Clarke: Use tax to fund pensions as well as schools

Philadelphia City Council President Darrell L. Clarke said Tuesday that he was pushing a plan to divide the city's now-permanent extra 1 percent sales tax between the perpetually underfunded schools and the public employee pension system.

That idea clashes with part of a state rescue package for city schools, which would have directed nearly the full amount of the extra sales-tax revenue - about $120 million - to the schools, starting July 1, 2014.

But city leaders have been eyeing that money for the pension system, which was less than half-funded in 2012. With revenue from the sales tax, Clarke said, the pension system could be fully funded as early as 2027.

"I've constantly said that if we don't fix the pension system, in 10 years or less we'll be where we are now with the schools," he said. "We got to have this pension issue on the table when we talk about the sales tax."

Clarke would like to dedicate $70 million of the sales tax to the schools, with the rest going to debt service and the pension system.

The plan has two optimistic assumptions, given recent political events - state approval for a cigarette tax in Philadelphia and $45 million in new state education funding, possibly from charter school reimbursements.

The state Senate passed the cigarette tax last month, but the House balked. And, as Clarke and other city leaders have noted, this year's state rescue package contained almost no state money, just $15 million in a basic education subsidy.

The rest of the state package included provisions to allow the city to borrow $50 million against the future sales tax revenue and engineer the forgiveness of $45 million owed to the federal government.

Clarke said he wants the state to provide that same $45 million every year, in some format.

But if the state fails to come up with the money or approve the cigarette tax, "it makes it very problematic," Clarke said.

The district has a $304 million deficit, and the state and city actions should bring in about $140 million this fiscal year, short of the $180 million the district had asked for.

The district hopes to find the rest of the money to close the gap in union concessions.

The district says it would have to lay off as many as 3,800 employees if the deficit is not reduced or eliminated.

The state has a 6 percent sales tax, and Pittsburgh and Philadelphia for years added 1 percent. Philadelphia was allowed to add another point - bringing the city sales tax to 8 percent - during the recession.

That extra 1 percent was slated to expire on June 30 of next year, but now seems destined for a permanent place in the city's tax structure.

Clarke said he had discussed his ideal split of that money with Council members, state lawmakers, and Mayor Nutter.

Mark McDonald, a spokesman for Nutter, said he would not comment on Clarke's plan until the administration could "take a look at what his thinking is."

Council has been criticized for not doing more this year to directly fund the schools, although members agreed on the cigarette tax, they did not even vote on increasing the business Use and Occupancy tax for the schools.

Council raised that tax last year, as well as the property tax in 2011, to benefit the schools.

A coalition of labor groups and education advocates held a rally at City Hall calling on Council to "adequately fund public schools."

Clarke also said he could support other ways to fund the schools, such as selling city tax liens to private investors and selling advertising on public property.