Before they accept $5.5 million from local nonprofit organizations, Pittsburgh officials should consider seeking a sliver of their payrolls instead, city Controller Michael Lamb said yesterday.

That suggestion, made in a letter to the city's fiscal overseers this week and reiterated at a City Council meeting, renewed the debate over what the city should get from its health, education and arts sectors. Mr. Lamb raised the issue because the city may soon sign away any right to try to tax institutions making voluntary payments, as long as those payments continue.

"The one sector of employment that has continually grown, even in these times, is the nonprofit sector," Mr. Lamb said. "We've got to make sure that people are paying their fair share."

He recommended the city's state-picked overseers seek General Assembly approval to cut the city's payroll preparation tax from 0.55 percent to 0.44 percent, but to broaden it to include otherwise tax-exempt employers, he said.

That would boost the city's take from the tax from around $45 million to $50 million or $55 million, he said, erasing projected future budget shortfalls. That estimate suggests that nonprofit institutions would pay $9 million to $14 million.

Mr. Lamb acknowledged that tax-exempt organizations have that status because they do charitable work, but said they pay some payroll taxes, and so could be included in the city's levy if the General Assembly allowed it.

Carolyn Duronio, an attorney at Reed Smith who specializes in nonprofit law, said her clients can't be taxed on their core missions, so their payrolls can't be tapped, either.

Nonprofit institutions "have to have employees to do what [they] do," she said, "and if you're taxing the payroll, you're using that as a proxy for taxing them."

Big tax-exempt institutions wouldn't comment yesterday on the proposal, but said they contribute a lot to the community.

The University of Pittsburgh Medical Center paid $99 million in local and state taxes last year, including city parking and wage taxes, a spokesman said.

Michael Weinstein, spokesman for Highmark Inc., said the insurer contributed $130 million to community efforts last year, and gives to the city.

The state-picked Intergovernmental Cooperation Authority proposed the payroll preparation tax in 2004, and wanted it to apply to nonprofit institutions at one-quarter of the rate levied on for-profit companies. The idea was dropped when the nonprofit organizations formed the Pittsburgh Public Service Fund and offered the city $14 million in donations from 2005 through 2007.

ICA Executive Director Henry Sciortino said the ICA recently asked the city to have an outside expert review its entire revenue picture with "nothing sacred. One element of that is the nonprofit piece."

This week council learned that the service fund has offered a total of $5.5 million to cover last year, this year and next year -- a 60 percent cut compared to the prior three-year pact.

The Rev. Ron Lengwin, spokesman for the Catholic Diocese of Pittsburgh and for the fund, said the reduction reflects "the financial times in which we exist, where people don't really know what they might be able to contribute next year" and the city's reduced need for help.

He confirmed that the proposed contract between the fund and the city would bar the city from "any action to tax or assess any tax or fee for city services against the contributors" through the end of next year.

Mayor Luke Ravenstahl's administration negotiated the proposed pact with the fund, and did not respond to requests for comment on Mr. Lamb's idea.

Mr. Lamb's idea "sounds like it's a worthy concept," said Councilman Patrick Dowd, a challenger in the Democratic mayoral primary. "I'd like to kick the tires."