pennbpc's blog

A Decade of Deep Cuts in PA. Don't Let It Happen.

Deep state cuts have already put health care at risk for kids and denied help to families struggling in this economy. They have put thousands out of work in schools, colleges, nursing care facilities and hospitals.

Think that’s bad? You ain’t seen nothing yet.

The Pennsylvania House may vote as soon as next week on a bill that will cut corporate taxes by close to a billion dollars by the end of the decade. More cuts to schools and health care will be next.

House Bill 2150 would close some corporate tax loopholes in Pennsylvania, but it is paired with big tax breaks for businesses. Even after counting new revenue from closing loopholes, this bill is a big money loser for the commonwealth.

The Pennsylvania Budget and Policy Center and Better Choices for Pennsylvania has an Action Page where you can send a message to your House lawmaker to reject this bill as is and to take steps to close tax loopholes more responsibly. Closing loopholes should not come at the price of budget deficits for years to come.

We’ve all seen the state budget headlines in recent months. 88,000 kids have had their public health coverage cut off. 14,000 Pennsylvanians have lost their jobs in schools and colleges. College tuition is rising, and help for families struggling in this economy is harder to come by.

Closing corporate tax loopholes could help Pennsylvania turn things around, but not if lawmakers pair it with business tax cuts that will cost us now and for years to come.

PA Revenue Picture Brightens

By Michael Wood, PA Budget and Policy Center

Pennsylvania tax collections came in better than expected in March, lowering the state's total revenue shortfall for the current fiscal year. It was also the first March ever in which tax collections exceeded the $4 billion mark. 

With three months left in the 2011-12 fiscal year, the revenue shortfall stands at $387 million, much lower than the year-end revenue shortfall of $719 million estimated by the Corbett administration and built into his 2012-13 budget.

General Fund Revenue Shortfall

This should be welcome news as lawmakers move closer to negotiating a 2012-13 state budget. Improved collections may signal a less severe year-end shortfall, and that could help reduce some of the painful cuts proposed in the Governor's budget. Get the Pennsylvania Budget and Policy Center's full revenue analysis here.

March is an important revenue month for a number of reasons. For one, almost half of corporate tax collections for the year were collected last month. And corporate taxes exceeded monthly estimates by $106 million, or nearly 5%, last month. This played a big role in creating a March revenue surplus of $95 million.

After the strong March collections, every major tax type now exceeds year-to-date tax collections this time last year. Taxes are now $583 million higher than they were at the end of March 2011 — a sign of the improving economy.

The Future of Health and Human Services in PA

Sharon Ward, director of the Pennsylvania Budget and Policy Center, was on WITF's Radio Smart Talk this week to discuss the state of health and human services in Pennsylvania. She squared off with Matt Brouillette of the Commonwealth Foundation.

She explained that it was important for the commonwealth to spend taxpayer money wisely, but that current policies were resulting in eligible Pennsylvanians, including thousands of children, losing their health care.

Rather than taking away health care from children or jeopardizing the nursing care of seniors, state policymakers should look at alternatives, including closing tax loopholes and ending corporate welfare.

You can listen to the show at WITF's web site. Let us know what you think in the comments section.

PA Budget Summit: Resources and a Recap

The Pennsylvania Budget and Policy Center hosted its annual Budget Summit on Thursday in Harrisburg, providing an in-depth look at the state and federal budget plans and what they mean for communities and families across Pennsylvania. With nearly 200 in attendance, it was our largest Budget Summit yet.

Check out our web site where we have posted materials from the Summit, including presentations on the state and federal budgets. And check back next week when we will have more, including video clips from the Summit.

And take a minute to watch this report from Fox 43 for a nice (and quick) recap of the Summit.

From the Fox 43 report:

Educators, political candidates, and community leaders gathering to discuss how Governor Corbett's proposed budget would affect them at the Pennsylvania Budget Summit.

"The ultimate goal is for everyone in this room to understand what's happening in Harrisburg. To be able to talk to their lawmakers intelligently, and bring their messages back to their communities to get involved, and speak up about the things that they value," says Sharon Ward with the Pennsylvania Budget and Policy Center.

