Philly Get Ready for Permanent Sales Tax Hike

The city's one-percent temporary sales tax will almost certainly become permanent

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    Philadelphia City Council President Darrell Clarke's office said Monday that legislators will make permanent a 1 percent sales tax that was due to expire next budget year.

    "Council will pass an extension of the sales tax," said Jane Roh, a spokeswoman for Clarke. "There is just disagreement at the moment about what the final sales tax extension will look like."

    Earlier in the day, Mayor Michael Nutter's aides said that Council members should quickly get on board with a plan to extend the tax so that the city can borrow $50 million this year against future sales tax revenues for the cash-starved school district.

    Superintendent William Hite also expressed urgency last week, when he said that he likely wouldn't be able to open schools on Sept. 9 without additional funding. He expected to have an extra $50 million in hand by now.

    The $50 million loan is part of Gov. Tom Corbett's plan to help fill the school district's $304 million budget gap.

    Originally, Nutter proposed raising money for the schools by imposing a $2 tax on every pack of cigarettes. Council passed the levy, but the Pennsylvania General Assembly did not provide enabling legislation needed to make it a reality.

    State lawmakers did OK the sales tax extension, which Nutter now supports. He wants to dedicate $120 million annually from the sales tax revenues to the school district.

    "These are the tools that we were given, and we need to use them to make sure the district gets the funding it needs," said Rob Dubow, Nutter's finance director.

    Clarke, however, wants to split the sales tax proceeds between the school district and the city's underfunded pension system. His strategy relies on the General Assembly approving the cigarette tax this year.

    Councilwoman María Quiñones-Sánchez, who argued that the sales tax is highly regressive, has also proposed an alternative plan to raise up to $50 million for the schools this year by tapping the city's general fund. But Dubow said that is not an option because it would lead to budget deficits in future years.

    Because of Nutter's position on Sánchez's plan, Roh pronounced it dead.
    "I believe the administration has said it opposes it," she said. "That effectively ends that discussion."

    City Council could signal approval

    Council is scheduled to come back from its summer recess on Sept. 12.
    Dubow said that Council members would not necessarily need to return from recess early in order to begin the process of borrowing $50 million from Wall Street.

    "I don't know that they need to meet," Dubow said. "If they gave indications of support, that would probably help get the process started."

    It is unclear whether a statement from the Council president's office would be enough to satisfy Wall Street lenders. Dubow said Nutter would work with Council to determine "what those indications would look like."

    Dubow said the city could borrow $50 million if lawmakers decided to split the sales tax proceeds between the district and pension fund, as long as the General Assembly passed the enabling legislation for the cigarette levy. That is considered a long shot.

    City officials said it may not be possible to borrow the money if Clarke's plan won support from Council, but not the General Assembly.

    "It's also a timing issue," said Lori Shorr, Nutter's chief education officer. "Because the tobacco tax would have to pass up in Harrisburg, and schools open" in five weeks.

    Clarke spokeswoman Roh, however, said the disagreement over the sales tax proceeds "should not affect the city’s ability to borrow against the extension."

    More pleas for school funding

    Several education advocacy groups visited City Hall Monday to try to convince Council members to boost school funding.

    Parent Dawn Hawkins, a member of Action United, said she supports Sánchez's plan.

    "They need to get that money and fund our children's education," she said. "Point blank. Period."

    Donna Cooper, executive director of the local nonprofit Public Citizens for Children and Youth, said elected officials should, at the very least, vote to extend the sales tax, dedicate $120 million to the district from those revenues starting next year, and move forward with Sánchez's $50 million grant or Corbett's $50 million loan.

    "School starts in one month and funds are still far short of what is needed," Cooper said in a letter to Nutter and Council members. "There is hard work that must be done."


    This story was reported through a news coverage partnership between NBC10.com and NewsWorks.org