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Wolf: Budget deal in 'deep peril'

Senate narrowly rejects measure to kill school property tax

HARRISBURG - Acknowledging that the plan to resolve the five-month budget impasse is in "deep peril," Gov. Wolf on Monday blamed Republican legislators for the potential collapse of a tentative agreement and urged a new effort to save the deal.

At the same time, GOP leaders said they were trying to salvage other parts of the so-called budget framework, even as they were positioning legislation for a vote that could have imploded it.

In the end, the sides could not even agree on why their deal was falling apart, let alone how to save it. That sowed new confusion and uncertainty about the stalemate, which has stalled critical funding for schools, counties, and nonprofit organizations.

Speaking at a Harrisburg luncheon, Wolf said Republican leaders made a deal they simply couldn't close. He urged them to work harder to revive the deal or deliver a new proposal by Dec. 4.

"We need to end this nonsense," Wolf said.

His comments came after a weekend in which the agreement encountered a lack of support among lawmakers for a key provision: how to cut property taxes.

A number of Republicans and Democrats appeared to favor eliminating property taxes and replacing the revenue with another form of tax, such as higher sales or income taxes.

A bill promoting such a plan went to the Senate on Monday night - then lost by the narrowest possible margin. The vote was 24-24, leaving Lt. Gov. Mike Stack, a Democrat, to break the tie by voting against it.

Supporters of tax elimination said their constituents historically have complained about property taxes more than most other issues. "It's time to slay this beast," said Sen. Donald White (R., Armstrong).

Those who helped vote down the measure, such as Sen. Christine Tartaglione (D., Phila.), said it would cause sales and wage taxes to soar. Sen. Tommy Tomlinson (R., Bucks) worried that large businesses would benefit from a property-tax cut while citizens would be forced to surrender more of their paychecks.

The debate leading to that vote crystallized the backlash that had quietly built to the $30 billion budget deal that Wolf and GOP leaders had pledged to finalize next month.

That framework called for raising the state sales tax from 6 percent to 7.25 percent, along with changes to the state's pension system and sale of wine and liquor. The estimated $2 billion generated by a sales-tax hike was expected to help offset a cut in property taxes, which for decades have been the primary funding source for school districts. Pennsylvanians now pay about $12 billion a year in property taxes.

Senate Majority Leader Jake Corman (R., Centre) said Republicans told the governor Friday night that there was a lack of support among rank-and-file members for the way the administration was proposing to distribute property-tax relief.

He said Wolf favored a formula that would spread money more heavily to poorer districts - one in which Philadelphia, in particular, would benefit. Republicans championed a plan that would factor in student population numbers in determining funds for school districts.

Corman said that because the divide on that issue was so wide and stubborn, he would suggest abandoning the property-tax piece of the agreement and focusing on it later.

"My point was, if this was June 30, we could sit down and haggle through this," he said. "But this is November, and we need to get a budget done."

In the wake of the setback, Wolf would not say whether he would consider signing a temporary budget - as Republicans have previously suggested - to get state aid to the schools, nonprofits, and other agencies that have had to rely on loans and credit to stay afloat. But he did say his own plan would still include money for a property-tax reduction.

The tentative agreement also called for $400 million in new school funding, although the governor on Monday said he hoped to get more for public schools and early-childhood education.

"One of the blessings we cannot count on [this Thanksgiving] is a budget," Wolf said at a press club luncheon. "All I want is to restart the bipartisan framework we had agreed to."

Steve Miskin, spokesman for House Majority Leader Dave Reed (R., Indiana), said that GOP leaders were "perplexed" at the governor's comments.

"Until a few minutes ago, we thought we were working together and with a partner," Miskin said shortly after Wolf's remarks.

House Republicans still anticipated negotiating with Wolf under the existing framework, Miskin said.

"We want to get this done," he said.

Several legislative officials have said one alternative being examined closely to raise new money is expanding the list of items subject to the sales tax. As it stands, there are dozens of exemptions.

Another possibility discussed Monday was eliminating a little-known but oft-criticized perk of allowing retailers to keep 1 percent of the 6 percent sales tax they collect and later turn over the state.

The break was originally envisioned to help businesses - particularly smaller ones - offset the bookkeeping costs associated with gathering and remitting the tax. Some legislators have argued for years that computerized systems have rendered it unnecessary.

While the sides argued Monday over the scope of the potential setback, several leaders of nonprofits rallied in the Capitol rotunda to urge lawmakers to finish the deal.

Terri Hamrick, who runs a domestic violence and sexual abuse shelter in Gettysburg, said funding woes stemming from the impasse have forced her to turn away more than 180 people.

In recent weeks, she said, her organization, Survivors, which relies largely on government funds, has stopped paying utility bills, seen its trash collection halted, and been referred to collection agencies. Without aid, the shelter could be forced to close by Christmas, she said.

"Every day that there's a delay, the ripple of devastation keeps growing," Hamrick said. "I'm looking at the faces of people who are being hurt every day."

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