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.”
Overall, the budget does call for a slight increase in spending over last year, $28.4 billion in General Fund revenue compared to the $27.7 budget he signed in July. As the Governor noted, “Thanks to two years of fiscal restraint, we are now able to make responsible spending increases.”
The budget asks for additional reductions in business taxes, contains a plan to fund road and bridge repair, and asks for the elimination of the state store system. Each element supports his goal of increasing business opportunities rather than the size of government.
“We saved three refineries in the southeast by sharing with the new investors the vision of Pennsylvania's energy future as a world leader, ” the Governor said.
His budget completes the phase-out of the Capital Stock and Franchise Tax, a tax levied even when businesses suffer a loss. The phase-out began in 2000 and the tax will no longer be collected as of January 1, 2014.
His plan also calls for the gradual reduction of the Corporate Net Income tax, the nation’s highest rate, from 9.99 percent to 6.99 percent; a figure closer to the national average. In addition, the cap on net operating loss deductions would increase from $3 million or 20 percent of income to $5 million or 30 percent of income.
At the same time, the Governor is asking for a record $5.5 billion for basic education and funding increases to programs for those with physical and mental disabilities.
“Governor Corbett’s budget continues to build a foundation for a strong Pennsylvania economy, and prosperity benefits everyone,” said PMA Executive Director David N. Taylor. “We applaud Governor Corbett’s commitment to fiscal discipline, refocusing on core functions, reinvesting in critical infrastructure, and creating a pro-growth environment for new jobs and private sector investment.”
Nearly $2 billion in additional spending each year will be available for roads, bridges and mass transit under a transportation funding proposal that will create jobs and rebuild an infrastructure desperately in need of repair.
“Pennsylvania sits within a day's drive of 60 percent of the nation's population. Every year, nearly half-a-trillion dollars worth of goods and services move through our state transportation system,” Governor Corbett said. “However, the average bridge in our state is 51 years old. More than 4,000 of them are now deemed structurally deficient.”
Finally, the Governor again called for selling off the state liquor monopoly and using the money for public education. “Selling liquor is not a core function of government,” he said. “Education is.” The sale of the liquor system, at an estimate of $1 billion, would be allocated to block grants for primary education, including the much-needed skill-set of science, technology, engineering, and mathematics (STEM).
The House and Senate will hold a series of budget hearings in the coming months and negotiations will intensify in the spring before the June 30 fiscal deadline. As those discussions proceed, PMA and many in the business community believe the Governor’s proposal is an excellent roadmap toward an affordable, effective General Fund budget.