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Budget 2013: On time but full of disappointmentBusiness leaders hopeful that fall will bring resolutions on key policy items

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And again attention turns to the fall.

Days after Gov. Tom Corbett signed his third straight on-time budget — a $28.4 billion plan with no broad-based tax increases — questions remain over key policy issues left unfinished that the administration was confident could get done in tandem with the perennial spending bill.

But attempts to privatize the state's liquor stores, bolster funding for transportation infrastructure and reform public-sector pensions fell short on the final day of the 2012-13 fiscal year.

Will they or won't they pass in the fall?

"We're certainly hopeful on transportation and privatization," said Gene Barr, president and CEO of the Pennsylvania Chamber of Business and Industry. "Everyone thought our best chance was here in June. Are they going to pick up all three (in the fall)? I guess it's possible."

Barr said he was disappointed about the way the summer session played out, but he added he was still hopeful all would not be lost. Chances of passage next year on these major items — all heavy lifts in a divided legislature — are not good given it's a gubernatorial election year.

"Next year is going to be very difficult," Barr said.

Transportation appeared to be on the smoothest road to completion following last week's amendment that lawmakers felt put the bill in the "sweet spot" for passage. But the path got bumpy near the finish line with lawmakers arguing over a wholesale fuel tax and mass transit funding.

"Other things got in the way. When that occurs, you muddy the bill," said Jim Runk, president and CEO of the Pennsylvania Motor Truck Association, referring to liquor and pensions.

The association has concerns about a growing number of weight restrictions being placed on bridges, which means added expense for the trucking industry and likely the end consumer, Runk said.

"Highway funding is timely and needed now," he said.

A bill tied to expanded Medicaid eligibility had not passed the General Assembly.

David Patti, president and CEO of the Pennsylvania Business Council, said he had confidence that the big items would get done by July 4. He is not as optimistic about the fall.

"We were very close on a liquor deal and transportation," he said. "We were even close on a defined-contribution plan (for pensions)."

Beyond the added scrutiny that comes with budget season, lawmakers will go back to digging trenches, Patti said.

What did we get in the budget?

The 2013-14 budget has its share of positives and negatives for the business community. Here are a few notable items.

Wins:

• Pennsylvania First, a job-creation grant program, saw an increase of $8.3 million for a total of $37.8 million.

• The net operating loss cap was increased to $4 million, or 25 percent of taxable income, in 2014 and $5 million, or 30 percent of taxable income, in 2015 and beyond. It is currently $3 million. The tax code bill, known as *HB 465, also expedited the tax appeals process.

• The *tax code included Indiana Republican Rep. Dave Reed's HB 440, which creates an expense add-back provision to address the Delaware loophole. This would require multistate corporations operating in Pennsylvania to "add back" specific transactions to their Pennsylvania taxable income to ensure they are not being made solely for the purpose of reducing instate tax liabilities.

• The *Banks Shares Tax is being adjusted as part of a comprehensive reform. The rate and base of taxation goes to 0.89 percent of total bank equity capital from 1.25 percent.

• The *inheritance tax, or so-called "death tax," on family-owned small businesses was eliminated.

Tourism got a boost to $7.4 million from $5.8 million. The line item for business marketing jumped to $3.4 million from $941,000, while the World Trade PA program saw an increase to about $7.3 million from $6.1 million. The latter promotes Pennsylvania exports in key international markets and works to attract foreign investments.

Losses:

• The capital stock and franchise tax, which businesses pay on assets, will continue to be phased out, but not eliminated, under this budget. The original budget proposal called for its elimination by Jan. 1, 2014. However, due to rising pension obligations, the life of the CSFT was extended two more years. It will be reduced to 0.67 mills in 2014 and 0.45 mills in 2015.

"This is the first instance where a tax that was supposed to be gone will be kept around because of our inability to solve our pension problems," Barr said. "This is the beginning of what we can anticipate over the next few years to pay for our pension obligations."

Patti called it a tax increase on the business community. He said the state will "take more money from us," anticipating growth in asset reinvestment from business owners looking to lock in on lower interest rates.

• A 10-year reduction of the corporate net income tax, or CNI, was not included in this budget. The governor had proposed a reduction to 6.99 percent, beginning in 2015, from the current 9.99 percent.

*The tax code bill had not been signed by the governor as of press deadline.

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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