By that time the guys in the back room with green eye shades will figure out another scheme to keep employer premiums low, legitimate or not.

Over the last two decades, there have been several methods to control health care costs for employers.  In the mid and late nineties the system deployed was known as “managed care.”

The idea then was to make primary care physicians the gatekeepers to the entire health care system.  You had to see your family doctor to get a referral to the more expensive specialists.  Took a few years to figure out that few patients requesting referrals were ever turned down by the family docs.  Refusing to refer over the demand of the patient could cost them business.

Next came more premium-sharing by employees early in the new century.   Some employers – one documented in a weconnectdots blog last year – passed all or nearly all of the premium increase on to their workers, particularly at non-union work sites, which in the private sector is nearly everywhere.

That didn’t work either for one simple reason.  Workers figured if they were being forced to ante more money for health care (while foregoing raises), they should use the system more frequently.

The new technique is to increase co-pays, enough to make workers and their families think twice about even getting treatment.  Two more tweaks will also help keep premiums to employers lower.  Commissions that are paid to independent agents are being reduced.  One agent reported that he was paid as much as 25 per cent of premiums a few years ago by one carrier.  This year that commission has been reduced to five per cent.

Another tweak also deals with co-pays, specifically dealing with rehabilitation therapy, almost always needed after surgery.   Once upon a time, for example, the attending physician might prescribe physical therapy three times a week for six weeks.  The insurer would pay $60 per session for a total of $1,080 collecting only a single $20 co-pay from the patient.  Today the carrier considers each session to be a single prescription, requiring the patient to pay the $20 co-pay every time he (she) submits to the therapy.

No one puts a better spin on this than the media people at Pittsburgh-based Highmark.  About 15 years ago on the night before Thanksgiving, then-acting Attorney Tom Corbett approved the merger of Blue Cross of Western PA and Blue Shield into the state’s largest health insurance company with almost five million members.

Recently Highmark announced profits for this “non-profit company” surged 146 per cent comparing 2010 with 2009.  One of the reasons cited – “medical claims rose less than expected,” according to a front page article in the Pittsburgh Tribune-Review.

The article cited Moody’s analyst Steve Zaharuk who bluntly said “faced with higher deductibles and co-pays, members sought fewer medical services.”

Highmark has opened six “Highmark Direct” retail stores, selling policies direct to the consumer and staffed with their own people.  The insurance giant intends to open more retail outlets, cutting more independent agents out of the pie.

Highmark also announced that employer premiums would rise “less than ten per cent in 2011.”  No one projected how high the premium hike might have been if Highmark had not increased profits 146 per cent.

The US Justice Department is investigating Blue Cross Blue Shield plans.  The focus is whether these companies “suppressed competition in violation of antitrust laws, resulting in higher health care costs.”

Consumers should not hold their breath.

It allows him to keep his no-taxes campaign pledge and base intact. It still does little to win over detractors.

The governor held court in an off-the-record briefing with the news team during a series of stops in Philadelphia. At least one briefing attendee said there were plenty of tough questions, from public reception to his policies to his hardcore approach to letting the shale industry drill away, tax-free — as well as ” a bit of tap dancing.”

Despite recent reports of his handling of the media, the “gutsy Irishman” struck a low-key and reserved tone in his interview with 6ABC’s Tamala Edwards.  The exclusive interview will air on Inside Story this Sunday at 11:30A, and can be caught again online after 2P.

Corbett also told the media not to confuse a “fee” with a “tax.” Presumably, shifting the responsibility for levying a financial burden on the industry from the state to the counties would fulfill the governor’s “no tax hike” pledge. However, just such a proposal was floated at a January hearing about the impact of the industry, particularly on rural, northern tier counties where much of the drilling is happening.

Severance Tax Proposals

While there is no proposal yet to allow local and county governments to assess such fees, six Democrats and a Republican introduced SB 352 in early February to actually levy a severance tax on natural gas extraction. It was referred to the Senate Finance Committee, which has not scheduled a hearing on the bill. Two of the bill’s Democratic co-sponsors sit on the finance committee.

SB 352 would impose a tax of five percent of gross profits plus 4.6 cents per thousand cubic feet of natural gas extracted. In contrast, a proposal that nearly passed in 2010 would have imposed a tax of 39 cents per thousand cubic feet.

