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State Tax Cuts Take a Bite Out of Pennsylvania’s Budget Pie

9:36 am in Uncategorized by ThirdandState

By Chris Lilienthal, Third and State

Advocates delivered half a pie to every Pennsylvania legislator Tuesday. Why half a pie?

To remind them that a decade of large tax cuts for businesses has left schools, health care services, and local communities with a smaller share of the state budget pie.

Tax cuts enacted since 1999 have drained close to $3 billion this year alone from state coffers. The cost of the tax cuts has more than tripled since 2002, with little to show for it. Too often, these tax cuts are put in place with very little accountability or obligation for companies to create jobs. In fact, Pennsylvania ranked 27th in job growth in 1999-2000 but fell to 34th in 2011-12.

Budget cuts fueled by large business tax cuts also pass the buck to school districts and local governments – and onto local taxpayers.

Governor Corbett is now proposing a new round of tax cuts for 2015 and beyond that will cost as much as an additional $1 billion. The proposal includes no plan to close tax loopholes that allow companies to hide profits and avoid paying their share of taxes.

Pennsylvania needs a budget that returns to tried-and-true investments in education and the public infrastructure that promotes long-term economic growth. After a long economic downturn, that is the path to more jobs, stronger communities, and a brighter future for our children.

We can fund corporate tax cuts or we can fund our children’s schools, but increasingly we can’t do both. Giving larger slices of the pie to profitable corporations means less money in the classroom, fewer early childhood programs, and less support for local services.

Pennsylvania needs real tax reform that levels the playing field for businesses that play by the rules, and stops giving away dollars that are essential to helping our children and families succeed. Only then will we be able to invest in a world-class public education and the community assets that build a stronger economy.

Photo by Mr. T in DC released under Creative Commons License

ALEC Policies Sell ‘Snake Oil to the States’

2:11 pm in Uncategorized by ThirdandState

Would billionaires spend millions to influence your  vote if it had no value?

Would billionaires spend millions to influence your vote if it had no value

By Sharon Ward, Third and States

Three national organizations offered a scathing criticism of policies endorsed by the American Legislative Exchange Council, or ALEC, in a conference call with reporters last week. Their findings strike a stake in the heart of ALEC claims that its view of the world — lower taxes, fewer workplace protections, and diminished public investments — is good for the public.

Pennsylvania state lawmakers who look to ALEC for guidance on economic policy should stand up and take notice.

Iowa Policy Project research director Peter Fisher discussed a recent report he co-authored with researchers from Good Jobs First, concluding that the tax, budget, and economic prescriptions put forth by ALEC simply don’t work.

Selling Snake Oil to the States took a look at ALEC’s annual Rich States, Poor States report, which ranks states based on their “economic outlooks” as defined by ALEC. The factors should come as no surprise: states with low taxes and right-to-work laws rank high by ALEC; those with progressive taxes, corporate income taxes, and worker protections rank far behind.

Fisher compared the ALEC rankings with actual state performance on real economic indicators over a four-year period. Do ALEC’s policy prescriptions improve state economies? The answer is no.

Between 2007 and 2011, researchers found no relationship between a high ALEC ranking and employment. They did find a correlation on personal incomes and poverty rates among states ranked high by ALEC, but it was a negative one — the better a state fared on the ALEC scale, the worse it did in real life. As Fisher said during the conference call:

It should be hardly surprising that policies to keep wages low have the effect of lowering the state’s income. … The ALEC policy prescriptions for states will not lead to growth and prosperity but to further inequality and lower incomes.

The Center on Budget and Policy Priorities examined sweeping tax and budget policies that ALEC is currently lobbying for in the states. The policies largely encompass deep tax cuts for wealthy individuals, investors, and corporations that will leave middle- and lower-income families paying more.

Both reports note that the ALEC agenda promotes low wage growth for families, fewer workplace protections, and strategies to starve public investments in education, health care, and other priorities — all of which reputable economists agree are critical to job creation and economic growth.

It is an article of faith among Pennsylvania lawmakers that ALEC policies are good for the economy. These reports provide clear and convincing evidence to the contrary: the arguments that the ALEC agenda are good for real people are nothing but snake oil. The policies are good for the businesses that pour millions into ALEC to promote this agenda.

