With the next fiscal year beginning July 1, the PA House of Representatives has finalized its proposed budget. The $29.1 billion dollar spending plan passed 110-93, with most Republicans voting yea and Democrats voting nay.

GOP budget designers chose to spend $300 million less than Gov. Corbett proposed in February; in part due to the lesser amounts of taxes collected. The plan increases spending by 1.9%, yet places no extra tax burden on Pennsylvanians.

Though Gov. Corbett’s “Ready to Learn” block grant to fund public education was not directly included in the proposed budget, the plan will provide $10.3 billion for K-12 education.

The budget, as currently written, is balanced, however it relies upon $380 million that would result from the privatization of liquor sales in the state. There are reports, however, that this effort would not survive the State Senate.

The budget is balanced and funds the states most crucial needs, according to House Appropriations Committee Chairman Bill Adolph (R-Delaware).

Adolph stated, “this is a solid spending plan that puts the priorities of our citizens first and makes sure we are good fiscal stewards of the taxpayers money.”

GOP leadership is confident that the proposed budget is one that “represents spending priorities supported by our constituents.”

House Democrats counter that the increase in education spending does not counterbalance the funds diverted three years ago to reform the pension system. Continuing to call for a 5% severance tax on natural gas drillers, Democrats claim that tax would raise $700 million.

Governor Corbett’s administration and the Senate will meet to discuss the proposal during the next few days. The Governor told legislative leaders last week that raising taxes are out of the question until the pension funding issue is adequately funded.

People are asking lots of good questions lately about Pennsylvania’s proposed 2014/2015 budget. But few are raising what may be the most urgent question of all: why are state revenues down this year–more than a half billion dollars amid a national economic recovery?

Indeed, Pennsylvania’s revenue shortfall contrasts markedly with most other states. Revenues in 80 percent of the other 49 states will meet or beat budget projections this year.  Pennsylvania is one of only 11 that will not.

Pennsylvania’s revenue gap, along with projected spending, leaves a budget deficit of at least $1.4 billion. The problem is so severe that Gov. Tom Corbett and his notoriously tax-averse administration are furiously signaling they might consider new taxes, including a Marcellus Shale extraction tax.

Not surprisingly, the administration is already lining up the usual suspects, charging them with causing the looming deficit: former Gov. Ed Rendell for spending too much; the federal government for spending too little; and the economy for underperforming.

But, the blame game really doesn’t work here very well, even if others did drive state spending, and admittedly pension debt and other debt service are cost drivers. But spending is not the problem with this year’s budget. The problem instead is revenue: some $522 million in tax receipts, mostly in income and sales taxes, that didn’t show up.

Why not?

This is a simple question without a simple answer. In fact, Pennsylvania’s revenue shortfall stems from underperformance of the state’s revenue system. That revenue system was barely adequate in the mid-twentieth century when much of it was developed. It is now hopelessly outdated in the 21st-century Internet age.

To put it simply, Pennsylvania taxes are a mess.

The basics of the state’s tax system are straightforward. Pennsylvanians pay some $29 billion annually to state government from an array of taxes and fees, including a state sales tax, personal income tax, corporate income tax, motor vehicle taxes, sumptuary taxes including cigarettes and alcohol, and miscellaneous taxes.

The state sales and income tax produce the lion’s share of revenue with over 30 percent for sales and about 40 percent for income. And therein lays the problem — or most of it.  These two taxes as implemented in Pennsylvania provide textbook examples of how not to raise revenue.

The sales tax may be the worst problem, at 6 percent levied on retail sales and some services. Allegheny County adds 1 percent and Philadelphia 2 percent.

In principal, a sales tax can be a productive tax in a consumer economy such as ours. In practice, Pennsylvania has demonstrated how to render a productive tax not so productive.

The state has achieved this remarkable feat by littering the tax base with dozens of confusing exceptions to what is taxable. Food is exempt except when it is prepared. Clothing is exempt unless it is sports apparel. Some services are exempt, others are not. And so on. And, of course, in the Internet age, some retailers simply don’t collect the tax.