Sen. Ted Erickson, the sole Republican co-sponsor of the senate bill and chair of the Senate Majority Policy Committee held a hearing on natural gas drilling in late January. He said:

Clearly, there is a need for some sort of consistent funding mechanism to help local governments address the issues that arise when wells are built in their area, as well as funding for the Commonwealth for its activities related to monitoring, inspecting and updating regulations. By working with all levels of government and the industry, we have the opportunity now to address many of these issues.

In the House, Rep. Greg Vitali is the lead sponsor of a companion bill, HB 33, which mirrors the language in SB 352. Vitali said:

Pennsylvania is the only major natural gas producing state in the nation that does not have a severance tax or fee in place. Out-of-state companies are profiting from the Commonwealth’s resources, and the Commonwealth should benefit too.

He also explained that the tax would raise an estimated $245 million for the upcoming fiscal year and $570 million by 2015. The revenues would be shared by the general fund, local governments and environmental projects, including the depleted Growing Greener fund.

The problem for severance tax advocates, of course, is Corbett’s vow not to raise taxes of any kind. Even if SB 352 or another natural gas tax would make it through the legislature, Corbett would likely veto it. That would mean both houses would need a two-thirds majority to override the veto. Even if the tax would appear as part of another bill, Pennsylvania governors have a line-item veto power.

Support and opposition

Despite Corbett’s pledge, Pennsylvanians seem supportive of a natural gas tax. A Franklin and Marshall College poll conducted this month found that 62 percent favor a tax on natural gas extraction. According to the crosstabs, 57 percent of Republicans favor such a tax. The only other tax proposal with more support was a tax on smokeless tobacco products. Apparently, the governor’s budget address did nothing to swing public sentiment as a January poll conducted by Susquehanna Polling and Research found 63 percent support for such a tax.

The Marcellus Shale Coalition, an industry group representing the interests of the natural gas drillers, does not necessarily object to a severance tax. However, they disagreed with the 39 cent rate proposed last year as too high to be competitive. In that statement issued last year, the coalition said, “(O)ur industry maintains its support for a competitively structured severance tax that allows for capital recovery and reinvestment, comparable to other leading shale gas producing states, such as Arkansas, Texas and Louisiana.”

The Pennsylvania Chamber of Business and Industry also opposed last year’s tax proposal, but left the door open for a compromise at a lower rate, which the current proposals offer. Chamber Vice President Gene Barr of Government and Public Affairs said last year:

It is possible for the legislature to pass a responsible severance tax that addresses the various concerns that have been raised, environmental and otherwise, while not harming the economic promise of the Marcellus Shale industry.

The progressive Pennsylvania Budget and Policy Center supports a severance tax and have created a graphic on their website showing how many millions of dollars the state has already lost from failing to levy a tax. They explain that most states tax either tax the gross profits on a wellhead or levy a flat fee per thousand cubic feet. While the HB 33/SB 352 proposals would tax both, PBPC notes most producers prefer the flat fee as it is easier to calculate and more predictable. Another progressive group, PennFuture, supports a “substantial” severance tax, a moratorium on drilling leases on public lands and additional environmental regulations. Renew Growing Greener, a group working to replenish the state’s environmental fund, supports putting a significant portion of any severance tax toward Growing Greener.

The conservative Commonwealth Foundation, on the other hand, argues that a significant severance tax would drive drillers away from the state. They also note that other states delay implementation of such taxes in order to allow drillers to recoup upfront costs.

The County Commissioners Association of Pennsylvania contends that a portion of any severance tax should be directed to local governments. However, CCAP is more interested in reversing the 2002 state Supreme Court decision Independent Oil and Gas Association vs. Fayette County that ruled oil and gas cannot be subject to property taxes. A reversal of that decision would be a revenue boon to Marcellus Shale counties. On the other hand, many companies lease land for drilling and the specifics of the lease would determine whether the landowner or the drilling company would shoulder the property tax burden.

Natural gas in Pennsylvania

The public and special interest opinion on a severance tax is only part of the story. On March 10, a public hearing in Pittsburgh illustrated both sides as some people talked about the new and badly-needed jobs as well as environmental impacts. Additionally, the industry creates economic ripples as state sales tax and local tax revenues increase in Marcellus Shale counties. The Marcellus Shale Coalition also notes that producers have invested $4 billion into the state. While the trucks needed for the work do cause damage to the local roads, the companies have been investing in repairs.

