Yesterday, Governor Tom Corbett unveiled his budget proposal which will inevitably be tinkered and toyed with until the General Assembly passes their final version in the end of June, but it made clear the hopes and dreams of Governor Corbett in the coming fiscal year.
Last year, Corbett proposed major cuts to education and paid for it with his approval rating. He hasn’t made the same mistake this year. Corbett proposed a 1.7 percent increase to basic education funding and promised $1.6 billion to higher education. However, these funding increases are not yet a foregone conclusion. The spending increase is tied to several other reform projects that Corbett has his eye on. Education funding will be tied to the privatization of state liquor stores, a greatly debated issue in the past few years. Without this reform, budget officials say that major cuts are inevitable. Public schools would be forced to choose between increasing their taxes, cutting their programs or an unfortunate combination of the two.
Funding for transportation will also be increased in a similar deal. Over the next five years, $5.3 billion is to be invested in transit with $510 million immediately going to highway and bridge projects if the legislature votes to reform the state pension system. The proposed reform would do nothing to reduce the benefits that current employees have already paid, but the future of their plan would switch to a 401(k) program in which they allocate 6.25 percent of their salary to their retirement benefits. New state employees would enter the pension system with this program in place.
New employees to the state may be sparse though; Corbett’s budget includes the elimination of 900 positions, including 400 layoffs. Most of these staff reductions will come from the Department of General Services, the Health Department and Public Welfare. In Human Services news, Corbett has proposed $6.1 million to transition patients at state facilities to community placements.
Despite the spending increases, this budget proposal is also business friendly. It eliminates the Capital Stock and Franchise Tax, reduces the Corporate Net Income Tax and repeals the Corporate Loan Tax. Small businesses certainly weren’t left out of business benefits either. They are now eligible to a $5,000 tax deduction for start-up businesses and access to a new team within the Department of Community and Economic Development that will provide advice on how to best utilize state and local incentives to increase the success rate of new businesses. The Pennsylvania Business Development Authority will consolidate eight loan programs into one large pool of $1.1 billion loan funds.
The Republicans control both the state house and senate, but it is unlikely that Corbett will get everything that he asked for in this proposal. However, it will certainly shape the debate in the coming months before the 2012-2013 fiscal year expires.