Carolyn Kaster, Associated Press
	Moderator Lesley Stahl, center, gestures between Pennsylvania Gov. Ed Rendell, right, and his Republican challenger, Lynn Swann, as they square off before hundreds of business people yesterday in Hershey, Pa., in a prelude to next months gubernatorial debates.

HERSHEY, Pa. -- The first campaign debate between Gov. Ed Rendell and Republican challenger Lynn Swann started slowly yesterday, with esoteric discussion about business taxes and net operating losses, but by the end it had escalated into a lively scrap about who should bear the blame for the infamous legislative pay raise of July 2005.

As he has done often on the campaign trail, Mr. Swann charged that the Democratic incumbent had called the pay raise "a good piece of legislation'' and signed it less than 24 hours after the Legislature approved it in the early morning hours of July 7, 2005.

"Most people were against the pay raise, but instead of listening to the voice of the people, he signed it as quickly as it got to his desk,'' Mr. Swann said. "Then Ed blamed the Legislature, saying it wasn't his fault.''

Mr. Rendell stayed calm but the emotion was rising in his voice as he said, "Lynn Swann is a hypocrite. The two architects of the pay raise -- Republican senators Bob Jubelirer and Chip Brightbill -- the two men who lost in the May primary -- Lynn Swann supported both of them. Lynn Swann said the pay raise was just one part of their whole record and they shouldn't be judged just on the pay raise."

Mr. Rendell also shed light on a notorious meeting in his office, late one night in late November 2004, about which rumors have circulated for almost two years. It was the first time a legislative pay raise came up for discussion between the leaders and Mr. Rendell. The tense session featured a head-to-head clash with the two legislative leaders.

"I was yelled at and cursed by the two Senate leaders,'' the governor said. "I was threatened. I said no to the pay raise. I said I wouldn't approve it."

But by July 7, 2005, the pay raise had become a bargaining chip to get several of the governor's major programs approved by legislators, so he signed it. He said he called it "a good thing'' because it would have taken power for future raises out of legislators' hands and tied them to congressional raises.

Mr. Swann didn't reply to the charge that he is an ally of the two senators, because it's common knowledge at the Capitol that Mr. Jubelirer, in particular, was one of his earliest backers in his race for the GOP gubernatorial nod. Both senators leave office Nov. 30 because they were ousted in the May primary.

Mr. Rendell and Mr. Swann spoke for 45 minutes at the debate, sponsored by the Pennsylvania Chamber of Business and Industry at the Hershey Lodge and Convention Center. The debate was moderated by CBS newswoman Lesley Stahl.

Mr. Swann, a former Steelers player and a political rookie making his first stab at office, appeared composed in his answers, even though he was up against a well-funded 30-year political veteran in Mr. Rendell.

Mr. Swann took to the attack first, claiming Mr. Rendell hasn't done enough to lower business taxes, like the corporate net income tax, and the personal income tax, which determines the tax rate for many smaller businesses. Mr. Swann noted Mr. Rendell led the charge for increasing the personal income tax in 2003.

Mr. Rendell said Mr. Swann must have a problem with math, because his proposed tax cuts would cost Pennsylvania government more than $5 billion, which it can't afford.

"How in the Lord's name will we pay for [those tax cuts]?" Mr. Rendell asked.

He said he has enacted measures totaling $1 billion in business tax cuts, "which I think is pretty good." They include speeding up the phaseout of the capital stock and franchise tax and more tax credits for research and development and net operating losses. The latter allows business losses in one year to be carried over to the next year to lower a company's tax burden.

Mr. Rendell insisted that Pennsylvania is creating more jobs but Mr. Swann countered the state isn't doing enough to lower business taxes.

"Ed is remarkable with numbers,'' Mr. Swann said sarcastically. "There is a lot of massaging of numbers going on."

After the debate, Republicans said that many of the business tax cuts Mr. Rendell takes credit for were enacted in the GOP administrations of Govs. Tom Ridge and Mark Schweiker.

The two candidates also clashed over medical malpractice issues and lawsuit reform that would make it harder for people to sue doctors and hospitals. Mr. Swann insisted that "Pennsylvania is losing doctors,'' and more must be done to stop the rise in their malpractice insurance rates.

Mr. Rendell denied the state is losing doctors, saying the number of doctors who get part of their insurance from the state-run MCARE fund has stayed steady at 35,000. The MCARE fund pays half a doctor's malpractice insurance premium and the state pays the rest.

Mr. Rendell said he's initiated a mediation program to resolve medical disputes with doctors and patients before they reach the lawsuit stage.

Mr. Swann said that isn't enough, saying, "It's like putting a new coat of paint over something and saying everything is fine."

Two more debates are scheduled between the two, Oct. 4 in Pittsburgh and Oct. 10 in Philadelphia.