But there are significant drawbacks. Anecdotal evidence suggests that hotel rooms in the region are filled with employees of the drilling companies. In rural Wysox Township in eastern Bradford County, a hotel owner is constructing a new 40-unit building out of pre-fabricated units. The owner told the Towanda Daily Review that the demand for more rooms is driving demand for hotel space. However, the region also offers outdoor tourism destinations and there are fears that businesses catering primarily to tourists will suffer — even as restaurants and convenience stores thrive – as tourists compete with drillers for limited hotel rooms during peak tourist seasons during the summer and autumn. Hunters are also concerned that all of the drilling activity could affect harvests in addition to being squeezed out of hotels.

This situation also poses a problem for local governments that use the state and local hotel taxes for tourism promotion. Under state law, anyone who stays in a hotel room for 30 days is considered a “resident” and the tax does not apply. One Bradford County hotel has been completely rented by a drilling company and has paid no hotel tax for months.

Finally, there is the health risk. At issue is the process known as hydraulic fracturing or “fracking.” The Halliburton, the company once headed by former Vice President Dick Cheney, developed the technology in 1949. New horizontal drilling technologies and marketing incentives helped dramatically increase the use of the technology since 2007. Source Watch, a publication of the liberal Center for Media and Democracy, details how Cheney urged the U.S. Congress to exempt fracking from regulation by the U.S. Environmental Protection Agency. This so-called “Halliburton Loophole” does not apply to state regulations, meaning the Pennsylvania Department of Environmental Protection has the responsibility to regulate and enforce those regulations until Congress restores EPA’s authority to regulate fracking. The liberal Center for American Progress in Washington DC called on Congress and the EPA Monday to strengthen water and air pollution measures in regards to fracking operations.

The problem is that the chemicals used in fracking are not particularly healthy to humans, animals and plants if they get into ground and surface water supplies. Halliburton recently began to disclose the chemicals used in this process and they include hydrochloric acid, methanol, acetic acid and formaldehyde. These chemicals are mixed with large amounts of water and sand and injected into the ground in order to get to the natural gas deposits. While there are plenty of reports of suspected contamination, it has been the iconic scene in the documentary Gasland of a man lighting his tap water on fire that sparked the public’s attention to the issue.

The Commonwealth Foundation, writing on their blog “Energy Facts Pa.,” claims that the Fracking process itself is not to blame for contamination. Rather, they claim, contamination is caused by the disposal of wastewater or resurfacing of wastewater caused by poor well design. Commonwealth foundation claims that drillers are constantly making improvements to well designs and adds that current laws fine violators and hold them responsible for remediation efforts.

There have also been scares of radioactive materials getting into rivers as the fracking process unlocks uranium in the rocks underground. DEP sampled seven of them and found no elevated traces of radioactivity. Additionally, there have been documented cases of gas wells blowing out, sending gas and polluted water into the air.

Since January DEP regulations have prohibited dumping wastewater with more than 500 milliliters per liter of dissolved solids into the watersheds, effectively preventing the dumping of frack water. Some industry professionals claim that the new regulations will be a challenge to the industry. In response, drilling companies claim they can recycle most of the water used in the fracking process, minimizing waste water, though critics remain skeptical as millions of gallons of frack water still ends up in municipal treatment plants, often ones not designed to treat that kind of capacity.

Natural gas is currently the country’s most efficient alternative to coal and oil. Washington DC, for example, runs their entire city bus fleet on natural gas. Unfortunately, extracting it from the ground has serious environmental and social impacts. Pennsylvania remains the sole major natural gas producer that does not charge a tax to help address these issues. A high tax might drive the drillers away, but a tax haven would likely attract even more drilling with no revenue benefit to the state or municipalities.

Governor Tom Corbett’s budget proposal takes the axe to higher education in Pennsylvania. While a gallon of ink has been spilled discussing the cuts to the Penn State appropriations, Pennsylvania’s 14 state-owned universities are looking at yet another hit as well. This will almost certainly mean huge tuition hikes and even more program cuts unless the General Assembly restores some of the funding.

Corbett seems willing to compromise on the proposed funding cuts to the Pennsylvania State System of Higher Education (PaSSHE) cuts, according to an interview he gave to KDKA radio on Friday. Still, Corbett’s proposal cuts PaSSHE funding from $503 million to $233 million. The basic subsidy would drop from $444 million; $38 million in temporary federal stabilization money disappears; and the budget proposal zeros out funding for recruiting disadvantaged students, Affirmative Action, program initiatives, the McKeever Center and the Pa. Center for Environmental Education both at Slippery Rock. Combined with the cuts to Penn State, Pitt, Temple and Lincoln, Corbett’s proposed cuts appear to be the largest higher education cuts in the nation this year.