Governor Tom Corbett has hidden large expensive new tax cuts to profitable corporations in his budget proposal released this month. This and other ALEC agenda items won’t create jobs, but they will lead to greater inequality, slower income growth, and continued starvation of our public schools, transit systems, and other priorities.
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Pennsylvania Among ‘Terrible 10′ Most Regressive Tax States

10:50 am in Uncategorized by ThirdandState

By Chris Lilienthal, Third and State

Working families in Pennsylvania pay a far higher share of their income in state and local taxes than the state’s wealthiest earners, according to a new study by the Institute on Taxation and Economic Policy (ITEP).

Pennsylvania’s tax system scored so poorly that it made the list of the “Terrible 10” most regressive tax states in the nation.

The Pennsylvania Budget and Policy Center (PBPC) co-released the report, Who Pays? A Distributional Analysis of the Tax Systems in All 50 States, with ITEP. PBPC Director Sharon Ward made the point in a press release that “No one would deliberately design a tax system where low-income working families pay the greatest share of their income in taxes, but that is exactly the type of upside-down tax system we have in Pennsylvania.”

Middle-income families in Pennsylvania pay more than double the share of their income in taxes than the very wealthiest Pennsylvanians, while low-income families pay nearly three times as much as top earners, the report found. Get more details on the report, including a Pennsylvania fact sheet, here.

PA State & Local Taxes: Shares of family income for non-elderly taxpayers
The report should bury once and for all the myth of the makers vs. the takers. Low-income families in Pennsylvania are paying much more of their income in state and local taxes than the top 1%.

Families who qualify for state personal income tax forgiveness still pay large shares of their earnings in sales, local income and property taxes, the report found. At the same time, wealthy taxpayers benefit greatly from tax laws that allow them to write off property and income taxes from their federal taxes. This is, at best, a modest benefit for middle-class families and no benefit to very low-income earners.

Pennsylvania’s flat income tax contributes to its regressive tax ranking. Without a graduated tax rate that rise on more affluent earners, the state’s income tax does little to offset more regressive sales and property taxes.

That’s why Pennsylvania should amend the state Constitution to enact a graduated personal income tax. Even without a constitutional change, the state could set a higher income tax rate on investment income, which goes primarily to wealthy Pennsylvanians, without raising the rate on wage earners.

PA Revenue Strong Midway Through Year; Tax Cut Could Have Big Impact

8:24 am in Uncategorized by ThirdandState

By Michael Wood, Third and State

With a strong December showing, the commonwealth now has a General Fund revenue surplus of $171 million (1.4% above estimate) for the first half of the 2012-13 fiscal year, double the Corbett administration’s revised estimate for the entire fiscal year. The strong December collections exceeded estimate by $112 million (or 4.8%).

The increased revenue is a good sign of a modestly recovering national economy and a brightening of the state’s fiscal picture going into the 2013-14 budget season. This is a nice change from previous years when midyear shortfalls triggered cuts to state services.

In December, personal income, corporate, and realty transfer taxes exceeded revenue targets by 10.1%, with sales, inheritance and other taxes (on cigarettes, alcohol, and table games) falling short of expectations by 2.8%.  

A similar picture exists over the first half of 2012-13 — corporate, personal income and realty transfer tax collections are a combined 5% higher than expected, while sales, inheritance, and other taxes have fallen 2.4% short of budget estimates.

One area of concern is that sales tax collections (the state’s second largest tax source) are $125 million, or 2.7%, lower than projected. It is not clear the reason for this as vehicle sales and consumer spending have been increasing. Perhaps the new tax collections from some online retailers may not be as large as anticipated.

Compared to last year, collections are $583 million, or 5%, higher, with corporate ($254 million) and personal income tax ($186 million) collections making up most of the increase in 2012-13.

A few caveats going forward:

  • Roughly 60% of the state’s General Fund revenue comes in during the second half of the fiscal year so a bad month or two of collections in the second half could cut or wipe out the state’s modest surplus.
     
