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Tag: EITC

PA Senate passes budget that draws praise, criticism

Pennsylvania’s Senate approved on Friday a 2023-24 budget of $45.55 billion, approximately $300 million less than what Gov. Josh Shapiro proposed last March. 

House Bill 611 increases the state’s Rainy Day Fund by $500 million and reportedly brings Pennsylvania’s budgetary reserves up to the national average. 

Senate Republicans, including President Pro Tempore Kim Ward, Majority Leader Joe Pittman, and Appropriations Chair Scott Martin, said in a press release that the budget “holds the line on taxes, promotes job growth, continues historic support for schools and sets aside money to prevent future tax hikes.” 

The release also states that the budget “continues the phased reduction of the state’s Corporate Net Income Tax and adds tens of millions of new dollars for workforce development, job training and career and technical education. It also provides additional resources to support improvements to the state Department of Environmental Protection’s permitting process as well as the modernization and upgrade of Pennsylvania’s occupational licensure system.” 

Senate Republicans stated that the budget reduces the tax burden on some of the state’s most vulnerable populations by expanding eligibility for and increasing the rebates provided by Pennsylvania’s Property Tax/Rent Rebate Program. According to the release, the budget “permanently protects program participants from losing eligibility due to future Social Security cost-of-living adjustments.” 

Proponents of the budget say it empowers Pennsylvania families by providing basic education with an increase of $567.4 million, while creating a new $100 million Pennsylvania Award for Student Success Initiative and adds $150 million more for school choice through the Educational Improvement Tax Credit (EITC) and Opportunity Scholarship Tax Credit (OSTC) programs. The plan provides $125 million for school safety grants and $100 million for student mental health. 

Republicans added that the budget seeks to improve public safety by providing enough funding to train 384 new Pennsylvania state troopers while also increasing the current cap on the overall complement of officers by 100. 

Senate Democratic Leader Jay Costa said the plan voted on Friday is not a final agreement and is but one more step in negotiations. 

“As we move through the process, it is imperative that we pass a budget that meets the adequacy and equity goals set out in Governor Shapiro’s budget and in the recent Commonwealth Court fair funding decision for funding public education,” Costa said in a release. “Head Start and Pre-K programs and investing in environmental remediation in our school buildings in particular are woefully underfunded in this version, as is funding for our institutions of higher education.” 

Costa said opponents of the bill are disappointed in the “deep reduction in funding to sufficiently assist our communities to address gun violence, as the Governor proposed in his original plan and as passed by the House of Representatives earlier this month.  

As discussions continue, we will advocate for a responsible spending plan that meets the moment.”

Democratic Whip Christine Tartaglione issued a no vote on the budget, stating that the budget fails to move Pennsylvania forward.

“From failing to act to raise the minimum wage for our Commonwealth’s lowest earners, to failing to fund mass transit, and continuing the systemic underfunding of public education, this bill, and this budget fall far short of the needs of our Commonwealth,” Tartaglione said. 

Tartaglione added that she hopes the leadership in the Pennsylvania House will see the “failures and shortcomings of this proposed budget and make the necessary changes to ensure ALL Pennsylvanians are heard and represented in our Commonwealth’s budget.

Pre-K for PA and Start Strong PA issued a release stating that the budget fails to address the early learning workforce shortage.

“No new money was included for PA Pre-K Counts, Head Start Supplemental Assistance Program or efforts to stabilize the child care workforce,” the release said. “This means early learning providers will continue to lose teachers and close classrooms jeopardizing families’ ability to work.”

Pre-K for PA and Start Strong PA said that for families with young children, access to child care and pre-k is a critical factor in their ability to go to work and ensure their children are in a safe environment.

“The early learning sector is the workforce behind the workforce,” the release said. “When families can’t get child care, their children suffer, their income drops, and the state’s economy is shortchanged. In a time of severe labor shortages, and billions in state budget surplus, the Senate’s failure to ensure parents have access to child care is a tragic oversight.”

Pre-K for PA and Start Strong PA said that when Pennsylvania’s businesses aren’t fully staffed or staff are unreliable due to lack of child care, they cannot produce goods or provide services, creating shortages and increasing prices. The organizations called on Shapiro and the Pennsylvania House of Representatives to invest in the workforce behind the workforce by investing in Pre-K Counts and in the Head Start Supplemental Assistance Program.

