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DN Editorial: DN Editorial: Disenfranchised: State needs to support crucial business tax

WE ALL KNOW the school district is in bad shape. But it could actually get worse, because Gov. Corbett's assumptions about revenue coming into the state have not panned out. That could jeopardize the $120 million in state aid the schools are counting on to help fill its own $300 million hole.

WE ALL KNOW the school district is in bad shape. But it could actually get worse, because Gov. Corbett's assumptions about revenue coming into the state have not panned out. That could jeopardize the $120 million in state aid the schools are counting on to help fill its own $300 million hole.

Unlike the schools, though, the state has an easy fix for the revenue shortfall - though whether it is willing to act is another story.

Corbett assumed a $250 million budget surplus that has not materialized. It is too early to tell for sure, since there are still three months of revenue to come, but it could dwindle to $50 million.

Corbett also counted on $175 million savings in state-pension payments based on the notion that the Legislature would approve changes he wants to make in the state employee and teacher pensions plans. So far, his proposals landed with a thud in Harrisburg, and legislators are wary about tampering with the existing pension-benefit packages. That means the $175 million may go poof.

There is a relatively painless way, though, to add money to the pot either with additional subsidies or a partial return to the aid the state once gave districts with charter schools.

Until recently, school districts got partial reimbursement for each student who left the district for a charter school, since the district budget is based on per-pupil allocations. And the stampede to form charters in Philadelphia - which now number 65 - had a serious impact on the district's budget. In his first year, Corbett cut that reimbursement, and the district lost $100 million.

The schools should get some of that back, and it could easily come from the Capital Stock and Franchise Tax that is levied on business ventures that are not corporations, such as partnerships and limited-liability companies.

It once amounted to a 12 percent tax on certain assets of the company. In 1998, in the name of being business friendly, the state began a program of slow reductions in the tax until it reached zero. The rate stands at a little less than 1 percent and is due to go to zero next year.

The Legislature should halt those cuts. Just keeping that tax at its current rate will bring an additional $350 million in a full year and $85 million to $90 million during next fiscal year. That $90 million could be used to help districts that must support charter schools without any state help. The Legislature has "frozen" the tax rates before. It did it early in the decade when we had a mild recession and again more recently when the Great Recession hit in 2008.

Budgets are not bibles; they have to be rewritten to accommodate reality. With revenues sputtering and the lingering effects of the recession being felt on tax collections, the governor and lawmakers must make adjustments; it is no time to be giving more tax breaks to businesses.

The stock and franchise tax should stay at its current level.