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Transportation funding, liquor expected to dominate budget talks

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Like four leaves on a clover, this June session of the General Assembly figures to be an anomaly.

Of course, as always, there will be a 2013-14 budget to debate.

However, three other major topics could run parallel and cut into the fiscal dialogue during the next four weeks: transportation infrastructure, liquor store privatization and public-sector pension reform.

"That's a lot on the plate," said Dauphin County Republican Rep. John Payne, adding that May already has been a busy month for lawmakers with bill introductions and hearings ramping up.

May traditionally is the calm before the June storm, where passing a budget by June 30 is the top priority.

"That's the challenge," said Rep. Ron Marsico, R-Dauphin County.

By and large, a third straight on-time budget with no broad-based tax increases is the primary goal for lawmakers.

But, given the early movement on transportation funding in the Senate and privatization in the House, this summer session could be quite memorable and set the stage for the 2014 election cycle. The governor's race will be on the ballot, along with the entire House and half of the Senate.

"It will certainly be a very busy June," said Erik Arneson, spokesman for Senate Majority Leader Dominic Pileggi. "Right now, there is a lot of optimism that we can get a lot of good things done."

Reforming the two state-administered pension systems, which have about $47.4 billion in unfunded liabilities, could be the one major item in jeopardy of not getting done by the summer break.

Both the House and Senate have versions of a bill that backs Gov. Tom Corbett's reform proposal in February. Adjustments to the future benefit formula of current employees is the political hot potato in the bill, because it faces potential legal challenges.

The bills also call for short-term collar adjustments on the annual increase in the employer contribution limit and moving new employees into a defined-contribution system, or 401(k)-style plan.

"That may or may not be on the board for June," Payne said.

Marsico and others, including Rep. Bryan Cutler, R-Lancaster County, also said pensions might be in the mix in June only if lawmakers can figure out the best way to handle the unfunded liability.

"Pension reform is on the front burner, but not with discussion on the budget," Marsico said.

The administration argues that not passing pension reform with the budget will mean $175 million in cuts elsewhere. The collar tapering is expected to save that amount in the budget this year and about $2 billion over the next five years, according to the Office of the Budget.

Lower-than-expected revenue projections "underscore the importance of many of the governor's initiatives, including pension reform," said Jay Pagni, a spokesman for Budget Secretary Charles Zogby.

Sen. Minority Leader Jay Costa said the state should ignore pensions, citing the 2010 passage of Act 120. That reform act helped address an anticipated spike in pension costs by "smoothing" the increases over a long period of time. That law also reduced benefits for new hires.

"We need to pay the bill and move forward," he said, arguing that the rising costs were well known. "(Act 120) will address the unfunded liability as we go forward."

Continuing to add employees to the defined-benefit system is a "mistake," said Rep. Warren Kampf, R-Chester County, who has introduced separate legislation that deals only with the piece on new hires.

"I'm going to continue to advocate for it or something like it," he said of pension reform. "I think pensions is a big one, but I want us to get it right. It's certainly complicated."

Cumberland County Republican Rep. Stephen Bloom called June a substantial opportunity to address these major legislative issues.

On transportation, he and other Republicans have campaigned for prevailing wage reform to be a part of the debate.

"If there is not a prevailing wage reform component, I think it's going to be very difficult for a transportation package to get the Republican votes necessary to pass the House," Bloom said.

Costa said the same about Democrats if prevailing wage is lumped into the debate.

Tax code changes also expect to play a significant role in this budget season.

Closing the Delaware loophole, reducing the corporate net income tax, phasing out the capital stock and franchise tax, and increasing the net operating loss cap are all items the governor and Republican lawmakers plan to address. The CNI reduction wouldn't take effect until 2015.

"There is a good argument to laying out tax policy with some advance notice to the business community, so people can plan for changes," Arneson said.

The Republican argument is that these changes will help make Pennsylvania a more business-friendly and competitive state. Democrats argue business tax cuts under Corbett have not done enough to create jobs and reduce the state's unemployment rate.

Costa argued that the CSFT phase-out needs to be frozen in place for at least a year, maybe two. Senate Democrats also are pushing hard for Medicaid expansion, along with modernizing, not privatizing the state's liquor system, and transportation funding, he said.

"We'll push those things and see how it plays out," Costa said.

The June budget season is the most opportune time to get other big items done, Bloom added: "June 30 is a useful target date to accomplish important legislative initiatives."

Jason Scott

Jason Scott

Jason Scott covers state government, real estate and construction, media and marketing, and Dauphin County. Have a tip or question for him? Email him at jasons@cpbj.com. Follow him on Twitter, @JScottJournal. Circle Jason Scott on .

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