Inside the Components of Corbett’s Third Budget Proposal

HARRISBURG – The state budget is a complicated mess of numbers, spreadsheets, charts and graphs.

And that’s before the politicians get their hands on it.

Gov. Tom Corbett proposed a spending plan for fiscal year 2013-14 on Tuesday that would cost $28.4 billion, a 2.4 percent increase from the current year.

The state legislature has until June 30 to pass the budget, and it is sure to go through some changes before then.  But here’s a brief look at some of the important projects, proposals and plans outlined by Corbett on Tuesday.

ISSUE: Education funding

CORBETT’S PROPOSAL: Increase spending for basic education by $90 million, increase funding for early education by $11 million, create a new block grant program to be funded with $1 billion over four years from the divestiture of the state liquor stores and keep state colleges/universities flat-funded after two years of propose cuts.

WHAT THE GOVERNOR SAYS:

“My budget works to provide our public schools with enrichment funding to help them achieve academic excellence at all grade levels. It provides for enhanced learning opportunities, career-focused training and most importantly, a safe learning environment.”

WHAT IT MEANS:

This will be – as always – one of the biggest budget battlegrounds.  After taking political knocks for cutting education funding (though most of those reductions were the result of federal stimulus money ending), Corbett has proposed increases to basic education and is holding higher education harmless this year after two straight budgets where they went under the scalpel.

But the complications here are many-fold.  Corbett has tied liquor privatization to additional money for schools, and Budget Secretary Charles Zogby has suggested that schools may be in line for cuts if cost-saving pension reforms are not passed.

And once lawmakers get their hands on the budget, they usually love to pump whatever extra cash is sitting around into education line items – that tends to score points with the people back home.

WHAT THEY’RE SAYING:

“Attempting to handcuff one year of education funding to a plan to sell off liquor stores is a gimmick, not a long-term solution to Pennsylvania’s declining investment in, and performance of, public schools,” – State Sen. John Wozniak, D-Cambria

“I support the governor’s efforts in this budget to provide stable funding for our higher education institutions. Providing level funding for our universities while securing a commitment from them to hold tuition increases to a minimum is good for faculty, parents and students.” – State Rep. Kerry Benninghoff, R-Centre

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ISSUE: Liquor privatization (and a little more education funding)

CORBETT’S PROPOSAL: Get rid of the state control liquor system by selling off licenses for state stores and changing where alcohol can be purchased. Then use $1 billion proceeds over a four-year period to boost education programs and school safety.

WHAT THE GOVERNOR SAYS:

“Selling liquor is not a core function of government. Education is.”

Gov. Tom Corbett gives his third budget address to the General Assembly. (Photo by Melissa Daniels)

WHAT IT MEANS:

Corbett announced the plan to privatize the state liquor system last week, but revisited the issue in his budget address to lawmakers. But this plan is no easy dunk. He’s not the first Republican governor to try to change the state’s liquor system, which employs unionized workers and gives Pennsylvania some of the largest buying power in the country.

Already, opponents are saying this plan could cause the state to lose money by not generating enough revenue currently made by the Pennsylvania Liquor Control Board, or could have safety problems.

WHAT THEY’RE SAYING:

“If you look at every other state that’s went from a system like ours to what they’ve proposed, the state lost revenue immediately and has not recovered that. Every other state saw lower selection and higher prices in every state that went this way. So when Gov. Corbett says, ‘Why can’t we be like the other 48 states, I think the real question is why would we want to?’” – Wendell Young, President, UFCW Local 1776.

“I think moving to a system that allows for private sales of wine and spirits and beer focused on convenience, customer convenience and customer choice, I think it’s an expectation that the vast majority of the public has put in front of us and we need to get that over the goal line,” House Majority Leader Mike Turzai, R-Allegheny.

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ISSUE: Business tax changes

CORBETT’S PROPOSAL:  Finish a phase-out of the capitol stock and franchise tax, set-up a future decrease in corporate taxes and make other changes to the tax code that businesses have been pushing for.

WHAT THE GOVERNOR SAYS:

Well, actually, not much.  Corbett skipped over the business tax changes in his budget address, though they were included in budgetary guidelines distributed by administration officials on Tuesday.

“Understanding that government does not create jobs, Governor Corbett is creating a business climate in Pennsylvania that encourages our employers to grow and create jobs,” said C. Alan Walker, Secretary of the Department of Community and Economic Development, in a statement. “The governor has created a solid road map that if followed, will lead to economic prosperity and a job for every Pennsylvanian who wants one.”

WHAT IT MEANS:

Corbett is finishing off a long-planned phase-out of the capital stock and franchise tax, a tax paid by businesses on goods and supplies they cannot sell.  He is also proposing the beginning of a 10-year gradual reduction in the state’s corporate net income tax, which is currently assessed at 9.99 percent and is the highest in the nation.

That gradual decrease will begin in fiscal year 2015-16 and continue incrementally for 10 years until the tax rate reaches 6.99 percent.

Senators and Representatives fill the state House chamber to hear Gov. Tom Corbett’s address on Tuesday. (Photo by Melissa Daniels)

WHAT THEY’RE SAYING:

“We would feel better about these proposals if he was also talking about closing tax loopholes that allow the biggest corporations to get away with paying almost no tax in Pennsylvania. He is not talking about doing that.

And what about the jobs? Wasn’t that supposed to be the point of all of these reductions in corporate taxes? Where are the jobs?” – House Minority Leader Frank Dermody, D-Allegheny

“We understand the need for that slow progression, but it is progress.  It’s an acknowledgment that we have to reduce it, because it’s a huge red flag for this commonwealth.” – Gene Barr, president/CEO Pennsylvania Chamber of Business and Industry.

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ISSUE: Medicaid expansion

CORBETT’S PROPOSAL: Refrain from expanding Medicaid in Pennsylvania under the Patient Protection and Affordable Care Act.

WHAT THE GOVERNOR SAYS:

“At this time, without serious reforms, it would be financially unsustainable for the taxpayers, and I cannot recommend a dramatic Medicaid expansion.”

WHAT IT MEANS:

Corbett had held off making a decision on the Medicaid expansion, citing an inability to get straight answers from Washington. In his budget address on Tuesday, Corbett said that without the expansion Department of Public Welfare costs are already going up by $400 million. Five Republican governors, including Ohio’s Gov. John Kasich, have opted into the Medicaid program.

Under the Affordable Care Act, states that choose to expand their Medicaid programs to new eligibility levels starting in 2014. The federal government will pick up 100 percent of the cost through 2017, eventually decreasing to 90 percent thereafter.

WHAT THEY’RE SAYING:

“He is turning down billions of dollars the federal government is offering to cover 800,000 uninsured Pennsylvanians, but he offered no alternatives… Even Governor Kasich, no liberal, said ‘This is such a good deal that we’re going to take it in Ohio.’” –State Sen. Daylin Leach, D-Montgomery.

“The federal government has to get their act together and give all the states their details. You can’t just say yes to a plan without the information.” –House Appropriations Chair Bill Adolph, R-Delaware.

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