  • To date, actual tax collections have been closer to the Independent Fiscal Office (IFO)’s projections than those of the Department of Revenue. Total General Fund collections are only $12 million higher than the IFO’s quarterly projections, and $171 million greater than Corbett administration estimates. There is cause for concern because the IFO projects $240 million less in revenue than the administration in the second half of 2012-13, with lower estimates for personal income, sales and corporate tax payments. While corporate taxes are currently $244 million (or 19.9%) higher than estimate, likely due to higher-than-expected quarterly estimated payments, the commonwealth could see smaller “final” tax year 2012 payments in March and April 2013.

  • Additionally, the capital stock and franchise rate was cut again January 1 from 1.89 mills to 0.89 mills, meaning future quarterly payments could be smaller. As this business tax goes away â€” without any revenue source set to replace it â€” total corporate collections will likely shrink compared to previous years. This cutting away of the state’s revenue base will make it harder in the future to pay for education for our children, care for our seniors, and protection of our environment.

What to Make of the Fiscal Cliff Deal?

2:06 pm in Uncategorized by ThirdandState

By Sharon Ward, Third and State

Tell us what you think about the Fiscal Cliff deal. Take our two-question survey.

The agreement reached by President Obama and Congress on January 1 was both historic and disappointing — and it leaves much unsettled. The urgency of the Fiscal Cliff has dissipated, but significant threats remain to federal funding for state and local services as well as refundable tax credits for low-income working families, Medicaid, Medicare and Social Security.

There is much to dislike in this agreement. It makes permanent most of the Bush era tax cuts, ensuring that income from dividends and capital gains will be taxed at a lower rate than income from work. It makes permanent the estate tax but locks in a tax rate that creates a huge windfall for the top 0.3% of households. Sequestration cuts — the automatic spending cuts that members of both parties hated and the President said would not occur — have been postponed for two months, with three-quarters of FFY 2013 cuts ($85.6 billion) and $109 billion in annual cuts after that still in law through 2022. The President’s line in the sand on raising tax rates for the top 2% of earners got pushed way back, with top rates kicking in at $400,000 for an individual and $450,000 for a couple. A low-wage earner might need 20 years to make that much.

The agreement is at the same time extraordinary. Eighty-five Republican members of Congress voted with their Democratic counterparts to raise taxes on wealthy Americans — no small feat in a Congress defined (some might say dominated) by its Tea Party members, Grover Norquist, and fealty to the no-tax pledge. Even toward the end, the House of Representatives stood firm in its defense of tax cuts, failing to muster enough votes for Speaker John Boehner’s “Plan B,” which included significant spending cuts and limited tax hikes to millionaires and billionaires.

On the plus side, the agreement abandoned the plan for “chained CPI,” a new measure of inflation that would have reduced future cost-of-living increases for Social Security, veterans’ benefits and other critical benefits. There were no additional spending cuts. The family tax credit programs — including the Earned Income Tax Credit and Child Tax Credit — were protected, and improvements made to those credits were extended for five years. Emergency unemployment insurance benefits were extended for laid-off workers who would have faced a significant immediate threat if we went over the cliff.

So what happened? The framework for the debate has always been the same: a grand bargain that would achieve a deficit reduction target of $4 trillion through a combination of cuts and new revenue. 

The President took what could be considered a realistic path — pressing for tax cuts for the middle class and tax hikes for the top 2% who could most afford it (and have done the best over the past decade). He largely succeeded, and while that is a significant victory, it does not raise enough revenue to stabilize the nation’s debt. This will end up putting significant pressure on the spending side of the ledger.

Already much of the press on the agreement is calling for significant new cuts, without acknowledging the $1 trillion in cuts already agreed to in the Budget Control Act of 2011. Plus, the President has lost the leverage of the Fiscal Cliff deadline.

The next fight will take place over the next two months when Congress will have to act to raise the debt ceiling, probably in February. Sequestration cuts will be announced on March 1 and scheduled to begin on March 27, the date that the continuing resolution governing current year spending expires. 

The President acknowledged that the debate is not over in his January 2 press conference and made two strong statements; that the vote on the debt ceiling should not be tangled up in the larger deficit reduction plan, and that new spending cuts have to be matched one for one with new revenue. Still, few are optimistic that Congress will take a reasoned, balanced approach to resolve the remaining issues, as The New York Times notes:

In the weeks to come, Republicans will use not just the debt-ceiling threat, but also the $100 billion across-the-board cuts known as the sequester, delayed for two months in this week’s deal, and the potential shutdown of the government when the current spending resolution expires in March. Standing up to brinkmanship will require a level of resolve that the president has yet to fully demonstrate.