After Wolf veto, EITC backers hope for compromise

State lawmakers are pushing to expand a program giving tax breaks to companies that donate to nonprofit educational and scholarship organizations, including private schools.

But the governor is pushing back. This month he vetoed a bill that would have expanded the popular program, known as the Educational Improvement Tax Credit program, arguing that the state couldn’t afford the loss of revenue when it was struggling to fund the basics for public school education.

The bill would have expanded the amount of credits per year from $110 million to $210 million, and usher in future increases. Gov. Tom Wolf estimated that the bill would have cost the state $650 million over the next five years.

Loss for a ‘win-win’

Many Pennsylvania companies tap into the tax-credit program, often known by the acronym EITC. It was enacted under former Gov. Tom Ridge.

Under the program, companies donate to nonprofit programs that provide scholarships or to educational improvement organizations, which include private and parochial schools.

Businesses apply for credits, which reduce their state taxes, and the applications are approved as they come in until the limit is reached. That means not all applications are approved.

A business can donate up to $750,000 per year under the program – but only if there are enough credits available.

Still, supporters call the program a “win-win” for corporate donors and the recipients of their donations, and say they hope elected officials can reach a compromise so the program can grow.

Kevin Schmidt, president and CEO of Neffs National Bank in North Whitehall Township, said donations made through the EITC program can help pick up where public education falls short.

“A lot of things just aren’t getting funded by the state budget,” he said. “There are educational foundations out there that are looking for additional funding.”

While there are nuances to how the tax-credit program works, the most common application is for a two-year commitment to donate to a program.

At that level a company get a 90 percent tax credit on the value its donation.

New Tripoli Bank, for example, has made two-year commitments to make $100,000 annual contributions to the Northern Lehigh Educational Foundation for the past 10 years.

“The foundation comes to us with ideas and projects outside the normal district programing,” said David Hunsicker, CEO of New Tripoli Bank in New Tripoli.

One recent projects involved buying computers and establishing an IT lab for the school district.

The bank, in turn, earns a $90,000 tax credit on its state tax bill.

So there is an advantage to a business, but at the same time Hunsicker noted, the $100,000 donation represents money the school district didn’t have to find in its own budget.

“I think any dollar you spend on education is well spent,” he said.

Donation decline?

The role of the tax credit in spurring donations is unclear.

Anthony Deutsch, a CPA and shareholder at Concannon Miller in Bethlehem, said he was unsure how many businesses would forgo education-related donations in the absence of the tax credit.

Some might still give, while others may give to different charities or to charities in states with more generous incentives.

Regardless, he said, it also boosts the efforts of companies that already are giving.

“It does give us a bigger bang for our buck when we’re donating to these organizations,” Deutsch said.

Nonetheless, he said, the bang is not quite as big as it used to be as a result of the 2017 Tax Cuts and Jobs Act. The law changed the way companies can claim donations.

Under previous law, Deutsch said, a company making a $10,000 donation would get a $9,000 credit on its Pennsylvania taxes, but it could claim the entire $10,000 as a charitable donation deduction on its federal return.

Now on its federal return, a company can only claim the $1,000 it didn’t get as a Pennsylvania deduction.

Still, even without the added federal benefit, Deutsch said most of his clients who had been participating in the EITC program have continued to do so.

But, he said the program benefits businesses and an expansion would allow more businesses to participate.

Deutsch believes there are enough companies and educational organizations interested in the program to justify an increase.

Hunsicker said New Tripoli Bank is looking at expanding its participation in the EITC program. It has opened a branch in the East Penn School District and would like to make donations there like it has done in Northern Lehigh.

What’s next?

The fate of the proposed expansion could be decided during negotiations over a budget for the next fiscal year, which starts July 1. The legislature does not have a two-thirds majority to override Wolf’s veto so it would have to work with the governor to get a bill signed.

Two of Wolf’s main sticking points – besides the cost of the program – were the income limits on scholarship recipients and the program’s accountability.

The bill would have raised the household income limit for scholarship recipients from $85,000 to $95,000. Wolf said that would further distance the program from the low-income children for whom it was designed.

He said he also wants more information provided to the state on where the money is going and the outcomes.

“The EITC lacks proper accountability and oversight, and little is known about the educational outcomes of students participating in the program due to a reporting loophole in the current law,” Wolf said in a statement accompanying his veto. “Even less is known about the scholarship organizations that retain up to 20 percent of each dollar that is supposed to pass through them.”