Rendell Official Addresses PBPC Budget Summit on Federal Fiscal Relief

Commonwealth Secretary of Policy and Planning Donna Cooper shed some light on how Pennsylvania will invest more than $9.8 billion in federal economic recovery funds when she addressed the Pennsylvania Budget and Policy Center's Budget Summit on February 26.

Cooper noted that the Commonwealth will be able to direct less than $4 billion of that money, since more than $6 billion is already reserved for the stateís school districts, highway and bridge repairs, and to prevent cuts in health care. The federal funds will be driven out over the next 24 to 27 months.

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Revenue Collections Lagging Behind Last Year's by Nearly $1 Billion

Pennsylvania's 2008-09 budget deficit approached $1.3 billion in February, and in a sign of the economic crisis pounding the state and nation, year-to-date collections are now trailing last year's by $978 million, or 6.2%. Expected revenue shortfalls for the rest of the fiscal year suggest that year-to-year gap will well exceed $1 billion in March.

In February, state revenue came in $197 million, or 11.6%, short of estimate. Pennsylvania took in $271.5 million, or 15.3%, less than it did in February 2008. Gov. Ed Rendell has projected a deficit of $2.3 billion by the end of the fiscal year in June.

Most of February's shortfall was due to declining tax revenues, with about half of the losses coming from the personal income tax and sales tax. Another quarter of the losses can be traced to particularly bad showings for corporate, inheritance and real estate transfer tax collections. Non-tax revenue came in once again in the negative, signaling more short-term investment losses for the month.

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PBPC Hosts 2009 Budget Summit

More than 70 people joined the Pennsylvania Budget and Policy Center for its 2009 Budget Summit Thursday, February 26. The event featured presentations on the state and federal budgets, federal economic recovery plan, and what it all means for Pennsylvania, as well as workshops on reducing poverty and understanding tax loopholes. Highlights included:

- Kris Cox, Research Assistant with the Center on Budget and Policy Priorities in Washington, D.C., discussing the federal budget and economic recovery plan. (Download "Federal Budget - Kris Cox")

- Michael Wood, Research Director for the Pennsylvania Budget and Policy Center, discussing the state budget with a presentation titled "2009-10 State Budget: Even with Stimulus, a Difficult Year Ahead." (Download "2009-10 State Budget - Michael Wood")

- Donna Cooper, Secretary of the Governor's Office of Policy and Planning, giving an overview of how Pennsylvania will benefit from federal fiscal relief included in the economic recovery plan. She also fielded questions from the audience.

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State Must Look at Revenue Options in New Budget

Pennsylvania's projected budget shortfall for the current fiscal year has jumped to $2.3 billion, Gov. Ed Rendell said Thursday. Looking ahead to the 2009-10 fiscal year, he predicted deep cuts in public services and state worker layoffs to keep the budget balanced amidst the economic recession.

However, state budget and staff cuts will only exacerbate the recession hitting Pennsylvania by taking money out of the state economy and sending more people to the unemployment line. The state needs to look at new revenue options to balance the budget.

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Gov. Rendell Outlines Plan to Close Budget Deficit

Gov. Ed Rendell says $500 million in state budget cuts, an expected federal fiscal stimulus package, and half of the state's Rainy Day Fund will close most of a projected $1.6 billion deficit in the 2008-09 budget.

Briefing lawmakers on the state of the budget December 9, Gov. Rendell also warned that the 2009-10 spending plan will include significant budget cuts, as economists predict a protracted recession.

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PBPC Releases New Roadmap to State and Local Tax Policy

Public investments make a difference in the lives of Pennsylvanians, but few really understand the esoteric world of state and local taxes. PBPC wants to change that with a new publication called The Common Good: What Pennsylvania's Budget and Tax Policies Mean to You.

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Wrong Time for Special Interest Tax Breaks: SB 1231 Would Subsidize Private Jets and Boutique Beer Despite Sinking Economy

The Pennsylvania Senate is considering a bill to exempt the sale or lease of private and corporate aircraft from sales tax. SB 1231 would allow individuals and corporations who lease or purchase small planes and jets to avoid paying sales tax and would exempt from taxation retail purchases of aircraft parts, and the installation of those parts. The Department of Revenue estimates the first year cost of the exemption at $9.8 million.

