PMA Bulletin - Corbett Budget Reaction

 “You Can’t Go Wrong” -- Reaction to Governor Tom Corbett’s 2014 Budget Address

In his annual budget address this week, Governor Tom Corbett reiterated his pro-growth vision for Pennsylvania, continuing fiscal restraint while upholding state government’s responsibilities to the commonwealth’s citizens. Governor Corbett placed the need for private sector growth on an equal station with adequately funding education, health care, and human services. In his remarks before the joint session of the General Assembly, Corbett said that when job creation is the test of every new policy, “you can’t go wrong.”

“The strong, consistent theme of this administration is building strong economic fundamentals for Pennsylvania’s prosperity,” said David N. Taylor, Executive Director of the Pennsylvania Manufacturers' Association. “Having led state government through the prolonged hangover from years of spend-borrow-and-tax, Tom Corbett gave a specific action plan to build on earlier successes and to continue moving Pennsylvania in the right direction. We commend the governor for the plain-spoken leadership he displayed in his budget presentation and look forward to working with him in the coming year to make Pennsylvania stronger.”

The latest job and revenue figures prove Corbett’s case: During his tenure, the unemployment rate has dropped from 9.2 percent to 6.9 percent, which is below the national average. More importantly, Pennsylvania has added more than 141,000 private sector jobs; three times more than the number of jobs created from 2002 through 2010. Pennsylvania has also regained 99 percent of the jobs lost during the 2008 financial meltdown and its aftermath. 

Collections from Pennsylvania taxpayers this year are projected to exceed $30 billion for the first time ever. That’s four percent above the $29.1 billion projected for this year and the biggest since the 2009 recession. Because business or personal tax rates have stayed the same, this new revenue comes from more people working, new business investment, and greater overall economic growth.

“Governor Corbett knows better than anyone that the government does not create jobs - that’s the role of the private sector,” said Carl A. Marrara, Director of Government Affairs for PMA. “In order for the private sector to continue expanding employment, tax rates must remain predictable. And, in order for tax rates to remain predictable, spending must responsible and balanced. Governor Corbett has done that and we hope this will continue into the next fiscal year.”

The governor’s spending plan contains no additional taxes, and Corbett stressed that the Capital Stock & Franchise Tax would be phased-out as scheduled. Under current law, the CSFT rate will fall from 0.67 mills to 0.45 mills on January 1, 2015 and reach a rate of zero on January 1, 2016, when it will expire from state law. Doing away with this business assets tax is a crucial component of making Pennsylvania more competitive, because most states have either a business income tax OR a business assets tax – not both.

Corbett insisted that the FY 2014-15 budget will be his fourth consecutive no-tax-increase, on-time budget. As with the past three Corbett budgets, it contains more state funding for education and social services.

Regarding education, Governor Corbett reminded his critics, who incorrectly blame him for a reduction in education funding during his first year in office, that the true culprit was the loss of federal stimulus dollars. In reality, Pennsylvania has invested an additional $1.2 billion in education over the governor’s three years in office. His proposed budget will set an all-time high of $10.1 billion in direct state support for public education in Pennsylvania. The governor notes that his Ready to Learn education agenda has transformed Pennsylvania’s public education system.

“Through targeted initiatives, Ready to Learn has increased accountability and transparency in our schools, infused stronger educational resources into our classrooms, and focused financial resources on supporting students at all levels,” Governor Corbett said.

He added: “We have a responsibility to give the children of this state a 21st century education, and over the past three years, we have worked every day with thousands of parents, teachers and administrators from across this state to ensure that we drive each and every dollar into an education that meets the needs of the children of Pennsylvania.”

To help pave the way for the increase in education, the governor has a plan to save $300 million in the state employee and public education pension plans. Overall, the unfunded liability of the two plans now tops $50 billion.

“Sixty cents of every new revenue dollar this year will go to fund the pension systems,” Governor Corbett said. “We have to work together now to manage this crisis before it comes a full-blow catastrophe.”

His jobs plan, JOBS1st PA, investments includes a private equity capital fund seeded with $10 million from the PA First program in this year’s budget. The investment will be split into two major categories: Make It in PA and Talented Workers. Make It in PA ensures “the continued resurgence of Pennsylvania’s manufacturing, life sciences and technology sectors.” Talented Workers renews and strengthens “our investment in job training opportunities for all Pennsylvanians with more being invested in Pennsylvanians through workforce training.”

Another initiative, Jobs for All, is an on-the-job-training reimbursement program, as a direct financial incentive to promote the hiring of young people with disabilities.  The first phase of this initiative will help employers successfully hire up to 1,000 young people with disabilities.

Click here to view the additional Jobs initiatives.

The governor also discussed health care during his address. Under his “Healthy PA” plan, first introduced in September, those eligible for Medicaid under the Affordable Care Act would be entered into health care exchanges created under the same act.

“The federal approach is a one size fits all approach,” he said. “With our approach we can get people into better plans with more flexibility, and save money.” A similar plan out of Arkansas did receive approval from Health and Human Services in Washington, but Pennsylvania has been waiting for some time for public feedback from the United States Department of Health and Human Services and they are not under any legal obligation to respond by a specific date.

Governor Corbett’s rejection of a one size fits all healthcare approach from Washington is indicative of his understanding of the burden such a system places on our Commonwealth. His Healthy PA initiative represents a positive, private sector alternative that will place health insurance within the reach of all Pennsylvanians.

Other elements of the Governor’s Healthy PA plan include: requirements that recipients pay a modest monthly premium and that working-age recipients be engaged in a job search in order to qualify. Additionally, Pennsylvania would be the first state to require able-bodied adults to participate in a job search or training program to receive Medicaid coverage. The premium for new enrollees would be set up on a sliding scale based on income, and recipients could get reduced rates for meeting certain health goals, such as a yearly physical, and for working, even part time.

Finally, Governor Corbett renewed his call for the end of the state monopoly over liquor sales in Pennsylvania -- welcomed with cheers by a group of business leaders watching his speech at the PMA headquarters.

Governor Corbett’s renewed call for pension reform and liquor privatization is critical to further ensuring the economic and fiscal well being of Pennsylvania. PMA joins Governor Corbett in supporting these two integral reforms.