State lawmakers are in the thick of the frenzy of patching together a spending plan for the 2014-15 fiscal year that begins July 1. Enacting a budget is a formidable task that entails long, tense negotiations and, since it must be balanced, attention to hundreds of details. Complicating matters further, this year the legislature faces a $1.2 billion deficit and General Elections loom in November.
“You Can’t Go Wrong” -- Reaction to Governor Tom Corbett’s 2014 Budget Address
When he first took office, Governor Corbett walked into a public education funding gap. For over two years Pennsylvania’s school districts received a total of $1.7 billion in stimulus money. Over that same two-year period, public school employee salaries and benefits jumped by $1.3 billion.
The unfunded liability for state employees and teacher pensions is $41 billion, and if something isn’t done soon we are on the hook for it. The Governor is offering a plan that will almost surely result in a tough political fight because part of it calls for adjusting the pension formulas of those currently employed. There may be no alternative. His budget office says that next fiscal year the costs for pensions will consume 60 percent of all new revenues, money that should be going to core government programs.
Only two states, Pennsylvania and New Hampshire, cap the net operating losses (NOL) business can carry over against their Corporate Net Income (CNI) taxes. Here’s why the other 48 don’t. The cap penalizes start-up and cyclical companies by significantly increasing their effective tax rate. Allowing for the deduction in net operating losses improves a business’s tax liability. Not allowing for uncapped NOL deductions puts Pennsylvania at a direct disadvantage in attracting or retaining jobs in these innovative industries.
Remarkably some have characterized the Medicaid expansion under the federal Affordable Care Act (ACA) as “free” for Pennsylvania because Washington “covers” the initial few years of cost. This, when the money to pay for the expansion still comes from the same pockets, ours, and the commonwealth will end up shouldering most of the costs in the down years anyway.
Our roads and bridges are not only costing us millions in delays and vehicle repairs but they are dangerous as well. Fifty years is the average age for a Pennsylvania bridge and PennDOT classifies more than 4000 bridges as structurally deficient. These deficiencies cause rerouting, shipping delays, and hazardous situations on a daily basis.
Restraint in Spending
The Governor’s budget builds on his first two spending plans that combined to erase a $4.2 billion deficit caused by the recession and the end of federal stimulus money. It hasn’t been easy or painless. According to his Budget Office, 260 line items in the annual budget have been eliminated since Governor Corbett took office.
Governor Corbett’s third budget proposal continues a restraint in pubic spending that over the past two years eliminated a $4.2 billion deficit without raising taxes.
“We stopped our fiscal cliff before it even had a name,” Governor Corbett said in his address before the General Assembly on February 5. “And we didn’t do it by raising taxes and increasing spending.”