In an attempt to defuse the state’s public pension time bomb, Governor Ed Rendell will propose lowering the state sales tax from six percent to four percent and expanding it to as many as 80 items not covered.

Pennsylvania faces a crisis in state pension fund payments. Mandatory payments are estimated to increase by $4 billion in 2012-13 for state government alone, up from approximately $550 million this year. Thus far attempts to modify state employee pension plans or change them from “defined benefits” to “defined contributions” have fallen on deaf ears, particularly those of public employee and government  teacher unions.

Mr. Rendell’s proposal is similar to one pushed unsuccessfully for the past eight years by State Rep. and GOP gubernatorial hopeful Sam Rohrer of Berks County. Mr. Rohrer’s plan, however, would eliminate state property taxes, rather than fund public employee pensions.

Last year the state estimated forgone sales taxes on exempt items (see list) was the equivalent of $17.8 billion. Mr. Rendell’s plan, according to Capitol and legislative sources, would exclude food, clothing and medicine.

Those items amounted to $2.5 billion in forgone tax revenues.

Using the $17.8 billion figure based on a six percent tax, eliminating the $2.5 billion from the base and dropping the rate to four percent could bring as much as $10.2 billion into state coffers in Fiscal Year 2011. That is highly unlikely because virtually every current exemption holder will fight tooth-and-nail to retain the exemption they have.

The Governor’s budget address is scheduled for noon on Tuesday.

Jim Panyard is a reporter with the Pennsylvania Independent.  He can be reached at Jim@PAIndependent.com