Gov. Ed Rendell, legislative leaders and their top aides hurried between meetings Thursday as they worked to finalize details of a $1 billion tax package, including the first income tax hike since 1991, to help finance new school programs and avert a deficit.

Although reports indicate that Rendell and Senate leaders have agreed to an income tax hike of nearly 10 percent, state Sen. Gibson E. Armstrong of Refton said Thursday night negotiations were still fluid.

"There are a bunch of other taxes they (the governor's office)
want to throw in there," Armstrong said. "Taxes on cell phones,
hard-wired phones and a cigarette tax to help doctors out of the
medical malpractice insurance crisis."

Also being pushed by the governor is a proposal to legalize slot
machines and use the tax revenue levied on those machines to offset
a reduction in property taxes. The governor believes slots could
generate $1 billion for the state.

The slots legislation would be separate from the tax bill, but
that and other bills aimed at bringing the budget stalemate to a
close would be passed as a package, said state Rep. Mike Sturla, a
Lancaster city Democrat.

"I think slots will run as a separate bill, but I think property
tax relief has to be part of the package in order for the whole
package to pass," Sturla said.

Sturla, the county's lone Democratic state legislator, was the
only local lawmaker who voiced support for legalizing slot machines.

Along with Armstrong, Republican state Reps. Roy Baldwin of
Manheim Township, Katie True of East Hempfield Township and Dave
Hickernell of West Donegal Township said there is nothing Rendell
could offer them that would make them vote for slot machines.

Baldwin, Hickernell and True also said they would not vote for
any bill that increases taxes on Pennsylvanians.

"We can balance the budget, fund schools and provide additional
dollars for education -- a 2 to 2.5 percent bump in basic
education-- without raising taxes," Hickernell said."

Hickernell said experts say the current revenue estimate is $285
million more than what Rendell certified in March.

That, along with $900 million dollars Pennsylvania is getting
because of President Bush's tax cuts, means Pennsylvanians should
be able to get a budget without a tax increase, Hickernell said.

"The fiscal situation now is very different than when the
governor proposed his budget in March," Hickernell said.

Sturla, however, said the state is still chafing fiscally from
"President Bush's second recession."

"Nobody likes tax increases," Sturla said. "But if we don't, I'd
like to hear what would be getting cut."

True, who was critical of the last-minute horse-trading going on
as a budget compromise apparently neared, predicted that the Senate
will pass budget legislation produced by its leaders. She expects
it will also be approved by the House.

"This is not meant to be partisan," True said. "I would expect
any governor -- Republican or Democrat -- to be here week after
week trying to get something done, not come back from a break at
the Pennsylvania Society (a social gathering in New York City for
state dignitaries) and decide he wants to do it all in a week,"
True said. "This using staff to do all the negotiations stuff
doesn't cut it. The governor needs to be at the table the whole
time, not trying to find out a week before Christmas what
legislators will take to get their vote.

"The governor is supposed to provide leadership, and frankly, I
am not seeing any. I don't disagree with some of the ideas, but
this is not the way to go about it."

Thursday was the fourth consecutive day of intense talks since
pressure recently mounted for an end to a budget dispute that has
lasted nearly six months into the fiscal year. Pennsylvania is the
only state without a completed budget.

The inability of the legislators to pass a budget has forced many
school districts to take out loans to keep classrooms open. Rendell
is withholding more than $4 billion in basic school subsidies as
political leverage to get at least some of his educational
initiatives passed into law.

Senate Republicans rejected a $1.1 billion budget bill that
included slots in October. The Senate had previously passed a more
limited slots bill, but the House scrapped the Senate legislation
and passed a version that included more slot machines.

Budget negotiations have been at an impasse ever since. Rendell
and Senate Republicans broke their stalemate Wednesday night after
the administration proposed increasing the cigarette tax by an
additional 10 cents per pack in lieu of a larger increase on the
income tax. That would be in addition to the 25-cent-per-pack
increase that has been proposed under separate legislation to help
doctors pay for medical-malpractice claims against them.

The deal, which has yet to be endorsed by House leaders, calls
for the income tax to rise by nearly 10 percent on Jan. 1 from 2.8
percent to 3.07 percent to raise an additional $700 million a year
for new learning programs in public schools, the restoration of
social-service cuts that were required to balance the budget in
March and to offset a projected deficit.

For a household with a taxable income of $50,000, the proposal
would increase the state income tax $135 a year.

Other levies in the package include the cigarette-tax increase,
new taxes on gross receipts from cell phone calls, interstate
landline calls (call centers were to be exempted) and receipts from
the state's seven major professional teams.

The 6 percent gross receipts tax on the baseball, basketball,
football and hockey teams, plus revenues made by visiting teams,
would raise about $26 million for the state and another $26 million
to be shared by Philadelphia and Pittsburgh.

The deal also would use $450 million in federal money, about half
of the emergency federal aid that President Bush provided to
Pennsylvania earlier this year.

It also would release the $4.2 billion earmarked for basic state
subsidies for school districts, which provide an average of about
35 percent of each district's budget.

The package includes $175 million for grants to school districts
and another $450 million to restore budget cuts and pay for
community improvement projects sought by lawmakers. The rest would
close a projected deficit of around $500 million and bridge a
shortfall in a benefits trust fund for state employees.

While the exact amount of restorations were not clear Thursday,
hospitals, drug and alcohol treatment providers, and mental health
services providers, would see all or most of their funding cuts
restored, while libraries would receive $10 million of $37.6
million that was cut.

House Democratic and Republican leaders expressed conceptual
agreement with the tax increase, but cautioned that details of the
rest of the tax package were still being determined.

Although the effort by Rendell to get slot machines passed in the
package was reported to have complicated negotiations, True said
the rumor mill had senators and administration officials agreeing
to a deal within 12 hours.

"We have heard that we won't be here (Saturday), " True said. "We
have heard the Senate will work tonight and we (the House) will
finish it up Monday or Tuesday."

The Associated Press contributed to this story.

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