Legislator backs raising rates on sales, income to offset property tax relief

State issues on pension reform, privatization, transportation funding and how they relate to formulating a budget before a June 30 deadline all are connected.

In fact, “they’re a little more intertwined than the Legislature would like,” admits state Rep. Garth Everett, R-Muncy.

Gov. Tom Corbett’s plans to use proceeds from liquidating the state’s wine and spirits shops are linked to an education block grant. And his proposal to use $1 billion for senior citizen programs was dependent on the sale of the state’s lottery to a United Kingdom corporation.

The lottery deal was rejected as unconstitutional by State Attorney General Kathleen Kane Thursday.

All this while Pennsylvania faces a more than $40 billion shortfall on funding public employee pensions.

“The pension fix is a big deal,” Everett said. “Whether we can get that, the budget, transportation and privatization all done before June 30, I don’t know. That’s what the governor would like to see happen.”

With so much on the plate of state lawmakers, Everett said things may have to be done in small steps.

For instance, he said legislation will be introduced soon that calls for the gradual phase in of liquor store privatization. Everett said Ohio took similar measures that allowed that state to slowly move out of the alcohol business.

“Philosophically, I don’t believe government should be involved in any business, including selling alcohol,” he said.

But the real losers in alcohol privatization are smaller, local beer distributors, according to Everett. He said their distributorship licenses will be devalued if beer is readily available at convenience stores and big box retailers like Wal-Mart and Target.

“In the governor’s proposal, they get killed,” he said of beer distributors. “They get killed. They’ll be put out of business within two years.”

Although distributors may be eligible to sell wine and spirits in their stores under privatization, they would have to purchase an additional license and most likely reconfigure their retail space.

In Ohio, Everett said beer distributors were offered a buyout of their license at fair market value if they chose to get out of the business.

“That’s what the distributors (here) have said to me: ‘If you’re going to sell me down the river, at least pay me fairly for what it is.'”

The union that represents state store employees may even be willing to help gradually phase out the system, Everett said, instead of facing a sudden, mass layoff.

Any money from liquor privatization that goes toward education is a one-time deal, according to Everett.

“If we don’t do privatization the way (Corbett) is proposing to do privatization, that block grant money will not be there,” he said.

Still, Everett said, school districts should not get used to these kinds of cash infusions. He said the state is funding education at a rate higher than inflation.

“I think we’re doing well by the districts,” said Everett, a former school board solicitor. “They’re never happy. We never give them enough money. If they can’t keep their costs under the rate of inflation, that’s something they’re going to have to deal with.

“The fact is, we don’t have ‘forever’ money to stick in there for them right now in those line items. When (federal stimulus money) went away, they screamed at us, ‘you just cut our funding.’ We raised your funding. The federal government is now not giving you stimulus money.”

On pension reform, Everett agrees with Corbett that what has already been earned by employees can not be touched. But does that mean the way future retirements are calculated can be changed?

“We’re not sure if we want to do that or legally even if we can do that,” he said. “We all fully know there’s going to be a court challenge to whatever we do.”

Everett said there is no way lawmakers can turn a blind eye toward pension reform. If left untouched, other parts of the state’s budget will be impacted severely.

“When that piece of the pie gets bigger,” Everett said about the cost of funding public employee pensions, “another piece of the pie has to get smaller, whether that’s going to be education or social services. Something has to give if we allow that to keep growing.”

He said the $40 billion owed to retirement funds could be paid for 20 to 30 years with a bond issue with no tax increases, if approved by voters.

“If not, taxpayers are going to be paying for this or sections of the budget are not going to get as much money … as they normally did,” Everett said.

He also called the state’s funding of school property tax reduction with casino money a “bait and switch” move that hasn’t made a real impact for the taxpayer. Slot revenue – not money from table games – is being used for school property tax reduction.

“Money from slots revenue to reduce property taxes is just offsetting school district increases. Depending on your district and how much they raised it, your tax bill may have stayed the same,” he said.

Everett said he is a co-sponsor of a bill that would raise the state income and sales tax by 1 percent each and broaden categories of taxable products.

Previous attempts among lawmakers to pass such legislation has failed.