Ummm… We’re number one, I guess.

According to PaSSHE, the proposed funding level for this year is $2.5 million less than the appropriations in 1983-1984, the first year of the system’s existence. “We want to assure them (students and families) that we will do everything possible to avoid disruptions in their education,” the news release reads.

PaSSHE’s Board of Governors, which authorizes annual tuition rates for the state schools, cannot act until final passage of the budget. PaSSHE students can cling to a bit of hope after House Appropriations Chair William Adolph (R-Delaware) said Tuesday that he can’t support the deep cuts in education. Still, any tuition hikes, coupled with possible cuts to federal Pell grants, would mean fewer low-income students can attend college in Pennsylvania and many who do stay would be looking at larger student loan payments after college.

State Sen. Vincent Hughes, minority chair of the Senate Appropriations Committee, predicts a tuition hike in the neighborhood of 20-25 percent if the cuts remain unchanged. Currently, in-state tuition totals $5,804 for the 2010-2011 school year. That is on top of state and university fees and room and board costs. A 25 percent tuition increase would mean students would pay $7,255 just in tuition for the 2011-2011 school year. According to the College Board, the average annual tuition at a public university is around $7,605. It should be noted that “public” university is not the same as a state-owned university.

As a state agency, PaSSHE’s press office cannot do too much Corbett-bashing. On the other hand, the union representing university professors can. “The Pennsylvania State System of Higher Education (PASSHE) simply cannot withstand this hit without depriving students of essential programs, imposing a massive tuition increase on Pennsylvania’s families, and wiping out essential services,” reads a press release from the Association of Pennsylvania State College and University Faculty (APSCUF).

APSCUF launched two web pages in response to the budget proposals. PA Student Voices is a forum for students to get budget information and contact their legislators. The site also notes the various schools have scheduled “days of action” next week. PA Faculty Voice is a similar site for faculty members.

A history of tuition hikes and funding freezes

APSCUF’s press release hints at a larger trend in state funding of the state-owned universities. It reads, “Pennsylvania’s public universities have already weathered the storm of depleted state funding by becoming more efficient and cutting back on programs; these proposed cuts may just sink the ship. It is unlikely that we will be able to offer students the type of college education that will be required for them to compete in a 21^st century global economy.”

The Pennsylvania Independent parsed out some of the revenue and cost increases in the past decade at the universities. The state appropriation for the 2000-2001 fiscal year totaled, $450.7 million, which is actually a slight decrease from the 2010-2011 appropriation. The story also notes that the state funding increased as much as five percent one year, illustrating the erratic nature of state funding. PaSSHE makes up any revenue gaps with tuition revenue. Between 2001-2002 and 2010-2011, tuition increased 44.5 percent, or about four percent a year on average during a period when the average inflation rate in the region was 2.7 percent. Enrollment still increased during that period from about 90,000 to around 110,000.

On the spending side, faculty salaries increased about 21 percent during that period, though rising health care benefit costs drove personnel spending up during the decade. Utility costs have also driven up budgets at the universities despite conservation measures.

But that does not tell the whole story. PaSSHE spokesperson Kenn Marshall told the Independent that the system has cut $200 million from the school budgets in the past decade in an effort to keep tuition costs down.

It is always the universities and the students who feel the pinch. Here are just a few examples:

