Borrowing, spending issues dominate Legislature’s last week in 2011
By PA Independent
HARRISBURG — The final week of the 2011 legislative session saw the General Assembly approve new congressional maps for Pennsylvania, despite outcry over the oddly shaped and politically motivated new districts.
Legislative leaders also received concerning signs from state Budget Secretary Charles Zogby over a potential budget deficit of about $750 million next year. The announcement is a warm-up for the state’s budget process, which kicks off with the governor’s budget address in February
State expects $750 million shortfall
Zogby said Tuesday that he wants to freeze some state spending to ease a shortfall he expects will reach at least $500 million by the end of the fiscal year in six months.
"State revenues are lagging, because the economy isn't growing, and it is gasping for air at every turn," Zogby said.
Without providing any details, Zogby said he expects Corbett to act "in a couple of weeks" on a set of cost-saving options Zogby provided.
Zogby also is forecasting a $750 million budget shortfall for the 2012-13 fiscal year, which begins July 1.
Republicans said the budget was far more sound this year than last year, when the state faced a $4 billion deficit even after higher-than-expected tax revenue in the spring months leading up to the budget discussion.
Democrats, however, scolded Corbett and the Republican-controlled Legislature for what they said was a failure to make jobs a priority and choosing a right-wing agenda, which attacks worker rights.
"Despite being well positioned to move forward after weathering the financial storm from the last recession, Pennsylvania continues to take on water, and that is a byproduct of the lack of direction," said Senate Democratic Leader Jay Costa, D-Allegheny. "Most importantly, we've seen no leadership from the Republicans on jobs."
New congressional districts are not compact
Pennsylvania’s newly approved congressional districts are among the least compact in the nation, according to an independent statistical analysis firm.
Among the 26 states that have completed the once-per-decade congressional redistricting process, Pennsylvania’s new districts rank well below the national average for compactness, said Daniel McGlone, a GIS analyst with Azavea, a geospatial analysis firm in Philadelphia.
“Prior to the recent redistricting, we already had some of the least compact districts in the nation, and then the score actually decreased,” McGlone said. “Needless to say, Pennsylvania is going to be right near the top in terms of least compact districts in the nation.”
According to a statistical measure of districts’ compactness, all but four of Pennsylvania’s 18 new congressional districts are less compact than the national average.
The controversial 7th district — which includes portions of Montgomery, Delaware, Chester, Lancaster and Berks counties — is the 5th least compact district in the nation, according to Azavea's analysis.
Cities want higher taxes, tax breaks at same time
Some Pennsylvania cities in economic hardship are asking for the option to impose a 1 percent local sales tax.
But many of those same cities take advantage of tax abatement programs like the state’s Keystone Opportunity Zones, which are supposed to create jobs and attract businesses.
KOZs are specific commercial or industrial areas with no tax burden for property owners, residents and businesses throughout the state.
The state has spent at least $176 million — or $19 million annually — on the program since its inception in 1998, according to Good Jobs First, a Washington, D.C.-based nonprofit, nonpartisan resource center that promotes government and corporate accountability in economic development.
Additionally, on the state and local levels, millions in tax breaks have continued to be issued for those participating in the program, rendering KOZs a failure in the eyes of those who track KOZs.
"The main problem with KOZs, along with a lot of similar economic development tools, is the unseen impacts of picking winners and losers," said Nathan Benefield, director of policy analysis for the Commonwealth Foundation, an independent conservative think tank here.
Of the 1,708 businesses approved for KOZs last year, 38,502 jobs were created. Those businesses invested $3.7 billion in improving structures that were once dilapidated, according to the state Department of Community and Economic Development.
Capital budget will cost taxpayers $2.3 billion over 20 years
The state House approved an annual capital budget this week, costing taxpayers an estimated $2.3 billion during the next 20 years.
The capital budget finances more than 1,500 ongoing projects. To fund those projects next year, the state must borrow more than $1.6 billion, which will be paid back over 20 years, according to the bill.
The bill’s funding is not project specific; rather, it is used on a “cash flow” basis to keep projects funded on a four-to-six-month window, according to the state Budget Office.
Passing the capital budget was necessary before the state could issue the bonds to fund the projects, wrote Zogby in a letter to lawmakers last week.
“Failure to enact the 2011-2012 Capital Budget Act before the holiday recess will lead to the Commonwealth having to shut down thousands of ongoing capital projects and the jobs that go with them, which are providing economic stimulus to the Pennsylvania economy in this trying time,” Zogby wrote.
Republicans in the state House expressed concern over the borrowing, but were convinced to pass the budget rather than face the prospect of laying off workers and shutting down ongoing projects.
Refinancing the Unemployment Compensation Trust Fund
Pennsylvania lawmakers put a Band-Aid on the state's unemployment compensation problem.
The House voted Monday earlier this week to use bonds to pay off the more than $3 billion the state owes the federal government, saving employers $50 million in 2012.
House Republican Leader Mike Turzai, R-Allegheny, called the proposal a "common-sense measure" and said there would be competitive bidding for the bonds.
"This is not new borrowing; it's a refinance of existing debt," Turzai said.
The action authorizes the state Department of Labor and Industry to borrow up to $3.5 billion at an interest rate that's expected to be at least 2 percentage points lower than the 4 percent charged by the federal government.
But state Rep. Bill Keller, D-Philadelphia, said the move would not address the underlying insolvency in the state’s Unemployment Compensation Trust Fund.
