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Behind the budgetSecond on-time budget has no new taxes or increases

- Last modified: July 6, 2012 at 10:19 AM
Pennsylvania capitol photo by Amy Spangler
Pennsylvania capitol photo by Amy Spangler

As he did last year, Gov. Tom Corbett signed the new state budget only minutes ahead of the deadline.

The $27.66 billion budget for 2012-13 was signed Saturday night.

The fiscal blueprint spends about 1.5 percent more, includes no new taxes and does not raise taxes. It also continues the phase-out of the capital stock and franchise tax — on track for elimination by 2014 — and expands the state's Educational Improvement Tax Credit program to $100 million.

The tax code bill passed as part of the budget adds a 25-year ethane cracker tax credit, beginning in 2017, to entice Shell Oil Co. to locate its natural-gas processing plant in western Pennsylvania.

Corbett originally proposed a $27.14 billion budget, but improved tax collections swayed an increase in spending, and many deep cuts were scaled back.

What are Pa.'s primary revenue streams?

Pennsylvania's 2011-12 fiscal year closed with $27.7 billion in General Fund revenue, according to preliminary collections data from the state Department of Revenue. That was $162.8 million, or 0.6 percent, below estimate.

The commonwealth's top revenue sources:

Personal income tax: $10.8 billion in 2011-12, which missed budget by $199.1 million.

Sales tax: $8.8 billion, which was $15.8 million below the budget projection.

Corporation tax: $5 billion, which beat budget by $38.8 million.

Taxes from cigarette, malt beverages, liquor and table games taxes: $1.5 billion, which was $1.6 million above estimate.

Inheritance tax: $827.7 million, which was $10.4 million below budget.

Realty transfer tax: $292.2 million, which was up $800,000 above estimate.

Nontax revenue: $529.5 million, which was up $21.3 million above estimate.

Where does Pennsylvania spend most of its money?

The 2012-13 state budget spends heavily in three areas: public welfare, education and corrections.

Comparisons given are against the 2011-12 budget.

$10.59 billion: Department of Public Welfare. This includes funding for child care services, programs for the disabled and health care for the poor. Funding is up from $10.56 billion.

$5.4 billion: Basic education funding for public school districts. Funding is up from $5.35 billion.

$10.02 billion: Total for public education funding. This is up from $9.61 billion. Education fund includes $1.03 billion for special education (no change), $856.1 million for school employee pensions (up from $600.2 million),

$542.3 million in pupil transportation (up from $538 million) and $212.2 million for community colleges (no change).

$1.87 billion: Corrections Department. No change.

$1.09 billion: General obligation debt service. Up from $1.04 billion.

$412.8 million: Funding for 14 state-owned universities. No change.

$344.9 million: Grants to college students. This is down from $380.9 million.

$272 million: General Assembly. This is down from$272.8 million.

$237.8 million: Department of Community and Economic Development. This is up from $212.8 million.

$227.7 million: Funding for Penn State University. No change.

$139.9 million: Funding for Temple University. No change.

$136.1 million: Funding for the University of Pittsburgh. No change.

$129.5 million: Agriculture. This is down from $133.1 million.

$121.2 million: Department of Labor and Industry. This is down from $128.7 million.

Source: Office of the Budget

Bankruptcy prohibition extended

An amendment to the state's fiscal code barring fiscally distressed third-class cities such as Harrisburg from filing for Chapter 9 municipal bankruptcy protection for five more months was approved as part of the budget.

The ban is now in place until Nov. 30. The original bill was approved as part of the 2011-12 state budget. It was set to expire July 1.

Harrisburg receiver William Lynch lobbied against an extension. He has said bankruptcy should be available as the last option for the capital city, which is buried under more than $326 million of incinerator debt and annual structural deficits.

Business leaders embrace Republican-led budget

In addition to a second straight on-time budget, business leaders cited the continued phase-out of the capital stock and franchise tax, adoption of the single-sale factor for corporate net income tax and the ethane cracker tax credit as top positives.

Some also were pleased with the expansion of the Educational Improvement Tax Credit program.

"It's really good for people to know this is a state that is frugal and gets the job done on time. If Pennsylvania sets itself up to be more competitive to attract more family-sustaining jobs, I think everyone wins."

—David Patti, president and CEO of the Pennsylvania Business Council

"I do believe (Gov.) Corbett understands the big picture and is taking the long-term view. I would expect Corbett to continue to work to right-size state government."

On the cracker facility: "We are very optimistic about what the new ethylene-based manufacturing industry is going to mean for manufacturing in Pennsylvania. Ethylene derived from Pennsylvania natural gas is an important feedstock for multiple intermediary products. This will likely leverage billions of additional dollars in private sector (investment)."

—David Taylor, executive director of the Pennsylvania Manufacturers' Association

"The ethane tax credit has no risk for taxpayers and will create thousands of jobs if we are ultimately successful in securing that $3 (billion) to $4 billion private investment."

—Gene Barr, president and CEO of the Pennsylvania Chamber of Business and Industry

Other budget items of note

Tax code change helps business

A notable change in the state’s tax code bill includes the adoption of a single-sales factor for computing the corporate net income tax.

The change eliminates property and payroll as a part of the sales tax reapportionment formula for the CNI.

The pro-business tax change will allow Pennsylvania employers to hire and expand their facilities without being penalized, business leaders said.


Human services pilot program introduced

The budget also includes a scaled-down version of Gov. Tom Corbett’s block grant system for human services programs.

The governor’s proposal called for phasing seven county-run programs into one system. The services include everything from mental health and child welfare to drug and alcohol programs.

The final version of the program includes up to 20 counties, rather than all 67. The program will allow counties greater discretion in spending the money, which was cut by 10 percent, and the new process streamlines reporting requirements.

The budget eliminates General Assistance, a program that provides cash payments for about 70,000 disabled adults — about half of whom are in Philadelphia — who are unable to work. The state expects to save $319 million from that proposal and new minimum work requirements for about 30,000 recipients who are medically needy.


Kindergarten support remains

Accountability block grants to support full-day kindergarten in many school districts are in the final budget.

Corbett originally proposed eliminating the $100 million in grants before tax collections improved.

Click here to view the memo informing county assistance offices of the discontinuation of General Assistance.

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