State Budgets

Pennsylvania Tax Giveaways and an Island in the Sun

By Jamar Thrasher, Third and State

A few weeks ago, the Pennsylvania General Assembly fast-tracked a bill in the waning days of the legislative session to allow certain private companies to keep most of the state income taxes of new employees. News reports to follow indicated the new tax giveaway was designed to lure California-based software firm Oracle to State College.

Well, it turns out the CEO of Oracle, which will benefit from the largess of Pennsylvania taxpayers, recently bought his very own Hawaiian island, as CNN reported back in June.

Oracle CEO Larry Ellison, the third richest man in the U.S., purchased about 98% of Lana'i, the sixth largest of the Hawaiian islands. Forbes reported that the deal was rumored to be worth $500 million.

As CNN tells us:

The island includes two luxury resorts, two golf courses, two club houses and 88,000 acres of land, according to a document filed with the Public Utilities Commission.

Which bring us back to Pennsylvania, where Governor Corbett recently signed House Bill 2626, allowing qualifying companies that create at least 250 new jobs within five years to pocket 95% of the personal income taxes paid by the new employees. 

Not Exactly a Mahogany-paneled Corporate Boardroom

By Kate Atkins, Third and State

Montgomery County Budget ForumA hundred days after passage of the state budget, it is too soon to fully assess the impact of cuts to human services, Montgomery County's administrator for behavioral health and developmental disabilities told a group of 50 consumers and social service providers at a budget forum last week.

Still, Administrator Eric Goldstein told the forum at the Norristown Recovery and Education Center that he has concerns about the state's move toward block grants for human services funding. Unlike Bucks, Chester, and Delaware counties, Montgomery County did not apply to be part of this year’s new pilot block grant for the Human Services Development Fund.

Eric Goldstein was joined by speaker after speaker who testified to the importance of the modest dollars invested in prevention and community supports for people struggling with mental illness or substance abuse.

One speaker, Troy, a solidly built man with a confident manner and a winning smile, said people call him a “success story,” but he remembered the days when he struggled with drug addiction. He described how he would walk into the Norristown Center and feel a lift from the friendly and familiar faces of the staff, who would ask him how he was doing.

“I’m looking for a job,” he would tell them.

“Really?” they would reply.

“No,” he would admit. “Not really.”

Pa. Budget: Failing to Invest in a Stronger State Economy

By Chris Lilienthal, Third and State

Despite ending the 2011-12 fiscal year with a $649 million fund balance, Pennsylvania fails to make the investments essential to building a strong economy or to reverse a recent trend where job growth in the commonwealth has lagged behind other states.

So concludes the Pennsylvania Budget and Policy Center analysis of the enacted 2012-13 state budget, which was released Friday.

In the final budget, the General Assembly restores some of the cuts proposed by Governor Tom Corbett, while leaving intact a 10% cut to human services and deep cuts to public schools and higher education made in 2011. The budget continues to shift costs to local governments and taxpayers, while adding new tax breaks for businesses.

The spending plan, at $27.656 billion, is $517 million more than the Governor’s February proposal but remains below budgeted 2008-09 levels, despite four years of recession-driven increases in demand for services. The largest cut in this budget comes from the elimination of the General Assistance Program, which provides a temporary monthly benefit to 68,887 Pennsylvanians who are sick, disabled or escaping an abuser. It ends next month

Cuts to education enacted last year, meanwhile, have diminished the quality of instruction in our poorest school districts and resulted in the loss of 14,000 jobs in 2011.

PA Starts New Fiscal Year with $400 Million in the Bank

By Michael Wood, Third and State

After a less than stellar May, General Fund tax collections bounced back strongly in June — exceeding estimate by $170 million, or 6.5%. This narrowed the 2011-12 revenue shortfall to $163 million, or less than 1% of total estimated collections for the year.

As a result, the state ended the year in a much better fiscal situation than projected back in February, when Governor Tom Corbett released his budget plan. Counting the dollars the state had in the bank, Pennsylvania actually started the fiscal year with a $400 million fund balance.

The recently enacted budget acknowledged this but only to a point. The Legislature increased General Fund spending in 2012-13 by $655 million from the Governor’s  proposal — restoring funding in a number of important areas: higher education, accountability block grants, and half of the 20% cut proposed for county services included in the now-rejected Human Services Development Block Grant. Lawmakers also found funding for another round of business tax breaks.

However, June collections indicate more could have been done — for General Assistance recipients, environmental programs, and child care. Lawmakers also passed on setting aside any of the additional revenue in the Rainy Day Fund.

Click here for the Tale of the Tape.

The revenue surplus in June was led by corporate tax collections — coming in $180 million higher than the monthly target, or 38%. After falling short of estimates for seven of the first eight months of the fiscal year, corporate taxes ended June with a small surplus of $39 million, or 0.8%.

