June 22, 2012 | By | Posted in General News

PA Week in Review: Budget spending number determined, big tax credit for Shell

By PA Independent Staff

HARRISBURG — It was all about big numbers this week – a $27.7 billion state budget agreement and a $1.65 billion tax break for Shell Oil.

Republican lawmakers left Gov. Tom Corbett’s office Wednesday evening, having agreed in principle to a $27.656 budget for the coming fiscal year. As the week ended, the specifics of the deal were still being worked out behind closed doors.

Democrats, Republicans, and interest groups from across the political spectrum appeared together, supporting a major tax break for Royal Dutch Shell if it builds a new plant in western Pennsylvania.

GOP agrees on budget number, but doesn’t discuss details as deadline approaches

With 10 days remaining until the constitutionally mandated budget deadline, Gov. Tom Corbett and other Republican leaders announced that Republicans agreed on a spending figure of $27.656 billion, more than $500 million more than Corbett’s original spending proposal.

Republican House and Senate leaders will be busy next week, getting their members on board before the Saturday, June 30 deadline.

Erik Arneson, spokesman for Senate Majority Leader Dominic Pileggi, R-Chester, expects every Republican senator to sign on to the eventual budget.

Initial reactions to the budget framework were also positive among House Republicans, with state Rep. Mario Scavello, R-Monroe commenting that “the spend number is where we need to be to live within our means.”

Republicans excluded Democrats from budget negotiations. According to state Rep. Joe Markosek, D-Allegheny, Democrats didn’t hear about the spending number until Corbett told the media.

House Minority Leader Frank Dermody, D-Allegheny, said the budget cuts too much from long-term spending.

“It’s bad for human services, it’s bad for people with disabilities, it’s bad for the most vulnerable,” said Dermody.

Budget includes new tax credit for worst schools, expands existing credit

A new tax credit program — tentatively called the Education Improvement Scholarship Credit — will parallel the Educational Improvement Tax Credit program, which helps provide scholarships to low- and middle-income students. The new $100 million tax credit program will fund scholarships for low-income students in the state’s worst-performing public school districts.

State Rep. Tony Payton, D-Philadelphia, who supports school vouchers, said that this program is “extremely important”.

The new program will replace the voucher proposal that could not pass the House after clearing the state Senate last year.

Another Democrat, state Rep. Mike Carroll, D-Monroe, opposes the new program.

“We have to properly and fairly fund basic education before funding any new programs.”

Preliminary reports indicate that the EITC will be boosted to $100 million this upcoming fiscal year, up from $75 million.

Report says state has $118 billion unfunded pension liability

The Pew Center on the States released a report showing that Pennsylvania’s total pension liability for retirements and health benefits exceeded $118 billion at the end of fiscal 2010.

Republicans in the state Legislature hope to move future employees into a retirement system known as a “defined contribution” plan, in which the state would set aside a certain amount of money each year per employee, which could then be invested and saved for retirement. Under the current “defined benefit” plan, the state promises a certain amount of benefits based on a formula that includes years worked and salary.

David Draine, a senior researcher at Pew, said that states need to have fiscally responsible budgets for retirement systems to be sustainable long-term.

“Without fiscal discipline, nothing is sustainable.”

Liquor privatization stalls again as alternative plan emerges in Senate

Less than two weeks ago, House Majority Leader Mike Turzai, R-Allegheny, came within a few votes of bringing his liquor-privatization bill to the floor.

But now, any hope of privatizing the wine and liquor market will have to wait until lawmakers reconvene in a few months

“It’s clear that people are supportive of privatization. It’s common sense,” Turzai said. “But to get to the sweet spot, to be able to garner the support in the House, is going to take additional work.”

Turzai’s plan would close the 620 state-owned wine and liquor stores in the state, while replacing them with about 1,600 privately licensed stores.

Multiple polls have shown that Pennsylvanians support liquor privatization, but groups such as the United Food and Commercial Workers and the Malt Beverage Distributors Association oppose the Turzai plan.

Meanwhile, State Sen. Chuck McIlhinney, R-Bucks, introduced an alternative privatization plan in the Senate that would allow about 22,000 stores to buy an annual $10,000 license for the right to sell liquor and wine.

Senate Bill 1554 would also allow beer distributors to sell beer individually and by the six-pack, and the president of the MDBA indicated his members would support the McIlhinney plan.

Government, business, labor back $1.65 billion tax credit for Shell

Pennsylvania’s power brokers came together at a news conference Wednesday to support a huge tax credit for Shell Oil.

Corbett assembled the alliance of business groups, union leaders, and state and local representatives in the administration’s continuing effort to induce Shell to build an ethane cracker plant in Butler County. Ohio and West Virginia are also trying to land the facility.

Corporations in Pennsylvania pay a corporate income tax rate of 9.99 percent on top of the federal rate of 35 percent, making them the most highly taxed corporations in the world. The proposed credit would alleviate the burden on Shell, while possibly creating 20,000 jobs.

Sharon Ward, executive director of the Pennsylvania Budget and Policy Center, a liberal think-tank in Harrisburg, opposes giving a tax break to the world’s second largest company.

“The question for lawmakers should be, Why is Pennsylvania providing any subsidy to the project at all?”

The tax credits would not start until 2017.

Decision on health care law will affect PA health-insurance exchange

As the U.S. Supreme Court prepares to determine the constitutionality of the Affordable Care Act next week, the governor’s office has a wait-and-see approach regarding a $33.8 million federal grant related to the law.

The federal Department of Health and Human Services gave the state $33.8 million to support the creation of a state-run health insurance exchange, a key component of the federal law. But if the law is overturned, Pennsylvania will not have to set up an exchange and may have to return the grant to the federal government.

The Insurance Department has not spent any of the grant money, waiting instead for the Supreme Court’s decision.

“We’ve tried to be as prudent as possible as to not expand money that would ultimately have to be returned to the federal government,” spokeswoman Rosanne Placey said.

Teachers groups oppose Gov. Corbett’s teacher evaluation plan

A new teacher rating system being tested in school districts, charter schools and vocational schools across the state has encountered opposition from both the unionized Pennsylvania State Education Association, and the non-unionized Keystone Teachers Association.

The new system would base 50 percent of a teacher’s rating on student performance. The current system, which gave the highest possible rating to 99.4 percent of the state’s public school teachers, does not factor in student performance.

KEYTA President Randy Hoffman opposes heavily weighting student performance because he thinks that many factors outside of a teacher’s control influence how a student performs on tests.

“The kid doesn’t go home and have conversations around the dinner table with the teacher,” Hoffman said.

State Sen. Jeff Piccola, R-Dauphin, chairman of the Senate Education Committee, said that student performance will have to be a major part of any new system.

“Language in the teacher evaluation bill that doesn’t preserve that measure or high level of student achievement involved in the evaluation would be problematic.”

The new system could be implemented statewide as soon as the 2013-14 school year.

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Eric Boehm is a reporter for PA Independent. He can be reached at or at (717) 350-0963.

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