Abandoning Pennsylvanians

Governor Tom Corbett unveiled a 2012-13 state budget Tuesday that abandons middle-class Pennsylvanians and our most vulnerable citizens.

The Pennsylvania Budget and Policy Center has a full analysis of the Governor's proposal. Here's the quick version.

With this budget, the Governor continues to turn his back on middle-class families who rely on good schools and affordable college tuition.

Help for the most vulnerable Pennsylvanians is reduced or eliminated. Tens of thousands of families and children have already seen health and other services terminated. This approach is not about finding efficiencies or cutting waste but rather cutting off help to people who have been hit hardest by the recession.

And while there is a call for greater accountability for every dollar in spending, businesses are let off the hook based on claims that they will create jobs in exchange for tax cuts that now total more than $1 billion.

This is not the path to a stronger economy or a better Pennsylvania.

We'll have more to say in the weeks ahead. For now, you can learn more by reading our analysis.

Governor's Budget Moves PA in Wrong Direction

Governor Tom Corbett delivered his 2012-13 budget address to a joint session of the state Legislature today. We are still working on our budget analysis at the Pennsylvania Budget and Policy Center. Check our web site later Tuesday evening.

In the meantime, check out Sharon Ward's op-ed below on the Governor's budget originally published in the Allentown Morning Call.

Will Michael Nutter Be the Deciding Vote on the Shale Bill?

Update: The Pennsylvania Senate approved the shale fee bill Tuesday by a vote of 31-19. The House followed suit Wednesday, approving it by a narrow vote of 101-90.

Will Philadelphia Mayor Michael Nutter be the deciding vote on a bad Marcellus Shale bill?

In typical fashion, the Pennsylvania Legislature is ramming through a shale bill, including a natural gas drilling fee, at the very last minute that is worse than anything we have seen so far.

Rumors are that the Mayor is pressuring Philadelphia Senators to take the deal, which is bad for all Pennsylvanians and not so hot for Philly.

There has been tremendous pressure on Southeastern Senators to hold out for a tax that is more than a pittance, and to restore to local governments the constitutional right to protect their communities from the excesses of drillers gone wild.

The Democratic leadership team of Jay Costa and Vince Hughes have breathed life into a Democratic Caucus that has existed pretty much to collect their paychecks. They have done a fabulous job pushing for strong environmental protection against a legion of gas lobbyists, while the Governor's inclination is to give the drillers the keys to the state and walk away. Philadelphia Senators Vince Hughes and Tony Williams are the most likely to take the bait.

We need a round two on the shale bill. Our Senators, and the Mayor, should hold out for a better deal.

Pa. Loses $300 Million to Gas Drilling Tax Impasse

Legislative inaction on a natural gas drilling tax has cost Pennsylvania $300 million in lost revenue, according to the Pennsylvania Budget and Policy Center.

Our Drilling Tax Ticker tracks the revenue Pennsylvania has lost since October 1, 2009 by not having a tax in place. It shot past $300 million Monday morning.

State cuts announced in January to services ranging from help for victims of domestic violence to hospital trauma centers to prekindergarten could have been avoided if the Legislature had enacted a drilling tax.

Plus, the $300 million in lost revenue may be just the beginning. Reuters reported last week that a Marcellus Shale “impact fee” bill now before the state Legislature could cost $24 billion to $48 billion in lost revenue over the next 20 years.

Higher Tuition, More Foreclosures: Just Some of the Ways We Are Paying the Price of Service Cuts

Price of Service CutsLast week, the Pennsylvania Budget and Policy Center launched a new series about the impact of five years of state service cuts on the citizens of Pennsylvania. Check out the first three installments below, and keep up with all the stories in the days and weeks ahead by liking our Facebook Page or bookmarking our Price of Service Cuts web page.