The bill also includes a provision that would make permanent an "Emergency Tax Credit" of $200,000 for small brewerie--those producing less than 1.5 million barrels of beer per year--for the purchase of equipment. The credit was first enacted in 1974 and is set to expire at the end of 2008. The cost of this credit is estimated at $1.1 million per year and may benefit 10 brewers.

The tax credits are proposed despite declining Pennsylvania state tax revenue and the most uncertain economy since the 1930s. State general fund revenue has fallen $281 million behind projections for the 2008-09 fiscal year, the national economy may already be in a recession, and the ongoing crisis in the nation's financial markets suggests that the economy will worsen, further increasing the demand for state services.

Lawmakers should question the wisdom of enacting special interest tax credits that benefit the few and the wealthy, while most Pennsylvanians are paying higher food, energy and health care costs and worried about the value of their homes and the security of their jobs.

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State of the Budget July 2, 2008

Governor Rendell and state legislative leaders agreed on the framework for a state budget agreement on the evening of June 28. According to news accounts, the 2009-10 fiscal plan will reduce the Governor’s February request by somewhere around $130 million through a 1.3% across the board cut in the proposed budget for most programs. Programs that had expected increases will see the increases diminish, while flat funded programs will see a real cut from 2007-08 levels.

The sharp about face came in response to June revenue numbers, which  came in $159 million below estimate. On July 1, the Revenue Department reported $27.9 billion in total revenue for Fiscal Year 2007-2008, leaving the state with a year end surplus of $159.4 million, far less than the $433 million surplus projected in February.

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Historic Education and Health Care Reforms Remain Bargaining Chips in Budget Negotiations

The calendar is closing in on June 30, the end of the 2007-08 fiscal year with legislators and the Governor furiously trying to reach agreement on a spending plan for 2008-09. PBPC surveys the situation in a new Budget Watch.

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House Earned Income Tax Credit Bill Turns into Tax Cut Frenzy

Combined Cost of "Christmas Tree" Full of Tax Cuts Rises to Estimated $3.8 billion

On Wednesday, January 16, the Pennsylvania House of Representatives took up legislation sponsored by Representative Dwight Evans to establish a refundable state earned income credit (EIC). Set at 15% of the federal EIC in the first year and 30% in year two and beyond, the bill would provide targeted tax relief to working families with annual incomes up to $35,000. The House Appropriations Committee estimates the legislation would cost $25 million in year one and $250 million in year two.

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PBPC Details Cost Estimates of Amendments to House Bill 377

On January 17, 2008, the Pennsylvania House passed a variety of admendments to House Bill 377 which will have a significant impact on state government revenues over the next few years. PBPC has produced a table detailing the costs associated with the various amendments that can be downloaded in PDF format.

download analysis summary (pdf)

Earned Income Credit Again Advances in PA Leglislature

A bill to establish a Pennsylvania Earned Income Credit (EIC) is scheduled for a vote in the Pennsylvania House the week of January 14th. House Bill 377 (sponsored by Rep. Dwight Evans) would create a state EIC set at 15% of the federal Earned Income Tax Credit beginning in Tax Year 2008 and 30% of the federal credit beginning in Tax Year 2009 and beyond. Working families with children would be eligible for the credit, which is an alternative to the state’s current Tax Forgiveness program.

A state EIC would make the state’s tax system more fair, and would return almost $1000 to a single parent family earning $12,000 a year, and $900 to a family of four earning $15,000 a year, in addition to tax forgiveness. This income would help to offset other taxes and provide much needed resources to the Commonwealth's poorest working families.

More than 15 amendments have been added to the bill and will be debated on the floor. Proposed amendments would eliminate the state inheritance tax, reduce the state personal income tax rate, repeal the telephone gross receipts tax and reduce business tax liabilities. Each of these amendments would add substantially to the cost of the legislation and provide little or no benefit to low-income working families.

PBPC released a revised analysis of the EIC bill on January 16th.

download PBPC's analysis of the EIC bill (pdf)

How Would a 30% PA Earned Income Credit Help Low-Income Families By PA House District?

Take a look at PBPC's district by district analysis.