Pennsylvania has perversely transformed its “broad-based’’ sales tax into a “narrow-based” tax due to its multiple exemptions, favoring some while penalizing others. Narrow basing the sales tax costs the commonwealth at least a billion dollars a year.

Consider this: If 50 percent of the loopholes in Pennsylvania’s sales tax were closed, the revenue shortage this year would be reduced to zero. And if all of them were closed, the state would have a $500 million revenue surplus.

The state personal income tax gives the sales tax some competition for the worst state tax. Its problem is not its exemptions but its paucity of exemptions. Everyone receiving any of eight separate classes of income (salaries, interest, rents, etc.) pays it and pays it at the same fixed rate of 3.07 percent. That’s because it’s a “flat rate” income tax, with the lowest rate in the country. As a flat rate, its “elasticity” or growth is among the lowest of any tax. As the Pennsylvania economy grows, it lags behind and consequently can’t keep up with the demands on it over time. It’s bad in bad economies and worse in good economies.

The irony, not to be missed, is that the Corbett administration has adamantly opposed any kind of tax increase or reform. Yet much of his electoral problems have occurred because he has had to preside over successive draconian budgets and cuts in vital public services – all a consequence of a failing revenue system.

If taxes are the problem, they are also the solution. Clearly we must drag, pull or push the states antiquated revenue system into the 21st century, starting with the sales tax and the income tax. The sales tax can be fixed legislatively. The income tax will require a constitutional amendment to substitute for the flat rate tax. With a modern efficient tax system the state can begin to support the dangerously pent up demand in vital programs like education and infrastructure. Without a modern tax system, Pennsylvania faces a long painful decline.

It’s not a hard choice.

Leaders from the Philadelphia Federation of Teachers traveled to Harrisburg today to advocate the need for sustainable funding in the state’s public schools.

In light of the looming budget deadline, they need action to take place quickly, or they will need to wait another year to see additional funding for their schools.

“Pennsylvania is one of three states without a funding formula for education,” said PFT president Jerry Jordan while petitioning in the Capitol. “The result has been massive budget cuts and huge deficits for school districts like Philadelphia, where students don’t have enough counselors, school nurses, certified librarians and other programs and services.”

In PA, schools are funded mostly via local property taxes, often leading low-income communities’ public schools to be significantly under-funded in comparison to those of wealthier districts. The funding formula Jordan mentions would ensure that more state dollars would go to communities with lower local funding, thereby leveling the playing field and providing all schools with the same funding.

The state legislature instituted such a formula in 2008 during Gov. Ed Rendell’s tenure, but the legislation was reversed in 2011 after Gov. Tom Corbett was elected to office.

The PFT leaders spent the morning in face-to-face meetings with legislators, followed by an afternoon rally and press conference in the Rotunda. They were joined by PA Representatives Cherelle Parker, James Roebuck, Louise Williams Bishop, Ronald Waters and Steven Kinsey and State Senator Vincent Hughes.

State Senator Hughes has introduced legislation that would provide public schools with additional annual funding through an extraction tax on Marcellus shale drilling. In addition to Hughes’ proposed legislation, the PFT supports legislation that would create a cigarette tax for additional public school funding.

They also voiced their opposition of several pieces of legislation while at the Capitol, including the proposed reformation of PA’s current layoff-by-seniority rules and the Corbett-Tobash pension plan.

“Not only will these pieces of legislation hurt working Pennsylvanians,” Jordan stated, “they are a needless distraction from what should be the primary focus of the legislature—passing a budget that keeps school districts out of crisis mode and helps to guarantee a better future for our children.”

Pennsylvania Republican House members proposed a $29.1 billion spending plan for the 2014 fiscal year, a budget leaner than that originally introduced by Gov. Tom Corbett.

The Governor proposed a $29.4 billion spending plan which seeks to create a balanced budget with no tax increases for a third consecutive year.

House GOP leadership has trimmed the spending plan further, and curtailed the public school funding increase to ensure that the state meets its scheduled pension payments.

Proposing a 1.9% spending increase of $536 million, a $315 million reduction from Corbett’s February proposal, PA GOP members wish to spend conservatively.

