Budget freezes, debt crisis and transportation spending
By PA Independent Staff
HARRISBURG — Though Pennsylvania is only halfway through the fiscal year, eyes in the state capitol are turning toward June’s budget in the first week after the calendar turned to 2012.
Less than two weeks after his budget secretary warned of a potential $500 million budget shortfall, Gov. Tom Corbett took steps to freeze a portion of the state budget — less than 1 percent of the overall total — in anticipation of lower-than-expected revenue.
There was other bad financial news this week that also could affect Pennsylvania taxpayers, as a new Marcellus shale impact fee, potentially higher gasoline taxes to pay for transportation projects and a possible debt crisis for the Pennsylvania Turnpike Commission made headlines.
With lower revenue, Corbett freezes spending
Gov. Tom Corbett is putting the freeze on $160 million in state spending, his administration’s first step in addressing Pennsylvania’s financial problems. With a freeze as opposed to an outright cut in funding, Corbett can reinstate those funds to the departments and programs if finances allow.
"Until revenue collections improve, we must take precautions to ensure that the commonwealth budget remains in balance," Corbett said in a statement.
At the halfway point of the state's fiscal year, tax revenue stands at $11.6 billion, which is $486.8 million, or 4 percent, below estimates, according to the state Department of Revenue. The fiscal year runs July 1 to June 30.
Administration officials cautioned Pennsylvanians not to expect a miraculous turnaround.
"The data we are looking at suggests there won't be any dramatic recovery soon," said Revenue Department spokeswoman Elizabeth Brassell. "It is about managing the realities that we are in."
State Rep. Joe Markosek, D-Allegheny, the ranking Democrat on the House Appropriations Committee, said in a statement that there is a "good possibility" the current revenue gap will close this spring. Revenue collections are, in raw dollars, running 1.5 percent ahead of last year, when a spike in revenue occurred during the final three months of the fiscal year.
Turnpike faces debt crisis
With urgency in his voice, Auditor General Jack Wagner said Thursday the Pennsylvania Turnpike Commission’s mounting debt could force it to raise tolls so much that motorists will find other routes to travel.
"The statistics show clearly that the Pennsylvania Turnpike Commission is drowning in debt due to the burdens placed on it by Act 44," Wagner said.
Implemented in 2007, Act 44 required the Turnpike Commission to transfer $450 million annually to the state Department of Transportation for a 50-year period. This annual payment would add at least $20 billion in additional debt to the commission, Wagner said.
If the Commission was to default on the obligations, Pennsylvania taxpayers would have to assume the obligations, he said.
Act 44 also gave the Turnpike Commission the authority to increase tolls every year without state government approval.
The Commission increased tolls in 2009 by 25 percent for all customers. In 2010, tolls increased again for all customers by 3 percent. In 2011, tolls increased 10 percent for cash-paying customers and 3 percent for electronic E-Z Pass users.
On Jan. 1, tolls increased another 10 percent for cash-paying customers, with no increase for those using the E-Z Pass system.
Turnpike Commission CEO Roger Nutt said there was no immediate financial crisis.
"The nation's major rating agencies have not changed their underlying ratings of Pennsylvania Turnpike bonds for more than three years," he said. "During that period, the turnpike has provided more than $3 billion to the commonwealth for statewide investment in transportation systems."
Democrats back Corbett's Transportation Commission plan
House Democratic leaders this week introduced legislation modeled after the proposals of Gov. Tom Corbett’s Transportation Funding Advisory Commission and urged the governor to make infrastructure spending a priority in 2012.
Corbett’s Commission outlined a plan to generate about $2.5 billion in annually recurring revenue this summer, but the governor has left the plan on the shelf for the past six months, citing concerns over raising revenue while the state is recovering from the Great Recession and economic growth is sluggish.
State Rep. Mike Hanna, D-Clinton, said Pennsylvania’s deteriorating roads and bridges deserve a higher priority than the governor has given them.
“If Gov. Corbett is choosing not to lead on this issue, then it is time for the Legislature to take action,” Hanna said. “We’re taking this directly from Gov. Corbett’s Advisory Commission.”
The largest piece of new revenue would be generated by uncapping one portion of the state’s gasoline tax — now 32.2 cents per gallon, the 14th highest in the nation. The proposed increase would generate an estimated $1.36 billion in new annual revenue, but would be passed on to consumers.
Democrats on Wednesday did not estimate the amount of the increase, but the governor’s Commission estimated an increase of up to 10 cents. The Commission also estimated that Pennsylvania requires infrastructure investments of about $3.5 billion annually.
Scarnati: Get shale bill done immediately
The leader of the Pennsylvania Senate is setting another deadline for the passage of a Marcellus shale impact fee package.
Senate President Joseph Scarnati, R-Jefferson, said he wants the state House and Senate to decide on a Marcellus shale drilling policy, before Gov. Tom Corbett gives his budget address in early February.
With the Legislature set to return Jan. 17, Republicans in the General Assembly and Corbett have about two weeks to reach an agreement.
“I would strongly recommend that we have this wrapped up … before budget negotiations start,” Scarnati said Tuesday. “I don’t think that there is any reason that we should hold back any longer. We know what our differences are, and there is going to have to be movement on both sides.”
While the shale bills have various components, the biggest sticking points are the amount and duration of the natural gas drilling fee and the government entity designated to collect it, Scarnati said.
The Senate wants to impose a $360,000 per-well fee over 20 years, while the state House passed a bill to impose a $160,000 per-well fee over 10 years. The state would collect the revenue in the Senate plan, but counties that host natural gas drilling would authorize and collect the fee in the House plan.
Democrats have opposed both plans and are calling for a more robust fee with the revenue being used to fund various state programs.
