Capitol Insiders Predict Gov. Tom Corbett Will Deliver an On-Time Budget

By Jan Murphy
The Patriot-News

HARRISBURG (June 24) – Although state budget negotiators spent the weekend trying to work through unresolved issues in the 2012-13 budget agreement, many Capitol insiders predict that Gov. Tom Corbett will be able to deliver an on-time budget for the second consecutive year.

It will call for spending nearly $27.7 billion, include no tax increases and would avoid the deep cuts that school districts and public universities saw in Corbett’s first budget.

The budget would cut funding for social services and eliminate a cash assistance program that served as a bridge to help disabled adults get back on track. It also would tighten eligibility criteria for medical assistance benefits.

But as with past budgets, a number of issues had to be resolved going into the weekend.

Among them were a new tax credit program that would provide voucherlike opportunities for students in the worst-performing public schools. Another was the amount of funding and the way it would be delivered to counties for mental health, drug and alcohol treatment and other social services.

None of those is expected to blow up the budget agreement that Corbett announced Wednesday after almost daily meetings with Republican leaders from the GOP-controlled House and Senate.

But they could push its passage closer to Saturday’s deadline, when the state loses its authority to pay some vendors and service providers.

Senate Appropriations Committee Chairman Jake Corman, R-Centre County, predicted that Pennsylvania will have an enacted budget by midweek.

“It’s a fiscally responsible budget and a budget that continues to try to address the needs of people of Pennsylvania, maybe not at the level we all would like, but the level we have the ability to do right now,” Corman said.

Over the weekend, the governor hailed the budget agreement as one that, because of a recovering economy and higher-than-estimated tax collections, avoids some of the cuts he included in his $26.1 billion February proposal.

“It’s my pleasure that [we] are going to be able to put back in money that I didn’t think we could put in,” Corbett told the crowd gathered in Hershey on Friday for the Republican State Committee meeting.

Included in next year’s budget is a continued phase-out of the state’s business assets tax. Plus, Republican lawmakers would like to throw in another tax break for businesses.

They want to move to a single sales factor, which takes payroll and property out of the formula for determining tax liability for companies that pay the corporate net income tax.

This would result in about a $12 million revenue loss initially, but Corman said “the idea is anytime you do those types of thing, you gain more in the outer years” from companies investing that money in creating jobs.

But its inclusion depends on how spending in other areas works out, legislative sources say. As of Sunday evening, that had not been determined.

The budget agreement also includes a legislative commitment to fund up to $1.7 billion in performance-based tax credits spread over 25 years, beginning in 2017.

Corbett wants this item to lure a petrochemical plant to southwestern Pennsylvania. He considers it a once-in-a-lifetime opportunity to create thousands of jobs at that plant and associated industries.

The cost of this tax credit would not impact next year’s spending plan. But Corbett wanted to secure it to keep Pennsylvania in the mix with other states vying for Netherlands-based Royal Dutch Shell, the multinational energy behemoth, which is looking for a location to build a processing facility.

Next year’s budget closely resembles one that lawmakers offered that restored about $500 million that Corbett proposed cutting in his February proposal. It would raise spending by less than 2 percent from this year’s $27.2 billion budget.

“We have been able to restore an awful lot of the programs,” said House Appropriations Committee Chairman Bill Adolph, R-Delaware County.

Better-than-anticipated tax collections in March, April and June and a rosier economic outlook gave lawmakers a stronger leg to stand on in budget negotiations with the governor, who was pressing to stash away $500 million for use in the 2013-14 budget.

Even with softening some cuts, Corman said he estimates the state would finish next year with as much as $380 million in reserve.

House Democratic Appropriations Committee Chairman Joe Markosek of Allegheny County insists that more of that reserve should be spent on schools and social services next year.

The budget would maintain funding for schools at this year’s level. That includes the return of the $100 million accountability block grant program that districts use to fund full-day kindergarten, tutoring and other programs proven to raise student achievement. Corbett had proposed eliminating this grant program.

The Pennsylvania State Education Association, among others, was grateful that lawmakers insisted on restoring this program.

“Unfortunately, the school funding crisis does continue in many of our school districts, and furloughs and program cuts will continue. But, clearly, without restoring funding for the accountability block grants, those cuts could be even worse,” PSEA spokesman David Broderic said.

Still, Cumberland Valley School District Superintendent William Harner suggested that level funding while schools’ operating costs soar, particularly pension contributions, is a recipe for trouble.

“We have not replaced 25 teachers who have resigned or retired over the past few years, and we have one of the lowest administrative overheads in the state,” Harner said. “Under the current course and without increased funding or revenues, we are looking at cutting an estimated 10 percent of our budget, $10 million more, over the next five years.”

Budget negotiators on Friday were haggling over proposed changes to the charter-school law. Corbett wanted to establish a state panel to approve and oversee brick-and-mortar schools. Some lawmakers balked at this idea. They argued it would force districts to foot the bill to educate students attending charter schools without any control over the education those students receive.

House Republican spokesman Steve Miskin said a proposal was taking shape over the weekend on a compromise that would meld the two ideas, but he was not familiar with the details.

Negotiators also were fine-tuning a proposed tax credit program, a spin-off of the state’s Educational Improvement Tax Credit program, that would be targeted to students in the worst-performing public schools.

It would provide $50 million in tax credits to businesses that donate to organizations that provide scholarships to attend another public or private school to income-eligible students.

Still being worked out Sunday were the number of failing schools to be included in the program and whether it would be targeted to lower-income students, Miskin said.

The budget agreement includes $100 million, a $25 million increase, for the original education tax credit program. It would provide tax credits to businesses that support more broadly available private school scholarship programs and innovative educational programs.

Rep. Sheryl Delozier, R-Lower Allen Twp., said she is onboard with the increase in funding for the original EITC program.

“The dollars are put to great use, and it’s a great way for our local businesses to have a hand in our local education system,” she said.

As for its spin-off targeted to failing schools, she said she looked forward to learning more about it. The House Education Committee has an informational hearing scheduled today to vet the proposed program.

On the higher-education front, the budget agreement would restore funding for public universities that Corbett had proposed cutting by 20 percent to 30 percent. But in exchange, university leaders had to promise not to increase tuition above the 3 percent inflationary rate.

One cut that the Pennsylvania Higher Education Assistance Agency has managed to prevent college students from feeling is a $25 million reduction in the state grant program.

PHEAA’s board on Thursday agreed to offset that cut by using more of the agency’s year-end surplus.

An area that appeared to be at a stalemate on Friday and was being worked on Sunday dealt with funding for social services.

Lauren Conzaman, vice president for child and family services for Diakon Lutheran Social Services, a nonprofit social ministry organization in Lower Allen Twp., said any size cut has consequences.

“Cuts to the state budget will push the expense down to the local level, which will just shift the burden, not eliminate it,” Conzaman said.

Corbett proposed cutting social service funding by 20 percent, or $168 million, and combining seven funding streams for such services as mental health, homeless shelters and drug and alcohol treatment into a block grant.

Lawmakers restored $84 million, which would make $758 million available for these county-administered services. They want to restore more, but Miskin said Corbett will agree to that only if the block grant approach is adopted.

The statewide county commissioners association has endorsed the block-granting concept, but service providers have not. They say it would put social services in competition for funding and drive money from mental health services.

Without the service providers buy-in, Miskin said, “There are not 102 votes in the House for a block grant.”

He said a compromise idea was being cobbled by House Republican leaders Sunday evening that attempted to break that stalemate.


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