Final 2012-13 Budget Analysis: Failing to Invest in a Stronger Pa. Economy
The General Assembly has enacted a 2012-13 state budget that restores some of the cuts proposed by Governor Tom Corbett to public schools, universities and other services, while leaving intact a 10% cut to human services and deep cuts to education made in 2011. The budget continues to shift costs to local governments and taxpayers, while adding new tax breaks for businesses. Although the state ended the year with a $649 million fund balance, the budget fails to make the investments that are essential to building a strong economy or to reverse a recent trend where job growth in the commonwealth has lagged behind other states.
Overall spending, at $27.656 billion, is $517 million more than the Governor’s February proposal. Still, the final budget remains below budgeted 2008-09 levels, despite four years of recession-driven increases in demand for services. Compared to 2010-11, this budget cuts spending by 1.4%, with public schools, higher education, environmental protection and economic development taking the biggest hits.
|State Budget Agreement Leaves
Spending Lower than in 2010-11
|(General Fund Spending In $ Millions)|
|Education - Classrooms||$6,090||$5,506||-9.6%|
|Education - Total PreK-12||$9,686||$9,661||-0.3%|
|Education - Higher Education||$1,888||$1,587||-15.9%|
|Community & Economic Development||$293||$238||-18.9%|
|Labor & Industry||$84||$73||-13.5%|
|Total General Fund||$28,040||$27,656||-1.4%|
The largest cut in this budget is $160 million for the General Assistance Program, which is eliminated effective August 1. General Assistance provides a temporary $205 monthly benefit to 68,887 Pennsylvanians who are sick, disabled or escaping an abuser. Over the years, it has provided a bridge to a better life for hundreds of thousands of Pennsylvanians.
Schools and universities were essentially flat-funded in this budget. The Governor had targeted three state-related universities, Penn State, Temple and Pitt, for 30% cuts and the 14 state-run universities for 20% cuts, but lawmakers restored the universities’ funding in the end – in exchange for limited tuition increases.
The budget leaves in place cuts to education that have diminished the quality of instruction in our poorest school districts and resulted in the loss of 14,000 jobs in 2011. Sixteen school districts in financial distress, in large part because of last year’s cuts, got a bit of a reprieve, with $40 million in additional funding. Accountability Block Grants, which support full-day kindergarten and other early childhood programs, also survived after the Governor initially proposed eliminating the funding.
|General Fund Summary (in $ thousands)|
A block grant proposal for county human services was viewed by many as a trial for a broader Medicaid waiver that could limit funding and enrollment for health care services. Under the leadership of state Representative Gene DiGirolamo, the House kept the human services block grant out of the budget, but a pilot program will put the block grant into effect in as many as 20 counties. That is a much larger pilot program than the five-county, two-year approach initially proposed by Representative DiGirolamo.
Even without a full human services block grant, Governor Corbett insisted on a 10% cut to county mental health services, homeless assistance, and services for people with intellectual disabilities. The Governor had sought a 20% cut, but the Senate and House made a partial restoration, as state revenue collections recovered in the spring.
The budget squeezes money out of human services and General Assistance at the same time it doubles the amount of tax dollars diverted to private schools through tax credits. The budget increases the $75 million currently spent on the Educational Improvement Tax Credit (EITC) to $100 million and spends an additional $50 million on a new scholarship program for students living in the attendance boundaries of low-achieving schools. Both programs provide tax credits to corporations that donate to scholarship organizations providing tuition scholarships largely to students attending private schools. The program is structured in a way that provides very little public accountability for how tax dollars are spent. A 2005 law prevents the state from collecting anything but minimum information on the scholarships. The new law requires slightly more reporting but does not require scholarship organizations to provide expenditure or outcomes data.
This budget also continues the ongoing phase-out of the capital stock and franchise tax, which will cost at least $275 million over two years. In addition, it makes the final move to a corporate income tax apportionment formula based entirely on sales, which does little to benefit most Pennsylvania corporations. In fact, the change raises taxes on a sizeable number of corporations. It is part of a decade-long pattern that will see the commonwealth spending $2.4 billion on corporate tax breaks in the new budget. That amount has tripled over the last 10 years and does not count the hundreds of millions of dollars lost annually to corporate tax loopholes. Most of these tax breaks primarily benefit the largest corporations and come with no commitment to create jobs.
As the economy continues to recover, Pennsylvania will need to make public investments to build a strong economy and make Pennsylvania a place where families will want to live. This budget takes a small step in that direction, but falls well short of where we need to be.