Analysis: Corbett's no-tax-hike pledge peril

FROM THE MORNING CALL

HARRISBURG—

— Mark your calendars: This budget season might well have marked the time when dents began appearing in Gov. Tom Corbett's famed pledge not to raise state taxes or fees.

First thing's first: The $27.15 billion compromise spending plan for fiscal 2011-2012 that lawmakers began work on Sunday does not contain any general tax increases. If approved, Pennsylvanians won't pay more in personal income or sales taxes after July 1.

But between Sunday and the start of the new fiscal year on Friday, Republicans who control the House and Senate, along with the administration, will have vigorous discussions about two very important fee increases. The more well-known of the two covers the local impact of Marcellus Shale natural gas drilling. The other, less-discussed, but still critically important, pertains to hospitals and their ability to access federal matching money.

That Corbett, a Republican, is even having either discussion marks a significant shift from his hard-line rhetoric on the campaign trail last year, where he said he'd oppose any sort of tax or fee increase if elected.

By the time he rolled into a gubernatorial debate against Democrat Dan Onorato in Pittsburgh last October, Corbett's decision to sign a no-tax-hike pledge sponsored by the hawkish, Washington-based Americans for Tax Reform had already passed into political folklore.

During that televised session, candidate Corbett went a step further, announcing that he'd expanded the pledge to include all fee increases, such as motor vehicle license and registration levies — even though there were exceptions built into the promise, the Associated Press reported at the time.

In the third gubernatorial debate in Philadelphia days later, Corbett underlined that stance, saying, "We will not increase any fees. Not now. Not ever," the online news service Capitolwire reported.

In the six months since becoming governor, however, the shackles that the sound bite-perfect pledge have placed on Corbett's ability to get both his first budget and political agenda through the General Assembly became clear as lawmakers began looking for ways to close a $4.2 billion budget deficit, and support for a tax or fee on shale drillers grew.

"Everyone knew this day would come, when the challenge to find revenue put the governor in a spot where there would be a lot of pressure on him to acquiesce," said Chris Borick, political science professor and pollster at Muhlenberg College in Allentown.

The pledge took its first flesh wound earlier this year when Corbett announced he'd be willing, under certain conditions, to entertain a local impact fee on Marcellus shale natural gas drillers that had been offered by state Senate President Pro Tempore Joe Scarnati, R-Jefferson.

The House is also mulling a number of different shale tax and fee proposals.

While he remained adamantly opposed to a severance tax on drillers, which he pronounced a job-killer, Corbett said he'd consider the fee if all the money raised by it went to local and county governments and not to coffers in Harrisburg.

Corbett has also said he wants lawmakers to wait until next month — after the budget is approved — before they start discussions on an impact fee. That's when a special Marcellus Shale Commission chaired by Lt. Gov. Jim Cawley is supposed to return its findings on the impacts of drilling.

The report could provide Corbett with the political cover he needs to sign off on a levy that polls show is already hugely popular among the public and members of his own party, said G. Terry Madonna, pollster and political science professor at Franklin & Marshall College in Lancaster.

"He picked something the voters overwhelmingly favor," Madonna noted. "What's the consequence of that?"

The pledge took another ding last week when Corbett brushed aside criticism from Americans for Tax Reform boss Grover Norquist that an increased state assessment on hospitals was a tax — and, thus, a pledge-breaker.

When he was told by a reporter of Norquist's initial ruling, Corbett said he had looked at the law on hospital assessments and "if you look at the law, it calls it a fee."

Corbett's initial budget plan slashed $87 million in state funding for hospitals — a cut that was allowed to stand in the $27.3 billion budget the House approved in late May. However, the Senate is working to restore the money.

To get some of the money back, the hospital industry agreed to increase what is currently a 2.95 percent state assessment to 3.17 percent, raising $40 million. The state takes that money from hospitals, which allows it, in turn, to draw down federal cash for the institutions.

"Hopefully, we can find the additional $40 million," said Jim Redmond, the top lobbyist for the Hospital and Health System Association of Pennsylvania. "We've argued that this saves the taxpayers money because you don't have to take the entire $87 million from the general fund [budget]."

HARRISBURG—

As first reported by Capitolwire, a day after calling the assessment a tax, Norquist pivoted, announcing that Corbett got a bye because he's reducing taxes somewhere else — in this case, by phasing out the capital stock and franchise tax paid by businesses.

Corbett's defense of the assessment as a fee raised eyebrows. But he may have had little choice. He has more than once said hospitals are key economic drivers in their communities. And the combined loss of $193 million in state and federal funding for those institutions could have a ripple effect throughout the state's economy.

And there's the trap that Corbett has set for himself: while pursuing another campaign season vow to reduce the size and cost of government, he's also put his promise to rebuild the state's economy at potential risk.

"He's made it much more awkward than it needs to be," Muhlenberg's Borick said.

Corbett's no-tax pledge is likely to face even more significant challenges in the weeks and months to come as lawmakers look for ways to repay nearly $4 billion in unemployment compensation benefits that the state borrowed from the federal government.

On tap in August is a long-awaited report from Corbett's transportation funding task force, which was charged with finding some $3 billion in recurring revenue to underwrite repairs to Pennsylvania's crumbling network of roads and bridges.

In an interview earlier this month, the panel's chairman, state transportation Secretary Barry Schoch, said any increase to the state gas tax was off the table. It's possible the panel could recommend hiking vehicle registration and motor license fees as a way to raise revenue — which, remember, candidate Corbett said was a no-no.

"You can make an argument that this is only the beginning of [situations] … where the pledge is going to be a problem," Madonna said.