Some city officials are upset with the Pittsburgh budget plan the Legislature approved early yesterday, saying it falls short of the full-scale tax reform they have been fighting for since 2001.

Others, including members of the city's fiscal oversight board, welcomed the state action, saying it will keep the city out of bankruptcy in the short term and give it tools to get its long-ailing finances back into shape.

"I realize there are things in this bill that everybody at some level wishes were different," said oversight board Chairman William Lieberman. "But in the end it provides a platform to spring this city into its next phase of renaissance."

Mayor Tom Murphy's office withheld judgment.

"It is premature for the administration to comment until we have had an opportunity to thoroughly review and examine all of the language that was passed early [yesterday] morning," spokesman Craig Kwiecinski said.

Everyone who works in Pittsburgh will pay a flat $42 more next year, as the occupation privilege tax rises from the current $10 to $52.

All for-profit city businesses will pay a new 0.55 percent payroll tax.

Along with a $4 million shift in county sales tax revenue from the Pittsburgh Public Schools, an agreement by Gov. Ed Rendell to expedite $3.5 million in city anti-terror funding and a 2 percentage point increase in the tax on visiting pro athletes, the city should have barely enough to stave off bankruptcy in the short term and cover its estimated $77 million shortfall next year.

But the help came at a price.

Some members of City Council and the fiscal oversight board wanted the city's current business and mercantile taxes completely eliminated. Those taxes are applied to a company's gross receipts whether it makes a profit or not.

The Legislature did eliminate the mercantile tax, but it decided to phase out the business privilege tax, rather than get rid of it altogether now. The rate will drop from the current 6 mills to 2 mills for 2005 and 2006. In the next three years, the level would drop to 1 mill, but only if the revenue from the payroll tax exceeds $50.5 million in a year. In 2010, the tax no longer would be imposed.

Large employers such as banks, utility companies and manufacturers, including the Pittsburgh Post-Gazette, remain exempt from the business privilege tax. But they have no such exemption for the payroll tax.

"The small business owners will continue to pay more than their fair share, making up for what the heavies are not paying," City Council President Gene Ricciardi said.

The occupation tax -- raised for the first time since it was implemented in 1965 -- is far lower than the $144 yearly tax the oversight board recommended. It is also lower than the $61 the tax would be if it had been adjusted for inflation.

The oversight board wanted the rate revisited every three years, but the Legislature did not add such a re-opener to the final bill.

Lawmakers also barred the city from seeking commuter taxes allowed under Act 47 for the seven-year life of the oversight board.

"What was served is not really tax reform. It's essentially putting a Band-Aid on," Councilman Doug Shields said. "This doesn't do anything but put us in position to be back in Harrisburg next year."

"The city is going to be locked in [to $52] for another 40 years," Ricciardi said.

There were also complaints about the use of Pittsburgh Public Schools funds to balance the city budget. Now, the city and school district split the 3 percent earned income tax -- with the city getting 1 percent and the schools, 2 percent.

In 2007, the city's share will be 1.1 percent and the schools, 1.9 percent. In 2008, the city would get 1.2 percent, the schools, 1.8 percent; and by 2009, the city would be getting 1.25 percent, the schools, 1.75.

"It was never my intent to rape and ravage the schools. Tax reform is not raiding the schools and putting it into the city's coffers," Ricciardi said. "When [the school district] raises property taxes, who's going to be paying? The same people who have been footing the bill for years -- residents and merchants."

It will be up to City Council to implement the new occupation and payroll taxes during budget debates in the next few weeks. That will determine when the new tax rates will take effect.

Some on council were fine with the state's package.

"I think we can work with it. I am happy," said council's budget chairman, Alan Hertzberg. Raising the $10 occupation tax "was a tremendous hurdle for us for a long time. It's a big success for Pittsburgh and at the same time cities all over the state can take advantage of it."

"I'm happy with what happened. We got more than I personally expected," said Councilman Jim Motznik.

"It's probably not the package I would have wanted," said Councilman William Peduto. "But this is just the end of the first, in a nine-inning game."

Council will have plenty of opportunity to debate the state package, starting today when it holds a 3 p.m. public hearing on spending cuts in the Act 47 recovery plan. The recovery plan is essential for implementing some $270 million in long-term spending cuts included in Murphy's 2005-09 budget.

Council barely approved the overall recovery plan in a 5-4 vote this past summer. Now it has to vote on 30 changes needed to enforce it, covering things like employee vacations and holidays, fee increases and bureaucratic moves.

City workers and unions are sure to lobby against the plan, as they have since the summer.

The requested changes include increased fees for swimming, park shelter usage, ice skating in Schenley Park and burglar alarms; several city work-force changes to holidays, vacation days and other rules; and eliminating departments, including its Engineering and Construction Department and its spay and neuter program.

New ambulance usage fees will probably be among the most debated changes. The plan calls for charges of $500 to $700 for ambulance transports, and says if a user's health care coverage does not pay the full cost of transport, the user will be billed for the difference.

Some council members want to force final votes on the bills tomorrow, when they will hold their final meetings before Thanksgiving. Others, like Shields, want lengthier debate.

State lawmakers and the state-appointed fiscal oversight board want City Council to implement the Act 47 changes to prove it is serious about cutting city spending. The board also made council's implementation of the Act 47 bills a condition of their approval of the city's $425 million operating budget for 2005.

But the contents of the new state budget package -- or rather, what was left out of it -- could affect council's vote.

To petition for commuter taxes, the city was required to fully implement the Act 47 plan first. Now that the state has barred the commuter taxes, that pressure is off.

"I'd like to throw Act 47 out of the window if we don't have a commuter tax," Motznik said.

Others are questioning the leadership of the Act 47 team and the oversight board, since they did not deliver the full amount of tax relief the city wanted.

"The Act 47 team has showed that they're impotent. They lack influence. They're lightweights in the arena of state politics," said Ricciardi. "What is our incentive to go down the path to work with 47?"

Bottom line: The debate over Pittsburgh's budget may be far from over.