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Wednesday, February 05, 2003

By John M.R. Bull, Post-Gazette Harrisburg Correspondent

HARRISBURG -- Gov. Ed Rendell has been hinting strongly that a tax increase could happen this year, but a high-ranking state senator didn't hedge on it at all yesterday.

He guaranteed a tax increase. A big one. This summer.

"I see no other way to solve this problem but for a tax hike," said state Sen. Vincent Fumo, D-Philadelphia, the top Democrat on the Appropriations Committee. "This is going to be solved, and it's going to be solved with a tax increase and Republicans are going to vote for it."

Because of the slumping economy, the state faces a budget deficit of between $1.4 billion and $2 billion when the fiscal year starts in July, depending on whose figures you believe. Rendell, who never ruled out increasing taxes during his gubernatorial campaign last year, said last week that the state's fiscal position was even worse than he thought when he was sworn in.

Fumo said he was considering increases in sales, income, cigarette and corporate taxes, as well as instituting one on health insurance companies, such as Blue Cross and Blue Shield, and was mulling eliminating the multiyear phaseout of the capital stock and franchise tax on business. To close the deficit, he said he also would allow casinos, riverboat gambling and slot machines at racetracks.

Fumo said he expected the political battle over this year's budget to rival that of 1991, when a large deficit had lawmakers at each others' throats for months until a budget was passed late one August night, long after the constitutional deadline to have a spending plan in place. Rendell is scheduled to propose his budget for the coming year on March 5.

That year, Democratic Gov. Bob Casey and lawmakers increased taxes by billions of dollars, raising the personal income tax from 2.1 percent to 3.1 percent. It now is at 2.8 percent.

In fact, Fumo has already told Senate Democrats not to schedule any vacation time in July. Lawmakers routinely adjourn for the summer in June.

He also issued some advice for lawmakers who weren't in office in 1991, as Fumo was, and may want to promise to never vote for a tax increase:

"Don't paint yourself into a corner because you are, at some point, going to have to walk in wet paint. There will be a tax increase. It's just a question of when."