revenue Department reported it collected $118 million less in three mainstay state levies - the personal income, corporate income and sales taxes - and numerous smaller taxes than it estimated.

Revenues have come in below estimate for the first three months of the fiscal year that started July 1. The revenue lag supports projections that Pennsylvania will have sizeable deficits during the next two years as a result of the deep national recession. The state accumulated a $3.3 billion deficit in the 2008-09 fiscal year.

While the budget deadlock has dominated attention, Sen. Lisa Boscola, D-18, Lower Saucon Twp., warned colleagues about a "time bomb" at year's end when electric rate caps are lifted for one million PPL customers. The rate caps have been in effect for the past decade as part of electric deregulation.

Ms. Boscola wants lawmakers to enact legislation to mitigate what she said could be a doubling of monthly electric bills for PPL customers.

"At a time when we are debating raising the cigarette tax 25 cents, a 30 percent to 40 percent increase in electric bills will take hundreds of dollars out of peoples' pockets," she said.

Contact the writer: rswift@timesshamrock.com

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