Will the status quo — another state budget cycle without new taxes or an increase in current levies — be good enough for the Republican majority in a gubernatorial election year?
Maybe. Maybe not.
As of press deadline Tuesday, Gov. Tom Corbett had not made a decision about the $29.1 billion no-tax budget passed by the GOP majority for the 2014-15 fiscal year. He has until the end of the day Friday to sign the budget, let it become law without action or veto all or parts of the spending plan.
Prior to the summer recess, the governor urged Republican leadership to bring him a pension reform bill that would overhaul the commonwealth's defined-benefit retirement system in favor of a hybrid model that incorporates a 401(k)-style plan. Republican lawmakers remain divided over the bill of choice and have opted to take up a pension vote in the fall.
“We've not slid backwards, other than on pensions,” said Gene Barr, president and CEO of the Pennsylvania Chamber of Business and Industry, the state's largest broad-based business advocacy association.
The state is contributing about $1.7 billion to cover its pension obligations this year, according to the Senate Appropriations Committee. That is up about $275 million from 2013-14 — about $150 million more in the line item for the Public School Employees' Retirement System, or PSERS.
There is an additional one-time tobacco settlement fund transfer of $225 million to PSERS, bringing the total increase in payments to about $500 million over last year.
The clear positives of this budget are no new taxes — that includes a severance tax on natural-gas drilling that Democrats wanted — and the continued phase-out of the capital stock and franchise tax, Barr said.
The latter, which businesses pay on assets, is slated to be eliminated in 2016.
The lack of greater consumer choice over liquor joined pensions on the list of disappointments for the business community this budget cycle.
Here are some of the business highlights:
• Spending: The $29.1 billion spending figure is more than $500 million, or about 1.8 percent, higher than what was available for 2013-14, according to the Senate Appropriations Committee. And it's about $320 million less than the governor's original budget proposal.
• Taxes: The net operating loss cap is slated to increase to $5 million, or 30 percent of taxable income, in 2015. No changes to corporate net income tax rate.
• Fracking: In his budget proposal, Corbett included a revenue line item of $75 million for “non-surface impact leasing” of state parks and forests for natural-gas extraction. The final budget calls for $95 million in revenue.
• Economic development: The Department of Community and Economic Development budget was cut by nearly $32 million. The marketing to attract businesses line item was cut to $2 million from $3.4 million last year. Pennsylvania First, a job-creation grant program, was slashed by nearly half, to $20 million from $37.8 million.
• Construction: The moratorium on the state's so-called PlanCon program, which reimburses school districts for construction projects, is lifted under this budget. Funding was also increased by $10 million.