State overseers said yesterday that they may flunk Pittsburgh Mayor Luke Ravenstahl's tuition tax proposal, setting up a possible showdown this morning between fiscal watchdogs on one side and revenue-hungry city officials and union representatives on the other.

The five-member Intergovernmental Cooperation Authority, picked by legislative leaders and Gov. Ed Rendell to approve city budgets, will meet in the Regional Enterprise Tower at 8:30 a.m., with rejection of the mayor's proposed $453.8 million budget on the agenda.

"This is a year when all of us, organizations and businesses, are balancing our budgets through cost savings," said ICA Chair Barbara McNees. The city should pursue "cost cuts, more efficiencies, more shared services" before creating a new tax.

The mayor huddled with union heads after getting word of the likely rejection, and some said they'll join him at the meeting today to protect their members' jobs.

A rejection of the tuition tax would bring "significant service cuts," said Mr. Ravenstahl. "Employees would lose their jobs, whether they were police officers or crossing guards. We could close more swimming pools, [recreation] centers." He said staff is preparing for the possibility of $15 million in cuts if the tax is nixed.

Last month, the ICA board gave the mayor's proposed 2010 budget "conditional approval," requiring that the administration outline its tax plans, pass any needed tax legislation, "comply with other items" that presumably included past ICA cost-cutting recommendations and improve its accounting system.

At that time, Mr. Ravenstahl was considering tapping tuition, hospital bills, all-day parking or water usage by educational and medical institutions to fill a $15 million budget hole. Last week, he settled on a 1 percent levy on tuition bills, arguing that it would defray the expenses of hosting tens of thousands of students, and raise $16.2 million -- enough to shore up the pension fund and aid the Carnegie Library of Pittsburgh. The pension fund contains around one-third of the money it should, and the library system plans to close four branches and merge two others.

College and university heads have vowed to fight it, potentially in court.

The city can raise taxes, but any hikes would "have to be something that is legal and that is enforceable," said ICA board member Matthew Simon, a former Point Park University president. "There's obviously significant legal questions about the enforceability of the [tuition tax] proposal."

He said that the mayor introduced the tax "late in the game," and with court challenges likely, the city shouldn't count on collecting it next year.

The city has hired Philadelphia tax attorney Joseph C. Bright, former chief counsel to the state Department of Revenue, to advise it on the tuition tax. He said yesterday that the tax was "squarely within the broad power" of local governments under state law, and isn't precluded or limited by any statute.

Mr. Simon is among two former university presidents on the ICA board. The other is Sister Grace Ann Geibel, former Carlow University president. Ms. McNees is on Robert Morris University's board. ICA board member Curtis Aiken recently signed on with the University of Pittsburgh men's basketball radio team.

Mr. Ravenstahl said those links show "exactly how powerful the nonprofit community in Pittsburgh is."

"If they feel the need to recuse themselves, I'm hopeful that they will," he added.

ICA Executive Director Henry Sciortino said the mayor's budget doesn't account for efficiencies that consultants and others have suggested.

Better billing for medic services and reduced paramedic overtime could yield $4 million to $6 million a year, he said. Fining those who violate fire prevention codes could bring in $1 million. Merging the city's accounting software on to Allegheny County's computer system would cost $3 million, but would bring millions in savings, he said. Cancellation of a private payroll service contract, and ongoing privatization of delinquent tax collection, could also improve the bottom line.

All of that, and more, could raise enough money to boost contributions to the ailing pension fund by $10 million a year, he said.

Union leaders said cuts would hurt services.

"Unfortunately, the cuts are going to start with the public safety, and that's going to mean fewer police officers," said Fraternal Order of Police President Dan O'Hara. "You tell me how we're going to attract police officers if there's another round of layoffs of police officers."

Mr. Sciortino said the mayor and council have until Dec. 31 to fashion a budget that the ICA can approve, or they could face seizure of millions of dollars in revenue from taxes enacted since 2004.

City Council is supposed to start its budget hearings on Monday and to cast a first vote Dec. 7. Members were divided yesterday on how to proceed.

Council President Doug Shields said it's the mayor's job to propose a budget acceptable to overseers, adding that the city has "an administration that doesn't know what it's doing."

Councilman Ricky Burgess said the city should negotiate a voluntary payment agreement with the universities.

Councilwoman Darlene Harris said the city should continue to pursue the tuition tax.

Council Finance Chair William Peduto said he'll propose a budget without a tuition tax.

The city's other financial watchdog, the Act 47 recovery team, did not respond yesterday to requests for comment.

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