Could We Have An On-Time Budget?

pa-state-capitol-b175d9a07740ecf3It doesn’t have to be pretty, just so long as the job gets done. That seems to be the attitude of Gov. Corbett and the legislature as they near the budget deadline.

With midnight Monday fast approaching, it appears the three branches might be close to a deal.

After the House passed their plan on Friday, the Senate is finalizing their own bill and the two could be reconciled on Sunday night or Monday. The process may be finished in time for the Governor to sign a budget by the close of business on Monday.

At the outset, Governor Corbett indicated that he wouldn’t accept any new taxes until pension reform and liquor privatization were dealt with. A problem emerged, though, as it appeared neither of those initiatives had enough support and the commonwealth had a significant revenue shortfall that needed to be filled.

The GOP and Democrats initially tried to fill the gap with taxes on cigarettes and maybe even on natural gas drillers but the Republicans abandoned that track and are seeking to cobble together one-time cash items to get the numbers to balance.

Marc Levy of the Associated Press went as so far as to call this action “the big gimmick.”

Meanwhile, Gov. Corbett and his campaign are alleging that Tom Wolf and Katie McGinty are pushing Democrats to oppose the budget.

“It appears that millionaire Secretary Tom Wolf’s hypocrisy has no end,” said Corbett-Cawley Communications Director Chris Pack. “Secretary Tom Wolf has repeatedly claimed that he’s not a politician, but he’s engaging in the most cynical of political actions – lobbying the General Assembly to blindly oppose Governor Corbett solely for political purposes.”

This political line of attack might not work, however, as Republicans control the Governor’s Mansion, the House and the Senate, so they are likely to receive all the credit or blame.

Nevertheless, it appears we just may have an on-time budget this week.

HD-163: PASNAP Endorses Santora

jamiesantoraJamie Santora has earned the endorsement of the Pennsylvania Association of Staff Nurses and Allied Professionals (PASNAP).

Having worked with Rep. Nick Micozzie over the years, PASNAP says they are confident that Jamie Santora will represent their interests as well as his predecessor, if elected. Micozzie announced his retirement earlier this year; now Jamie Santora and Vince Rongione are vying for HD-163, in what is shaping up to be a competitive race.

“We are pleased with your commitment to safe staffing and workplace violence prevention, issues that we and Rep. Nick Micozzie have worked to promote for many years,” PASNAP President Patricia Eakin and Executive Director William Cruice wrote to Santora in their endorsement letter. “Electing you to the state legislature will ensure continued support for our nurses and their patients in Delaware County.”

Promising to support legislation that prevents against workplace violence, Santora also stated he would support the establishment of minimum nurse-to-patient ratios. The long-term goal of such legislation is to drive down healthcare costs, improve patient safety and care, and reduce the prevalence of preventable infections.

PASNAP represents 5,000 registered nurses and healthcare professionals across the state.

A wide variety of organizations have endorsed Santora, however his opponent Vince Rongione has been supported by a larger number of different labor unions, including the UAW who announced their backing last week. PASNAP’s endorsement is key, however, as it is generally less common for labor unions to endorse Republican candidates.

The Delaware County Committee of the Building and Construction Trades Council, the Local 654 of the International Brotherhood of Electrical Workers, the Pennsylvania Fire Fighters Association, and SEPAC, a business organization consisting of leaders from chambers of commerce in Southeast Pennsylvania also all endorsed Santora.

An elected Councilman in Upper Darby Township and small business owner, Santora worked in real estate for the past 16 years.

PA Gas Leaders Discuss Proposed Severance Tax

Elk-Co-MarcellusEarlier this morning, three executives from some of Pennsylvania’s top oil and gas companies held a conference call with statewide reporters to discuss their views on how the proposed severance tax, which drillers would pay on the value of the gas taken from a well, could potentially affect their industry and the Commonwealth.

The three executives were Stephanie Wissman, Executive Director at Associated Petroleum Industries of Pennsylvania (API-PA), Lou D’Amico, President and Executive Director at Pennsylvania Independent Oil & Gas Association (PIOGA), and Dave Spigelmyer, President at Marcellus Shale Coalition (MSC).

Though these individuals may represent different companies, they were unanimous in the feelings that the severance tax would be a major threat to the economic stability of Pennsylvania.

Wissman, who spoke first, was quick to point out how the growth of the oil and gas industry in Pennsylvania has benefited the citizens of the Commonwealth and that continued growth will lead to greater prosperity.

“Today, over 200,000 core and ancillary jobs are associated with the oil and gas industry in Pennsylvania,” she asserted.

Wissman did, however, state that the development of this industry is still far from complete and that the severance tax could prove detrimental to Pennsylvania’s progress.

“Further expansive capital investment is needed and a severance tax could stunt the growth of this very promising industry,” she said. “A misguided severance tax could strangle production, undermine Pennsylvania’s competitive position, and threaten our bright economic future.”

“It seems to me quite strange to single out a single industry, applying a tax to that industry different than any other tax on any other industry in Pennsylvania and equate that with fairness,” Lou D’Amico noted.

Finally, Spigelmyer chooses to discuss the impact the severance tax could have on Pennsylvania’s ability to compete globally.

“If Pennsylvania upset the competitive apple cart, so to speak, we lose capital and we lose jobs.”

During questioning, the officials were asked if they would accept a severance tax at a lower rate than the 5% proposal currently being advocated.

“We are absolutely against any severance tax,” Wissman replied. “We have had conversations with numerous legislators, business leaders, small and large businesses that have a stake in this industry and any kind of severance tax is extremely problematic.”

GOP State Budget Plan Clears House

PA House ChamberWith 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.

Politically Uncorrected: The Real Question About the Budget

pa-state-capitol-b175d9a07740ecf3People 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.

PFT Advocates for New Funding Formula in State Capitol Rally

PFTLeaders 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.”

House GOP Proposes $29.1 Billion Spending Plan [Updated]

A view of the Pennsylvania State house from the State Street bridge in HarrisburgPennsylvania 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.

HD-163: Rongione Keeps Ahead of Santora in Money Race

vince-rongioneDemocratic 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.”

SD-24: Hansen Makes Democratic Ballot Through Write-In Votes

Jack Hansen

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.

Pileggi Suggests Legislature Will Miss Budget Deadline

Dominic-PileggiPennsylvania’s State Senate Majority Leader Dominic Pileggi announced today that he has informed his fellow Republicans that they will probably have to continue working on the $29.4 billion budget plan into July.

With only two weeks remaining before the fiscal year ends on June 30, Senator Pileggi said that it’s unlikely a new state budget will be approved before then.

Balancing Pennsylvania’s budget has been the on political slate for several months, but with current projections estimating the gap could be as high as $2 billion dollars, the conversation has now captured the focus of both the major parties.

Governor Corbett recently stated that he believes the key to controlling the budget is fixing Pennsylvania’s pension system. “If we want to be able to spend more on education, more money in agriculture, in tourism…we have to get control of our pension system.”

Jay Pagni, the spokesman for Gov. Corbett, reinforced this point by stating that “the governor is prepared to stay as long it takes” until lawmakers address ways to restructure the state’s public employee pension systems and liberalize the sale of alcoholic beverages in Pennsylvania.

Earlier today, the Pennsylvania Democratic Party unveiled a new video that points the finger of blame at the Governor, attributing the shortfall to his poor planning and ineffective fiscal decisions.

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