The Human Cost of Eliminating General Assistance in Pennsylvania

By Kate Atkins, Third and State

Since the Great Depression, Pennsylvania has had a General Assistance (GA) program — a small cash benefit that serves as a bridge to self-sufficiency for the temporarily disabled and for victims of domestic violence and addicts seeking help to turn their lives around.

Since the Great Depression. Until late last month when state lawmakers adopted a new budget.

That budget will end Pennsylvania’s modest benefit for 68,000 people, effective August 1. At $205 per month, nobody was getting rich from the program. Here is a sample of who is using General Assistance and why:

A disabled military veteran in Lancaster County, who applied for General Assistance to get him through until his Social Security disability benefits were approved.

A waitress in her 50s who was diagnosed with breast cancer and used General Assistance when she could not work as she was receiving chemotherapy and radiation treatment. After about nine months, she was able to return to work.

Good Samaritans who are caring for children not related to them — perhaps children of a close friend of neighbor. Many of these children are now likely to end up in the foster care system.

A very focused group of young women I saw at a recent rally in Delaware County, who chanted: “Pennsylvania, we need GA. We’re in treatment, we need to stay!”

Piecing Together the PA Budget Framework

By Chris Lilienthal, Third and State

Some details emerged Thursday about the state budget framework unveiled midweek by Governor Tom Corbett and legislative leaders, but questions still remain. More details may be available later today when budget spreadsheets are released.

Funding for county human services is one area that appears to be in flux, as some House Republicans continue to voice concerns about a plan to block grant and cut that funding. 

A number of GOP House lawmakers want to add more dollars for the mental health and mental disability programs in that mix, said [Rep. Mario] Scavello.

A Senate-approved bill restores half of the $168 million spending cut for the human services programs initially proposed by Mr. Corbett. House members would like to restore even more money but have to balance that with cuts elsewhere, he added.

Although the statewide association representing county commissioners recently agreed to a two-year phase-in for the block grant, Rep. Gene DiGirolamo, R-18, Bensalem, chairman of the House Human Services Committee, said he's trying to stop the block grant altogether and substitute a pilot program for several counties instead ...

The seven programs considered for a block grant include community mental health and mental disability services, the human services development fund, homeless assistance, child welfare grants, the Behavorial Health Services Initiative and Act 152 drug and alcohol treatment programs.

The Myths Behind Governor Corbett's PA Budget Myths

By Sharon Ward, Third and State

Governor Tom Corbett's May 21 newsletter offered up responses to five "myths" the administration claims are circulating about his proposed budget for next year. The Pennsylvania Budget and Policy Center examined these myths and the myths behind the myths to give you a clear picture about what is fact and what is fiction in Harrisburg.

Governor's Myth #1: Pennsylvania spends more money building prisons than building schools. 

We’re not sure where this one came from, but we will give it a whirl.

Fact: The Corbett administration’s budget includes a moratorium on new school construction projections, and NO FUNDING for school district projects in the pipeline.

Fact: If the Governor’s proposed plan for higher education is adopted, Pennsylvania will spend twice as much on prisons as it does on colleges. In 2009-10, the state's corrections budget was $1.8 billion and college funding was $1.5 billion. If the Governor had his way, Pennsylvania would spend $1.9 billion on corrections and $980 million on colleges in 2012-13.  

Fact: It costs the state much more to house prisoners than it does to educate a child. In 2011-12, Pennsylvania will house 49,000 inmates at a cost of $35,188 per inmate and spend $9.3 billion to educate 1.8 million students at a cost in state dollars of $5,305 per child.

Fact: It is better to build schools than to build prisons. 

Governor's Myth #2: The reductions in higher education funding will cause universities to raise tuition.  

Pennsylvania Hunger Games Diet: Cash for Corporations, Cuts for Kids

By Mark Price, Third and State

On Tuesday Marty Moss-Coane, the host of WHYY's Radio Times, moderated a question-and-answer session with Governor Tom Corbett at an event sponsored by the Greater Philadelphia Chamber of Commerce. The Governor ran wild with analogies.

Corbett repeated a folksy analogy to the business suit-and-tie audience, saying that state revenue amounted to an eight-inch pizza pie before the 2008 financial crisis. Now, he said, it’s a six-inch pie “but with the same mouths to feed.”

Moss-Coane noted near the end of the hour-long conversation that Corbett could hear demonstrators beating drums and chanting slogans outside. What would he say to them, she asked.

“I understand that you’re upset because we’ve had to put the state on a diet, for want of a better description,” Corbett said. “I haven’t met anybody who likes to go on diets. It is not easy. It is not what we want to do.”

Let the Games Begin: PA Senate Announces Details of Budget Proposal

By Sharon Ward, Third and State

Action on the state budget began in earnest Monday with state Senator Jake Corman, chairman of the Appropriations Committee, releasing important details on the Senate budget plan that will be advanced this week.

