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Corbett budget features deep education cuts, tax breaks to encourage job growth #pabudget

Note: The Governor’s Budget Dashboard is available here. – pa2012.com ed

Gov. Tom Corbett delivered his first budget proposal Tuesday, calling for deep cuts in education spending, government spending and economic development programs. The budget also slashes business taxes and proposes a number of targeted tax credits to encourage growth.

Corbett also announced that his lieutenant governor will head up a task force to study the issue of natural gas drilling in the Marcellus Shale region.

Corbett told the joint session of the General Assembly that his budget address had two underlying messages.

“One: We have to spend less. Because we have less to spend,” Corbett said. “Two: We must tax no more. Because the people have no more to give.”

Public Education Spending

The $27.3 billion budget proposal seeks to close a projected $4 billion deficit, driven in part by the loss of $1 billion in federal stimulus spending that the state funneled to public education.

Corbett proposed spending a total of $5.23 billion on the state’s 500 school districts. This represents a decrease of $550 million from last year’s education spending. All of that decrease comes from the temporary federal funding, so Pennsylvania is actually spending more from the general fund on public education. This also means that school districts can expect to see their state subsidies shrink by at least five percent and as much as 10.5 percent. Special education funding remains level at $1.02 billion.

In an effort to minimize or avoid hikes in school property taxes to make up for the state budget cuts, Corbett called upon school employees to accept a pay freeze.

“I’m calling on the employees of our public schools – administrators, teachers, support workers, everyone – to hold the line,” Corbett said. “If it means a pay freeze, trust me, you’ll have plenty of company out there to keep you warm.”

Corbett also said that he believes district residents should be allowed to vote in a referendum on any property tax increase, though that would require a change in the state law as well.

The budget also eliminates funding for specific programs including accountability block grants, Science: It’s Elementary and Science in Motion. Pre-K Counts, Headstart and public libraries will also see funding cuts.

Higher Education Spending

Next on the chopping block was higher education funding. Under the budget proposal, the State System of Higher Education, representing the 14 state-owned universities, would see a 53 percent reduction in state funding and the four state-related schools (Penn State, Pittsburgh, Temple and Lincoln) would see similar reductions. Community Colleges face reductions totaling 10 percent or $212 million. The proposal also cuts off any funding to non-state universities. Additionally, the budget makes deep cuts to the Pennsylvania Higher Education Assistance Agency, reducing money available for student grants and loans.

Corbett made general statements about “rethinking” state spending on higher education, but did not discuss specific reform proposals. He noted that tuitions have continued to rise in spite of state subsidies.

“When it comes to higher education we should do the same thing that we do in basic education: the dollars should follow the student,” Corbett said. “It’s their money.”

Public Welfare

The budget proposal does increase spending for the Department of Public Welfare by $607 million. The increase is supplemented by a transfer of $247 million from the Tobacco fund. Administrative line items at DPW would see an across-the-board five percent decrease. The budget proposal definitively cuts the adultBasic program, zeroing out the line item. The budget also proposes cuts in programs for child autism services, County Child Welfare services, and cash assistance to low income families.

Public Employee Wages

Corbett then moved on to state employee salaries. His budget calls for eliminating approximately 1,000 currently vacant positions and laying off another 500 employees. In his address he called for freezing the salaries of the remaining state employees and increasing employee contributions to health insurance benefits. He noted that private sector workers have seen their wages stagnate during the recession while state employees received raises.

The contracts for 17 of the state’s 19 unions expire this year. Corbett seemed eager to avoid a repeat of the chaos in Wisconsin over collective bargaining in Pennsylvania, but warned the unions that they must recognize economic realities.

“I want to be clear about this to our union leaders,” Corbett said. “Collective bargaining doesn’t mean some ill-defined middle ground. It means finding the spot where things work. In this case it is going to have to work to the good of the taxpayer or it’s not going to work at all. Let’s find that place and meet there. Let’s keep things working. Neither side need lose for the taxpayers to win. We need to act on our financial challenges now, before they act on us.”

Economic Development

Corbett then moved on to economic development programs. For one thing, the budget proposal does not include Walking Around Money that legislators use to directly fund projects in their districts.

“It’s not there, plain and simple,” Corbett said.

The budget proposal also calls for a 31 percent reduction in funding to the Department of Community and Economic Development. Under the proposal, DCED would receive $223 million to fund projects intended to create jobs.

Corbett called for significant changes within DCED by eliminating line items that have proven to be ineffective. He also called for a streamlined process for funding projects and forcing local economic development agencies to compete for funding in an effort to ensure the best projects get funded.

Marcellus Shale

Corbett announced that Lt. Gov. Jim Cawley will head up a Marcellus Shale Commission. The commission, Corbett said, will look at ways the state can build the natural gas drilling industry while protecting the environment. A report is due in 120 days.

Corbett did say, in no uncertain terms, that he does not support taxing the gas drilling industry, arguing that any tax would scare away more growth and thus jobs and economic activity.

“Let’s make Pennsylvania the Texas of the natural gas boom,” Corbett said. “I’m determined that Pennsylvania not lose this moment. We have the chance to get it right the first time, the chance to grow our way out of hard days.”

Tort Reform

Corbett called for reforming the state’s tort reform law. Under the current law, one party could be responsible for two percent of an injury and another for 98 percent of an injury. However, the former party could be stuck with the full liability if the latter party can evade payment.

“We need to change that aspect of tort law,” Corbett said. “The general assembly has passed this reform before. I’m asking you to pass it again. You now have a governor who will sign it.”

Corporate Tax Cuts

Corbett said that Pennsylvania currently ranks tenth worst in the nation in terms of state and local tax burdens. These burdens scare away business development, he noted. To that end, Corbett proposed eliminated the corporate stock and franchise tax. Phase out of these taxes started under Republican Govs. Tom Ridge and Mark Schweiker, but halted under Democratic Gov. Ed Rendell.

In addition, Corbett announced that his budget proposal continues the film tax credit and the increases the research and development tax credit.

“My budget retains an array of tax credits, not as a favor to businesses, but as a promise to their workers,” Corbett said.

Law Enforcement

Corbett’s budget proposal includes funding for two classes of state police cadets this year and another class next year. Additionally, he called for increased funding to allow counties to hire more parole officers to help released inmates transition back into society. He also called for reexamining sentencing guidelines to stay tough on crime while reducing the number of people in the prison system.

Liquor Store Privatization

Corbett reiterated his call to privatize the state liquor stores. He noted that his position is based solely on principal and not money.

“Government should no more run the liquor stores than it should run the pharmacies and gas stations,” Corbett said.

He went on to announce the formation of a new task force that will look at additional state functions that could be privatized.

Corbett wrapped up his budget address by noting the efforts and struggles of Pennsylvania’s founders. The state has an obligation to not only future generations, but also to the “sacred trust and the Holy Experiment these people passed on to us.”

“Let’s sit down and deal with the present so we can build the future in a way that respects our past,” Corbett said. “Let’s build a new Pennsylvania.”

The General Assembly will begin hearings on the budget proposal next week.

March 8, 2011 at 6:03 pm

--Chris McGann

Tags: economic development, Education cuts, marcellus shale, Pennsylvania Budget, property tax, Tom Corbett

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