End to Mortgage Aid Nearly Cost Pennsylvania Woman Her Home

Judy earned a modest income from her clerical job until an unexpected health problem hit. She needed to work to pay her mortgage, but her doctor and physical therapist told her she had to take time off to recover. Judy, who lives in Allegheny County, went five months without income and fell behind on her mortgage payments. She faced the awful prospect of losing her home. ...

When Judy turned to the Homeowners’ Emergency Mortgage Assistance Program (HEMAP) for help, she hit a wall. Funding for HEMAP was cut so deeply in the 2011-12 state budget (by $8.5 million or over 80% from the previous year) that the Pennsylvania Housing Finance Agency had no choice but to shut HEMAP down in July 2011. Read the full story.

Pa. Revenue Mixed, as Governor Prepares 2012-13 Budget

Pennsylvania's revenue picture remains mixed as Governor Tom Corbett prepares to roll out his 2012-13 state budget proposal in a few weeks.

Pennsylvania continues to see an increase in collections over last year, but revenues trail Corbett administration estimates so far this year. That has prompted the administration to announce midyear budget freezes this month and could impact the budget plan the Governor will present in early February.

Weak corporate collections are taking a toll, and it appears likely that Pennsylvania will end the year with a revenue shortfall, despite solid growth from 2010-11. Still, the revenue picture, in the short term, may not be as dire as that painted by the Corbett administration. The state is carrying a half a billion dollars in reserve that more than covers the current shortfall.

The Pennsylvania Budget and Policy Center has a full analysis of the revenue numbers at the midpoint of the 2011-12 Fiscal Year.

Year-to-date tax collections as of December are up $398 million, or 3.6%, over this point last year, but are falling short of Corbett administration estimates by $466 million, or 3.9%. Total revenue collections are $487 million, or 4%, below estimates.

Year-over-year growth slowed in December with monthly tax collections outpacing those a year earlier by only $6.5 million, or 0.3%. Some of this slowdown has to do with a shift in the timing of sales tax payments, but weak corporate collections are also having an impact.

Bank Swap Deals Cost Philadelphia City, School District

Large financial institutions, including many that received financial bailouts in the wake of the financial crisis, are making hundreds of millions of dollars off interest rate swaps negotiated with the City and School District of Philadelphia.

That's the key finding in a new report from the Pennsylvania Budget and Policy Center. We found that swap deals negotiated with banks such as Wells Fargo, Morgan Stanley and Goldman Sachs have cost the city and school district $331 million in net interest payments and cancellation fees. If interest rates continue to remain low, still-active swaps could cost the city another $240 million in future net interest payments.

WHYY's NewsWorks was there and posted this brief video clip.

Our report recommends that banks refund a portion of the cancellation fees they received for terminating bad deals and renegotiate those deals which are currently active.

Financial institutions have returned to profitability after the financial crisis, yet some Philadelphia schools cannot afford to keep nurses on staff. Now the banks have an opportunity to step up and help prevent more damaging cuts to schools and public safety, just as taxpayers helped the banks avoid total collapse just a few years ago.

Some other news outlets covered our release of the report yesterday. Check out the coverage.

January Freeze: Governor Announces $157 Million in Midyear Budget Cuts

Governor Tom Corbett announced $157 million in state spending cuts this week to resolve a midyear revenue shortfall. This marks the fifth straight year of cuts to health care, education and human services.

Weak economic growth in the first half of the fiscal year contributed to lower-than-expected revenue, but the picture, in the short term, may not be as dire as that painted by the Governor. The state is carrying a half a billion dollars in reserve that more than covers the current revenue gap. And despite falling short of estimate, state revenues as of December 2011 are still ahead of collections a year ago. Every major tax has seen year-over-year growth, except for corporate tax collections (which account for more than half of the current revenue shortfall).

Actions taken by the Corbett administration and the General Assembly have contributed to the revenue shortfall. The decision last year to allow corporations to accelerate depreciation costs may be costing more than originally estimated, while doing little to improve the economic outlook. That, combined with the continued phase-out of the capital stock tax in 2012, will cost the state hundreds of millions of dollars in lost revenue.

