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Capitolwire: House Democrats want to tap reserves to avoid tax hike. Scarnati says no.

House Democrats hope for property-tax-swap vote by mid-June. Scarnati says he will oppose any such bill that doesn't tighten spending controls on school districts.

By Peter L. DeCoursey
Bureau Chief
Capitolwire

HARRISBURG (May 21) – House Democratic caucus chief of staff Mike Manzo says it may take more than $400 million of the $590 million state Rainy Day budget reserve fund to balance the upcoming budget.

But Senate President Pro Tem Joe Scarnati, R-Jefferson, said, after speaking to a Pennsylvania Press Club luncheon at the Hilton, Harrisburg & Towers: "It isn't raining. The economic sky is sunny. It would send a terrible message to taxpayers if we tapped into an emergency reserve budget fund to pay for new programs when we have a good economy."

Speaking of Gov. Ed Rendell's proposed spending increases and of about $500 million in spending that Rendell cut and the Legislature wishes to restore, Manzo said: "We can do all of his stuff without a tax increase or we can do all of our stuff without a tax increase. The next month [of budget negotiations] will be all about who gets their priorities met."

Manzo said that since the current budget is producing a roughly $200 million surplus, it may be necessary to draw down more than $400 million from the $590 million budgetary reserve fund. State law says the maximum withdrawal from that fund would be $442 million this year.

Scarnati disagreed, saying "we are working at the staff level and we can come up with a no-tax-increase budget without dipping into the Rainy Day Fund. … Pennsylvanians can't afford another bill, another tax. They just can't."

So while Manzo says his caucus prefers a budget with "few or no new revenues," and Scarnati says "Senate Republicans want and know we can deliver, by June 30, a no-tax-increase budget, as taxpayers expect," they remain far apart on how to do that.

Administration officials hope to exploit that difference and win some modest revenue measures, including a tax on energy usage and tobacco taxes.

Manzo said the energy tax "was still an open issue," but said the tobacco taxes, which raise only $28 million to $30 million, "may not be worth" raising taxes for those sums. Scarnati said that proposal was "another bill the taxpayers can’t afford."

Manzo and Scarnati agreed that Rendell's proposed taxes on oil company profits and employers who don't provide health insurance are, in Manzo’s words, “growing increasingly unlikely.”

Scarnati said bluntly of the oil profits tax that it "isn't real," and "it doesn't work" in that it cannot be imposed without the costs being passed along to car owners at the gas pump.

On Sunday, during an interview on the "Pennsylvania Newsmakers" TV program, Rendell asked if that were true, why were major oil companies fighting the tax so fiercely, "if they can just pass it on at the pump?"

While Rendell and House Majority Leader Bill DeWeese, D-Greene, are pushing hard for a dollar-for-dollar sales tax hike to cut school property taxes, Scarnati said: "I will not entertain any proposal for a tax swap unless it tightens up the spending controls by dramatically reducing the exceptions to the back-end referenda."

Manzo said DeWeese hoped to get a House vote on the tax swap "by mid-June."

Even if that occurs, Scarnati said, it may be tough to pass such a bill through the Senate after the May 15 referenda. After his speech, Scarnati said: "I'm reading the vote from the May primary, and people aren't interested in raising their taxes or shifting taxes."

Scarnati also said Rendell's remarks on the "Pennsylvania Newsmakers" TV show on May 20, backing a dollar-for-dollar sales-tax-hike-for-property-tax-cut, "sends a huge subliminal message that he thinks the budget can be balanced without new taxes."

Before that TV appearance, Rendell had continued to push for his plan to devote two-thirds of the sales-tax revenues this year, and half of it in the future, to the general fund.

Scarnati covered a wide range of topics in his speech and the question-and-answer session that followed.

Speaking about campaign finance reform proposals to bring a federal-style system of donation limits to Pennsylvania, Scarnati said he wanted such a system to place limits on outside group expenditures, "because that has become a real problem at the federal level.

Scarnati joked that donation limits would "make my life a lot easier," because of the large amounts of time "we have to spend raising money."

Scarnati also said he would support "finding and squeezing out these cost-drivers" in rising health insurance costs, although he questioned whether Rendell had identified the right cost-drivers in his proposals.

Scarnati also said that on everything but the budget, setting a June 30 deadline is "unrealistic." He said the Legislature would promise the governor they would continue to work towards deals on energy and transportation funding, but that might not come until fall.

He also said that on mass transit, "before we throw more money at systems that are broken, let's fix them first."

Scarnati said he did not know why his counsel, Drew Crompton, received a $19,000 bonus last year, when he spent about four months working for Republican gubernatorial candidate Lynn Swann. Crompton worked for Scarnati's predecessor, then-Senate President Pro Tem Robert Jubelirer, R-Blair, until Dec. 1 last year.

Scarnati joked: "The bonus certainly wasn't paid based upon his results" for the Swann campaign. Republican gubernatorial nominee Lynn Swann got only 39 percent of the vote. Only Barbara Hafer, the 1990 GOP nominee and Ivan Itkin, the 1998 Democratic nominee, fared worse since World War II.

Scarnati then referred to a probe by Attorney General Tom Corbett of the bonuses paid to legislative staff by all caucuses.

"I think the attorney general will do a fine job and we will await his results," Scarnati said.

Scarnati also said he was surprised that little media attention was given to the Senate passing out of committee major reforms, including shrinking the size of the Legislature, ending lame-duck sessions and reapportionment reform.

Scarnati said he hoped for Senate action on those issues "soon," before laughing and adding "in Senate time, soon can be six months."

Reprinted with permission from Captiolwire

April 26th hearing at Seton Hill University.

April 26th hearing at Seton Hill University.