Members such as House Majority Leader Mike Turzai (R-Allegheny) are actively advocating for state liquor privatization. Selling state liquor stores and licenses to private business owners could create $380 million in new revenue according to proponents, and help to fund the proposed budget.

Senate leaders are currently struggling to amass the necessary votes for liquor privatization.

Nevertheless, the budget proposal includes neither tax increases nor natural gas extraction tax on Pennsylvania’s abundant Marcellus Shale resource.

The state will gain $75 million in Oil & Gas Lease Fund Money, after Governor Corbett’s executive order allowing non-surface impact drilling on state forest and park land.

Corbett’s $340 million “Ready to Learn” Block grant did not make the cut in the most recent spending plan.

House Democrats strongly object to the proposed budget, claiming that the $100 million funding increases to education is not enough. They also think that the increase in funding to human services is not adequate.

The new fiscal year begins July 1, and the full PA House of Representatives will consider the proposed budget before that date.

Update: The State House Appropriations Committee approved the plan this morning on a 21-14 party-line vote.

Democratic nominee for the 163rd District seat in the State House Vince Rongione outraised Republican opponent Jamie Santora once again.

In this latest campaign finance filing period, the Democrat bested his opponent by 28 percent, with Rongione pulling in $29,594 and Santora $23,050. In last month’s report, Rongione’s margin was much smaller, though still worthwhile, at just under 10 percent.

Rongione currently has over $86,000 cash on hand, while Santora has $76,464. Both candidates are looking to replace retiring Rep. Nick Micozzie (R-163) in November.

“We knew we were up against a lot when we started the campaign in January,” Rongione said in a press release. “We’ve worked extremely hard to get where we are now, and if I’m given the privilege to be State Representative for the 163rd and represent my hometown in the state legislature, I’m going to work even harder.”

Rongione once again touted his strong grassroot support in his announcement of the fundraising success, as over half of his 348 contributions from individuals or organizations were for less than $100. Additionally, his total sum of contributions under $50 was 6 times more than Santora’s.

Rongione’s fundraising success is particularly noteworthy due to historic Republican fundraising success in the 163rd. In the district’s past four elections, the Republican candidate raised at least double, and sometimes triple, that of the Democratic candidate over the course of the election. On average, the Republican candidate outraised the Democratic candidate by just over $100,000.

This information, however, should be taken as a grain of salt, as the Republican candidate in those elections was long-time incumbent Micozzie, who has held the seat for the past 36 years.

Regardless, Rongione and his campaign are incredibly optimistic about what his fundraising numbers, in addition to his support from various local unions, mean for the November election.

“The outpouring of support has been incredible. The support of the local community, the support of my family and friends, the support from local unions–all their help has added up to this,” Rongione said. “Our message is resonating. We need a representative who will fight against Corbett’s cuts to education, fight for a property tax freeze for seniors, and fight for an economy that works for everyone.”

Jack Hansen

Jack Hansen received enough write-in votes to become the Democratic nominee in the race for State Senate in the 24th district.

Hansen entered the race after a vacancy in the first week of May. In that short timeframe he not only got the requisite 500 write-ins but finished with 1,506.

“I am deeply moved by everyone who took the time to do a write-in vote for me,” Hansen said. “I will work just as hard for all of you from now until November, and even harder when I am elected to serve you in the Senate. Thank you!”

The 24th district is currently represented by incumbent Republican Senator Bob Mensch. The district contains most of upper Montgomery and Bucks Counties as well as the Southeast corner of Berks. 945 of Hansen’s votes come from Montco.

“That’s an impressive number for a write-in campaign,” noted Montgomery County Young Democrats President Nate Webster. “I have worked with Jack on past campaigns, so I am not surprised that he got well over the minimum required, but to triple it is phenomenal.”

Hansen served in the Navy during the Vietnam War and has been a member of the Lansdale Borough Council since 2008, including a stint as president. Sen. Mensch won a special election in 2009 and re-election in 2010, he is currently seeking a second full term.

Vince Rongione, the Democratic candidate for the 163rd district in the Pennsylvania State House, obtained the endorsement of the Pennsylvania State Building and Construction Trades Council on Tuesday.