Changes to the revenue estimate may also be playing a role. Estimating a larger share of revenue collections in the first half of the year and a smaller share in the second half of the year, may have contributed to the midyear shortfall and could set the stage for a stronger revenue showing between now and June.

Don't Weaken PA's Oversight of Health Insurance Rate Hikes

Many states have taken steps to ensure that there is a meaningful review of proposed health insurance rate increases for small businesses and individuals.

Pennsylvania, however, is headed in the opposite direction with legislation in the House and Senate that would keep more consumers in the dark and undermine the state’s ability to review most rate hikes.

House Bill 1983 and Senate Bill 1336 would extend rate review to insurance providers that currently escape any scrutiny, but they also reduce the Insurance Department’s authority to review and disapprove rates. The bill would give insurers license to raise individual and small business rates by 9.99% annually without any review at all. Small employers already struggling from the recession cannot afford continual rate increases and deserve to have better protection than this bill affords.

You can get more details in a memo that Pennsylvania Budget and Policy Center Director Sharon Ward wrote to editors and reporters today.

Under current state law, the Pennsylvania Insurance Department has some authority to review rate increases. It is not a perfect system, but the Department has used it effectively to perform rigorous reviews of numerous rate proposals. According to a recent Government Accounting Office study, in 2010, 37% of rate filings were reduced or withdrawn after Insurance Department review, ranking Pennsylvania 9th in the nation.

Instead of curtailing the Department’s authority, lawmakers should improve upon it with greater transparency, citizen input and meaningful review of all rate proposals.

Giving Away the Store: A Marcellus Shale Fact Check

The Pennsylvania Legislature is debating a Marcellus Shale impact fee today, but unfortunately both the House and Senate appear to be playing a game of limbo to see how low they can go on a drilling fee rate.

Governor Tom Corbett’s proposed drilling impact fee, contained in HB 1950, would collect $160,000 over the 50-year life of an average Marcellus Shale gas well, the equivalent of a 1% rate. Senator Joseph Scarnati’s SB 1100, as amended on November 14, would raise $360,000 over the life of an average well, the equivalent of 2.2%.

A comparable well in Texas would raise $878,500 – five times more than Governor Corbett’s plan and nearly two-and-a-half times more than SB 1100. Even an industry-supported proposal from August 2010 would collect more than these plans.

Other drilling tax and fee plans, proposed by Representatives Tom Murt and Gene DiGirolamo and Representative Marguerite Quinn, would put Pennsylvania more in line with other energy-rich states, assessing effective rates between 4.4% and 4.6% over the life of an average well. The average Marcellus Shale gas well in Pennsylvania is projected to generate $16 million over its life.

Check out the Pennsylvania Budget and Policy Center's recent fact check on the Marcellus Shale tax and fee plans that are now before the General Assembly.

An Impact Fee Gift Wrapped for Drillers

Legislation is moving in the state House to enact one of the smallest levies on gas drilling in the nation. House Bill 1950 adopts Governor Corbett's drilling impact fee plan, amounting to a 1% effective rate over the 50-year life of an average Marcellus well. It would be a big gift to drillers.

Nearly every other energy-producing state in the nation levies a more robust tax or fee on drilling. Drillers in Texas will pay five times as much in drilling taxes over the life of a comparable deep well as they will in the Marcellus Shale under the House plan.

The bill also strips authority from cities, boroughs and towns to regulate local gas drilling activity – a right protected by state law and upheld by the state Supreme Court. Local zoning laws will be eviscerated, while property owners hundreds of miles from active drilling sites could find a pipeline running through their subdivision or a compressor station next to their playground, with no recourse.

House Bill 1950 was approved by the House Finance Committee on a party-line vote last week and could come before the full House for a vote the week of November 14. Meanwhile, the state Senate continues to negotiate the details of its own drilling fee plan.

Things will move fast in Harrisburg over the coming weeks. It's time for our lawmakers cross the drillers off their gift list and do the right thing for the people of Pennsylvania.

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