Some agencies could see budget increases, film tax credits still included

 

By Darwyyn Deyo   PA Independent

 

Gov. Tom Corbett's first budget for Pennsylvania is nearly $712 million less than last year – $27.3 billion vs. $28 billion.

The $27.3 billion figure covers general fund spending, while the total figure amounts to $63.5 billion when special funds and other funds are added. With capital bond authorizations, which go toward the state’s bond debt, the proposed budget’s cost is $64.3 billion.

There is also an additional $20.27 billion in funds from the federal government applied to executive departments.

 

Former Gov. Ed Rendell’s budget from last year totaled $66.8 billion, with special funds and other funds included. Capital bond authorizations were not part of the 2010-2011 budget.

 

With the state facing a $4 billion deficit, Corbett proposed cuts to 15 departments and agencies, including the legislative fund. Notable proposed cuts include $50.8 million from the Department of Agriculture; $114.4 million from the Department of Community and Economic Development (DCED); and $24.2 million from the Conservation of Natural Resources Department.

 

Corbett singled out DCED in his budget address, pointing to the “Walking Around Money,” or WAMs, the department was wont to distribute as economic development grants, and more than $65.5 million of which were added into last year’s budget after being cut the year before.

 

“It’s not there, plain and simple,” said Corbett. “DCED has been a hunting ground for assorted nice-to-haves that were especially nice to have when looking for a few votes back home. We can’t afford that. We never really could. That kind of spending is part of what brought us to this moment.”

 

The governor also highlighted the state’s employee retirement fund and said state government could not ask Pennsylvania taxpayers to pay for salaries and health benefits in the public sector that are better than those in the private sector

 

Since June 2004, state employee salaries have risen from a median average of $39,037 to $45,105, not including benefits. In the private sector, the median average salary has been stuck at $32,239.

 

“We will be looking for salary roll backs and freezes from state employees as well as asking them to increase their contributions for health care benefits,” said Corbett. “We also need to start the conversation about the necessary repairs to our public retirement system.”

 

The governor pointed to cutbacks in Democratic states, such as California where Gov. Jerry Brown has proposed an 8 percent to 10 percent cutback in take-home pay for state employees. Pennsylvania has 62,000 unionized state employees.

 

Possibly trying to avoid the confrontations that have gripped Wisconsin, Indiana and Ohio over collective bargaining rights for state government employees, Corbett suggested compromise.

 

“Collective bargaining doesn’t mean some ill-defined middle ground,” he said. “In this case, it is going to have to work for the good of the taxpayer, or it’s not going to work at all.”

 

With a right-to-work battle also potentially on the horizon, the Labor and Industry Department saw proposed cuts of $13.9 million, to a budget of $72.27 million.

 

Suggested higher education funding also fell to the ax, with $29.64 million cut. In his budget address, the governor called on the state’s higher education employees to “consider sacrifice.”

 

“I ask nothing more of our best educated people than to face up to a hard economic reality,” Corbett said. “The system in which you have flourished is in trouble.”

 

The proposed basic education subsidy for 2011-2012 would be $5.226 billion. Last year, the basic education subsidy was $4.73 billion, in addition to $1 billion in stimulus funds, for a total of $5.7 billion.

Addressing the potential for property taxes to increase at the local level, Corbett said any new property tax increases, exceeding inflation, should be put on the ballot, while also arguing state government-imposed mandates on school boards should be relaxed.

 

Not everyone saw budget cuts, however. Many departments and agencies actually saw proposed budget increases, including the Department of Public Welfare, which could grow by $2.34 billion in addition to more than $14 billion in federal funds. Corbett said his welfare budget retained “core services.”

 

“It puts the brakes on a runaway train of spending,” he said. “My administration is committed to caring for the eligible poor. This budget reflects that commitment.”

 

The budget lists “cost-containment reforms that are designed to save millions of dollars in state funds while having a minimal impact on older Pennsylvanians, children, families and other vulnerable citizens,” worth approximately $364.6 million.

 

The governor’s targeted welfare reforms are moving from a reliance on nursing home care to more home and community-based care; a health care plan redesign emphasizing personal responsibility, prevention and wellness; competitive purchasing; developing financial controls and fiscal accountability; and fair-share payments by recipients.

Other departments that saw proposed budget increases include $19.6 million for Military and Veteran’s Affairs; $8 million for the Department of Revenue; and $392.2 million for the Department of Health.

Despite this, the Hospital & Healthsystem Association of Pennsylvania issued a statement arguing the proposed cuts to Medicaid will result in a reduction in matching federal funds.

 

Corbett also said he would not eliminate the Film Production Tax Credit, though he decreased the annual tax credit cap by $15 million to $60 million, beginning July 1.

 

“My budget contains an array of tax credits, not as a favor to businesses, but as a promise to their workers,” said Corbett. “New and growing industries, like the film industry that is growing around Pittsburgh and Philadelphia, need a government that knows enough not to shout ‘cut’ in the middle of production.”

 

The annual cap on the Research and Development Tax Credit, however, was increased to $55 million, from $40 million.The Job Creation Tax Credit was decreased from $22.5 million to $10.1 million. The governor cited growth industries such as pharmaceuticals, chemicals and agriculture as creating the “next generation of jobs.”

 

Despite Budget Secretary Charles Zogby’s assurance last week at the Pennsylvania Press Club that the budget would not include accounting “gimmicks” such as fund transfers, Corbett has proposed a transfer of $8.336 million from the Pennsylvania Higher Education Assistance Association (PHEAA) to the general fund, along with a “continued transfer of moving violation surcharges,” part of the Catastrophic Loss Benefits Continuation Fund, part of the Mcare Fund, approximately $44 million worth.

 

Merging the Tobacco Settlement Fund with the general fund was also proposed, with a total of $478.6 million being transferred. Corbett estimates the proposed tax modifications and fund transfers to be worth about $540 million.

 

Throughout his budget address, Corbett repeatedly emphasized taxpayers could no longer afford the high spending of the past and argued jobs and taxes were linked. He also proposed eliminating the capital stock and franchise tax on non-retail business assets, and addressing tort reform in the Commonwealth.

 

“Pennsylvania is now ranked as the 10th-worst state in terms of state and local tax burdens,” said Corbett. “In the past eight years, the number of unemployed here has increased by 47 percent. In the last seven years alone, the state lost 25 percent of its jobs in manufacturing. There’s no escaping the obvious. We tax too much and for our troubles we get fewer and fewer jobs.”