“The State Building Trades and Construction Council is enthusiastically backing Vince Rongione’s campaign for the 163rd,” said President of the State Council Frank Sirianni. “Forget about which party he belongs to, Vince is the right guy for this district and this community. He has the right ideas to bring economic growth to Delaware County and will bring good jobs for those who need it most, middle and working class families.”

“It’s truly humbling [to] earn the endorsement of the Pennsylvania State Building and Construction Trades Council. This is a huge victory for the campaign,” Rongione said. “I look forward to working with the State Council to fix our economy, bring jobs to the 163rd and get people in the 163rd working again. We need economic growth that works everyone, not Corbett’s corporate friends and big money interests.”

The State Council consists of 15 Regional Councils and over 115 local unions, making it the largest and most highly organized building trade in the state.

The Trade Council brings Rongione’s total union endorsements up to twelve, including the United Steelworkers Local 10-1, United Steelworkers Local 12698, Plumbers Local 690, Painters District Council 21, Bricklayers Local 1, Bricklayers Local 5, IBEW 614, UFCW 1776, Sheet Metal Workers Local 19, Elevator Constructors Local 5, and United Transportation Union.

The unions who have chosen to endorse Rongione may come as a surprise, as some of them backed Republican Rep. Nick Micozzie during his 36-year hold on the seat.

Meanwhile, Rongione’s Republican opponent Jamie Santora has been endorsed by  the International Brotherhood of Electrical Workers (IBEW) Local 654.

Rongione out-fundraised Santora prior to the primary elections. Both men are seeking to replace Rep. Micozzie who has held the seat since 1979. The 163rd district contains parts of Delaware County.

Americans for Prosperity (AFP), a conservative 501(c)(4) organization, has created a 31-second radio advertisement that promotes the introduction of ‘Paycheck Protection’ in Pennsylvania.

‘Paycheck Protection’ legislation attempts to diminish the power of public-sector unions by discontinuing the practice of automatic collection of union dues for political purposes.They feel this is an improper use of taxpayer dollars.

Meanwhile, opponents argue that the state spends less than $100 a year on deducting dues for public-sector union employees.

The AFP commercial features a school teacher from Chester County named Robin.

“I was shocked to learn our school district resources as well as my tax money are being used to deduct not only union dues, but political action funds for the union’s PAC that goes to candidates I do not support,” Robin says in the ad. “Even our regular union dues fund organizations that many of us disagree with.”

She continues, “We should have a choice where our tax dollars are used.”

The radio spot ends by urging listeners to sign an online petition.

Americans for Prosperity has been called the “main political arm” of the Koch Brothers and is accordingly despised by liberals.

It appears State Rep. Mike Fleck will be on the ballot in the fall after all, though not where he expected.

As we reported last week, Fleck was beaten by write-in votes in the GOP primary. It was initially unclear whether enough of those votes would be valid, however, and the possibility remained that Fleck could prevail.

Now it is being reported by WTAJ-TV that Fleck did lose the GOP nomination to write-in challenger Rich Irvin. Yet, in an unexpected twist, Fleck won the Democratic nomination by receiving more of those write-in votes than Irvin.

According to the unofficial totals, Irvin was the recipient of 3,600 write-in votes in the GOP primary while Fleck picked up 3,396. In the Democratic primary, though, Fleck outpaced Irvin by a 901 to 886 margin in the write-in votes.

Rep. Fleck seems ready to embrace this reality and campaign against Irvin in the fall.

“Rep. Mike Fleck (D) Three Springs. How’s that for an oxymoron,” the State Rep. wrote on his Facebook page. “Thank you to the 15 democrats who put me over the top on the democratic write-in, with a final tally of 901-886. And thank you to the three thousand plus republicans who voted based on my job performance. While a lot can still happen legally, today is a new day and if we are ultimately successful in our bid to continue thru the fall, rest assured, I will give it my all.”

These results must still be certified by the county Board of Election and it is also possible that Irvin could challenge these results. Nevertheless, as things currently stand Rep. Fleck remains a viable candidate for re-election.