By Patrick Kerkstra

Every so often, when Mayor Nutter opens his mouth, a little gem tumbles out that captures matters perfectly. Yesterday, it was a five carat diamond.

“We are caught in a vortex of political hell with no way out,” Nutter told reporters. Later, he mentioned ping pong.

At issue is the cigarette tax for city schools, which is a questionable policy on its own, but also the closest thing the district has right now to a lifeline. Yesterday morning, it looked like a lock. But that was before the State Senate voted to put its growing feud with the House of Representatives and the tender concerns of the tobacco lobby ahead of the School District of Philadelphia and its 191,000 students, adding a five-year sunset provision to the tax and putting its final passage at risk.

How did this happen? Didn’t the Senate approve the tax sunset-free on June 30?

Well, yes. But then the House got the bill, and while the House shocked all by accepting the cigarette tax, its version of the legislation gave an assist to city charter schools and took out a few provisions unrelated to the cigarette tax but near-and-dear to the hearts of Senate Republican leaders like Majority Leader Dominic Pileggi (see here and here).

That gave the Senate a second chance to tinker (ping pong), gave the tobacco lobbyists the entree they’d been looking for (which is definitely political hell), and now everything the district thought it had won, meager though it was, is suddenly at grave risk (a vortex of, say, potential doom).

Now it’s back to the House, which has scheduled a rare summer session to take the matter up again.

Philadelphia Democrats in Harrisburg are howling about all of this, with the peculiar exception of State Senator Anthony Williams, the Democratic whip. On Monday, he claimed credit for his role in moving the cigarette tax (Williams introduced the tax authorization bill) in a joint appearance with Mayor Nutter. On Tuesday, he was the lone Democrat in the Senate to vote for the amendment sun-setting the tax after five years.

Yesterday, shortly before the votes on the bill, Williams told me that “the tobacco lobbyists are up here, not trying to kill it but inflict pain upon it.” He described the five-year-sunsetting as a better option than “more egregious” alternatives the lobby was pushing.

“We basically said, look, we need to vote it out of there, we’ll accept a five year sunshine,” Williams said, when asked why he would support the sunset provision. “A cigarette tax is not a permanent funding solution for the schools, and if it works, it’ll probably get renewed.”

I suspect some version of the cigarette tax will ultimately pass. But that’s obviously not a sure thing. And if the district does get a tax with a five-year lifespan, it’ll be difficult for Superintendent Hite to do long-term fiscal planning. One of the Philadelphia school district’s many problems is the lurching about it’s been forced to do each year to find stopgap funding, instead of being able to rely on a predictable stream of revenue, like the rest of the districts in the state.

A five-year cigarette tax would also be a far, far cry from the grand bargain that seemed, fleetingly, to be in the works earlier in budget negotiations. According to sources, the proposed framework of the deal looked roughly like this:

• A new tax on Marcellus Shale gas extraction, with annual revenue of between $200 million (which Republicans were willing to accept) to $600 million (which Democrats were angling for).
• The issuance of pension obligation bonds, both to shore up the state’s pension fund and free up short-term cash for school districts like Philadelphia’s that are buckling under extreme pension payments.
• A rollback on pension benefits for new state employees, either in the form of mandatory 401(k)-type plan, or a mandatory hybrid plan.
• New funding of around $70 million for the “charter reimbursement” line of the state budget, which would have translated into significant new funds for school districts like Philadelphia’s that have a lot of charter operators.
• In all likelihood, the cigarette tax would have been included in a final deal as well.

If that framework had held up, the district would have been looking at more than $60 million in new state funding, plus the $80 million or so the cigarette tax is estimated to net the district in its early years.

That’s the kind of investment that shuts off the sirens at district headquarters, the kind of money that returns counselors and nurses and librarians and aides to city schools. It’s the sort of cash that gives Hite and his team a fighting chance to make schools better.

But the framework, which was being assembled principally by Pileggi and Williams, fell apart before it matured into a concrete proposal, and it’s not hard to see why. There’s a pretty vast spread between a $200 million shale tax and a $600 million one. I think it’s unlikely many Republicans in the Senate or the House would have accepted $600 million in new taxes, and I doubt many Democrats in either chamber would have been willing to cross their allies in the public employee unions, certainly not on the cheap.

Perhaps, if it was not a gubernatorial election year, Philly Democrats in safe seats would have been freer to vote in the interests of the school district, and perhaps they would even have had the silent blessing of party leaders. That might have been enough to clear the Senate and give the deal a soupcon of bipartisan flavor.

But it is an election year. And it would surely take a lot of Democratic votes in a Republican House as conservative as this one to pass any budget that included hundreds of millions of dollars in new taxes.

And that’s to say nothing of Gov. Corbett, who resisted the shale tax throughout (though I do think he would have had little choice but to sign off on a grand bargain if it had made it to his desk in an election year).

You get the drift. Republicans say Democrats wouldn’t bend, Democrats say the same of Republicans, and in the end we have a still-unsigned, status-quo budget and the prospect of no new money for city schools.

It would be simplistic and reductive to proclaim a pox on both their houses. Republicans control state government top-to-bottom, full stop. But I don’t see any profiles in courage on the Democratic side of the aisle here either.

“A vortex of political hell” indeed.

Source: http://www.phillymag.com/news/2014/07/09/cigarette-tax-fail/