Democrats in the Pennsylvania Senate say the state's ugly budget hole makes this a good time to dust off a proposal to force big corporations to file combined tax reports, instead of separate returns for different subsidiaries.

That would eliminate the "Delaware loophole" which allows big, complex companies to move income out of state and avoid Pennsylvania taxes. The change would pour $500 million a year into state coffers, said State Sen. Robert J. Mellow (D., Lackawanna), the minority leader. The plan would also cut business taxes in future years.

Mellow admitted this will die without Republican support; he said he'd be happy to give the GOP credit for a bill. Gov. Rendell backs the plan, said spokesman Chuck Ardo.

"Combined reporting is a complicated issue," Republican leader Dominic Pileggi (R., Delaware and Chester) told me. "It could cost Pennsylvania employers more or less," it would cost money to implement, and it would not, in Pileggi's view, cut the state deficit this year or next. "It's a worthwhile long-term tax discussion," Pileggi said. "It's a legitimate debate to have."

Mellow told me "fewer than 10" corporations, including Comcast Corp. and "out-of-state" retailers and oil companies, would see the most "substantial" tax increases. Comcast didn't respond to requests for comment.

Pension drain

The Pennsylvania State Employees' Retirement System's investment portfolio fell an additional $2.2 billion, to $21.8 billion, during the first quarter.

The system paid more than $500 million to pensioners, as its domestic stocks fell 10.7 percent, foreign stocks fell 10.3 percent, real estate fell 14.8 percent, and private equity - nearly a quarter of the fund - dropped 16.5 percent. (The private-equity and real estate data cover previously unreported losses from the last three months of 2008. SERS reports those numbers months after the fact.)

By contrast, the state's hedge funds - 27 percent of its total - actually rose nearly 1 percent during the quarter, said spokesman Robert Genzel.

SERS's funded ratio (liabilities vs. assets) dropped to 89 percent at year-end, from 98 percent a year earlier, according to consultant Hay Group Inc. The actual ratio is worse; Hay "smoothed" the numbers using SERS's rolling five-year average calculation.

The ratio is important because it's used to calculate the fund's "employer contribution." That's now projected to balloon from the equivalent of 4 percent of state workers' paychecks to 31 percent in 2013-14.

That means SERS's state subsidy would zoom to $2 billion, up from $226 million this year - unless markets recover, or state legislators muddy the formula to delay the day of reckoning, as they have before.

White House talk

We caught up with Professor Larry Summers, adviser to President Obama and treasury secretary in President Bill Clinton's administration, as Summers prepared to speak to graduates of his alma mater, Harriton High School, in Rosemont, on Tuesday night. Highlights:

On the contrast in serving Obama and Clinton: "The biggest difference is the magnitude of the problems we're facing. Under Clinton, I was involved in addressing financial problems in other countries . . .

"President Obama is a remarkable man to work with. He has an ability to stay completely calm and cool in making all the decisions he has to make . . . "

On the economy: "It's not just the markets. The underlying economy feels better now than three months ago. . . . Look at the statistics on the confidence of consumers. . . . We still have a long way to go. But three months ago it felt like a ball rolling off a table. That's certainly not the sense today."

On Americans' future quality of life: "I believe that people are going to have a higher savings rate than they did historically and that they'll be better prepared for retirement than Americans have been in recent years."

On whether that means we'll have less to spend: "Yes. But the quality and innovation of the American workforce are better than any other economy in the world. In that context we can expect to continue to enjoy increases in the standard of living. I have no doubt my children's generation will enjoy things that my generation did not . . .

"We have serious problems in this country. But having spent a lot of time traveling around the world, I'd rather have our problems than theirs."

PhillyDeals:

Summers speaks . . .

his mind on the economy, future standard of living, serving under Obama, Clinton. PhillyDeals, C3.

Contact Joseph N. DiStefano at 215- 854-5194 or JoeD@phillynews.com.