The proposal would increase Governor Tom Corbett's budget proposal by $500 million, with total spending rising from $27.15 billion to $27.65 billion for 2012-13. The Senate plan rejects $191 million in fund transfers and new revenue and proposes new spending cuts of $165 million. Those spending reductions were not yet detailed.

According to a Capitolwire.com report (subscription required), the Senate budget plan:

Good News on PA Revenue But Don’t Count Your Blessings Just Yet

By Sharon Ward, Third and State

Pennsylvania’s Independent Fiscal Office (IFO) released its revenue estimate this week, offering a more upbeat view of the economy moving forward. The official revenue estimate predicts a smaller revenue shortfall for the current year and more robust revenue collections for 2012-13.

The IFO estimate leaves the General Assembly with as much as $800 million available to restore cuts proposed by the Governor. This is clearly good news, but both the Corbett administration and legislative leaders are already dampening expectations about the scale of funding restorations.

A Look at the Numbers 

In the current 2011-12 fiscal year, the Corbett budget pegged revenue at $27.1 billion, with a revenue shortfall of $719 million. The IFO estimates revenue collections will be $419 million higher, at $27.5 billion and a shortfall of $300 million for the fiscal year. With $700 million in current-year reserves, this leaves an actual year-end surplus of around $400 million.

In the 2012-13 fiscal year, the IFO predicts revenue at $28.7 billion. This is approximately $404 million higher than the Corbett budget (the IFO excludes $142 million in new revenue sources proposed by the Governor in his budget plan, since those measures have not yet been enacted). See a table with more details.

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.

Prevailing Wage Opponents Fail to Look at the Research

The Final Part of a Three-part Series on Prevailing Wage by Mark Price and originally published at Third and State. Read Part 1. Read Part 2.

In the first two posts of this series, I explained why the numbers being tossed around by advocates of repealing prevailing wage don’t add up. I explained that the claims of cost-savings are not based on any actual experience and that they represent the result of laughable hypothetical, or “what if,” calculations. 

This leads to the most important point that the Pennsylvania School Boards Association, the Pennsylvania State Association of Boroughs, the Harrisburg Patriot-News Editorial Board and others keep missing: we can do much better than a hypothetical when assessing the impact of prevailing wage laws.

There is a body of research that examines construction costs (and other construction outcomes, like safety, training investment, wages, benefits, etc.) in states with and without prevailing wage laws as well as in states that eliminated prevailing wage laws. We don’t have to conjecture what “might” happen: we can look at what did happen. The preponderance of the evidence shows that prevailing wage laws do not raise construction costs.

Back in the late 1990s, Pennsylvania actually ran this real-world experiment itself — we lowered our prevailing wage levels, particularly in rural areas. That means we can look at what happened to construction costs. What happened is the same thing that has happened in other places — lower prevailing wages did not translate into lower construction costs. 

Prevailing Wage Opponents Fail Labor Market Statistics 101

Part Two of a Three-part Series on Prevailing Wage by Mark Price, originally published at Third and State. Read Part 1.

The overwhelming weight of evidence based on the actual cost of public construction projects shows that prevailing wage laws do not raise costs. Therefore, advocates of repealing the law in Pennsylvania ignore this evidence. Instead of “evidence-based policy,” we have “lack-of-evidence-based policy.” Go figure.

Repeal advocates use a hypothetical calculation that makes assumptions about cost, rather than empirically examining the relationship between higher wages and total construction costs. (As discussed here, even these hypothetical cost estimates don’t make sense once you apply real world data to how much labor costs represent of total construction cost.)

Another key ingredient in the hypothetical calculations used by proponents of repeal is the claim made most recently by the Pennsylvania State Association of Boroughs (PSAB) that “the prevailing wage is 30 percent to 60 percent higher than the average wage for the same occupation.”

Public Employment Job Losses a Drag on Economy

A blog post from Christopher Lilienthal, originally published on Third and State.

Add this to the list of reasons that the economic recovery is limping along. Our friends at the Center on Budget and Policy Priorities explain:

July’s employment report included more bad news from states and localities:  job losses are continuing. Since August 2008, state and local governments have slashed 611,000 positions, and the cuts have been getting worse — 340,000 of those jobs were lost in the last 12 months. July was the ninth consecutive month, and the 29th out of the last 35, in which total state and local employment shrank.

Three Years of State and Local Job Losses

And we haven't seen the last of the public sector job cuts. As the Center notes, many states have enacted new state budgets that make deep spending cuts sure to reduce public employment that much more.

So where are we seeing the most cuts? Cities, counties and other local governments, along with local school districts, account for the lion's share:

  • Local school districts have cut 229,000 positions.
  • Cities, counties, and other local governments have cut 237,000 positions.
  • State governments have cut 145,000 positions.
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