• In April, 2010 Lock Haven University’s student newspaper, the Eagle Eye, reported that 13 “small” programs – those that graduate six or fewer students a year – were in danger of being eliminated. Those programs included biology, foreign language, sociology and chemistry.
• In January, 2009 the state system announced that 128 faculty positions would not be filled and non-union administrators would see a pay freeze.
• In 2003, PaSSHE forecasted a $40 shortfall. When that deficit disappeared, the system claimed they had made cuts. The faculty union president claimed that the system overestimated the deficit to give them leverage in contract negotiations.
• At Mansfield University, five faculty members will be “retrenched,” meaning that the positions will be cut, as of the end of this academic year. The cuts threaten the continued survival of the theatre, physics and French majors. Even though the original proposal was to cut as many as 11 faculty members, the faculty passed a no confidence vote against the president and provost in December. Any cuts at Mansfield are on top of the school’s decision in 2006 to cut the Division II football program, a team that often struggled to win a game or two each season. The move saved the school half a million dollars.
• Last week, Kutztown University faculty received a similar notification about possible retrenchment decisions, sparking a wider concern about more faculty cuts at the other 13 schools.
• In July, 2010 IUP announced that it cut 11 full time and 23 part-time faculty positions. While all of those positions were vacant at the time, the vice president of the IUP chapter of APSCUF noted that meant about 100 courses were cut.
• In the wake of Corbett’s announcement, Shippensburg University’s president noted that his institution has made $10 million in cuts in recent years. Last year he noted that numerous positions, including ten percent of the facilities management staff, were unfilled.
• In 2005, Bloomsburg University delayed some capital improvement projects and did not fill nine positions in order to save $1.6 million in the face of minimal revenue increases.
• Slippery Rock University’s board of trustees approved an energy savings plan in 2008. The initiative was an effort to save as much as $200,000 in utility costs per year.
• Edinboro University’s student newspaper reported last year that the school has avoided retrenchment since 1979, though that experience left a lasting impact on the long-time faculty members. Still, Edinboro has largely avoided such drastic measures by hiring more and more temporary faculty and fewer professors in tenure-track positions. The story does raise the question of whether tenure-track professors tend to be more effective than temporary employees.

A move toward privatization?

The decline in state support is not limited to the last decade or so. California University of Pennsylvania President Angelo Armenti Jr. gave a presentation in 2008 asserting that the state system is being privatized without a plan. In his presentation, he shows that state support for the 14 state-owned universities steadily declined from 64 percent in 1984 to 37 percent in 2008. In 1993, state support equaled the local share provided by tuition and fees. Since then, the percent of funding from the state has steadily decreased while tuition and fees covered more of the system and university budgets.

Meanwhile the PaSSHE portion of the state budget has decreased from flirting with three percent in 1987 to around 1.88 percent in 2007. If the trends continue at the rates measured in 2008, Armenti noted that the state appropriation would reach zero by 2041. He also noted similar decreases for Penn State, showing that their appropriation would disappear by 2033 at 2008 rates. Of course, Corbett’s proposed cuts only accelerate that trend.

Capital projects – renovation and new construction – typically require the school to raise half the projected costs in order to leverage the other half of the costs, Armenti added. In the beginning of the state system, the state covered all capital costs. These funds normally come from fund-raising efforts or increased student fees.

Armenti notes that no state official has publically announced that there is a plan to privatize the universities. Indeed, the decrease in percentage of funding has occurred under both Democrats and Republicans. Meanwhile, the schools operate under restrictions affecting all state agencies. Therefore, he calls the trend “privatization without a plan.”

Corbett’s budget proposal for 2011-2012 makes Armenti’s argument even more relevant and raises some valid questions:

Is Corbett really planning to privatize the state-owned schools?

If he does, how will students from poor and middle class families afford a decent education?

Will the Republican-dominated General Assembly go along with it?

How many students will drop out of school or decide to enroll elsewhere if tuition jumps dramatically? Will such a drop in enrollment force tuition even higher?

Will Democrats frame this as another attack on the middle class in Pennsylvania?

Could this force the smaller universities like Mansfield and Cheney to consider either closing or dramatically cut their program offerings?

Would taxpayers go for higher taxes to support public higher education?

Even if the economy does recover, would a future governor and General Assembly renew the state’s commitment to public higher education and increase the state’s share of PaSSHE funding?

We should know the answers to at least some of these questions as the appropriations committees continue their work.

The biggest surprise in PA is that there’s been no surprise. Tom Corbett as a candidate was earnest, a little boring, and talked about cutting spending and keeping down taxes. Tom Corbett as Governor is earnest, a little boring, and is still talking about cutting spending and keeping down taxes.

The State Democratic response is shaping up as a variant of the party’s national strategy: scare up as many constituency groups as possible and hope that Republican overreach, together with a changing economy, will turn things against the GOP. It’s not an especially inspired strategy—one notes an almost complete absence of new ideas—but it could work in the right circumstances. Right now the ideological momentum seems to be in the other direction, with the Republicans making the moves, in Harrisburg and DC, and the Democrats in a more reactive posture. Whether it stays that way remains anyone’s guess, but it’s an astonishing turnaround from where we thought the country and State were headed a few short months ago.

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.