It is also unclear where new revenue will come from given the long-term agreement on the Bush tax cuts and the fact that the President has taken corporate tax reform off the table, arguing that loophole closures should be dedicated to corporate tax reduction. The easiest and most politically popular option, higher marginal tax rates on wealthy individuals, is done. The other options (capping the value of tax deductions for home sales or charitable contributions) will be harder to accomplish.  

So what’s at stake moving forward?

Sequestration cuts. The current plan locks in three-fourths of the cuts ($85.4 billion) plus another $4 billion in discretionary cuts in the current year (FFY2013). While there is some hope current year cuts will be reduced, it is more likely that the debate will center on knocking back the devastating sequestration cuts for 2014 and beyond.

Working family tax credits. One of the surprises of the debate was the targeting of the Child Tax Credit and Earned Income Tax Credit programs, which are refundable for very low-income working families. While the fiscal cliff agreement continues those programs for five years, including the improvements that specifically benefit low-income families, there is grave concern that their refundability may be in jeopardy.

Medicaid. The health care program was excluded from sequestration, but cuts are likely to be on the table. Since states jointly fund this program, reduced federal participation will just shift costs to states. On the plus side, Medicaid is key to the promise of coverage under the Affordable Care Act, so protecting Medicaid is likely to be a high priority for the administration.

Entitlements. Chained CPI might return, as well as cuts to Medicare and Social Security. 

Pressing for additional revenue will continue to be the key to avoiding new deep cuts to health care, education and other critical services. While the Fiscal Cliff no longer looms, the Debt Ceiling Cliff is just over the horizon.

Pennsylvania Tax Giveaways and an Island in the Sun

9:01 am in Uncategorized by ThirdandState

This is Oracle's headquarters.

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.

Legislative sources told The Philadelphia Inquirer that “the bill was designed to lure California-based Oracle, the world’s third-largest software maker with $37 billion in revenue last year, to open a facility in the Penn State region, which would provide a pool of highly educated job seekers.”

We’ve already blogged about why this bill is a bad deal for Pennsylvanians, but Larry Ellison’s island provides us with yet another reason.

Oracle should not be pocketing the withholding taxes of new employees in State College, especially at a time when the state is cutting investments in schools and underfunding infrastructure.

And especially when the boss is doing well enough to afford an island in the sun.

Photo by Alamagordo under Creative Commons license.

A Rare Victory In The Endless Fight Against Corporate Welfare

1:52 pm in Uncategorized by ThirdandState

By Mark Price, Third and State

In a rare victory against corporate welfare in Pennsylvania, Ahold USA has withdrawn its request for property tax breaks for a meat-packaging facility it is building in Lower Allen Township, Cumberland County.

As Michael Wood explained before the request was withdrawn:

Ahold is the poster child for a system that is costly, lacks real accountability and leaves the taxpayers paying more…

Paying a profitable corporation for something it was already planning to do makes no sense at all…

Lower Allen Twp. officials decided wisely to put the Ahold tax break on hold. It’s time more public officials followed their lead to stop playing the economic development game and direct tax dollars where they should be spent: on schools, public safety and other vital services. 

In some more mixed news, The Associated Press reports that both the House and Senate have approved House Bill 2626, which allows certain companies to keep new employees’ personal income tax withholdings.

The Pennsylvania Budget and Policy Center came out last week with a Top 10 List of concerns with this plan, laying the foundation for some improvements to the bill made in the Senate this week. They include capping the cost of the program at $5 million per year (the original version could have cost hundreds of millions), and requiring that a qualifying company create at least 250 jobs within five years (100 within the first two years).

The bill still reflects a flawed approach to economic development, but the Senate’s more cautious approach is much better than the initial House version.

Sen. John Blake, D-Lackawanna, said the bill “crosses a line” in smart economic development by diverting tax revenue to a handful of private companies, and it duplicates existing programs in law that offer tax credits to companies that hire people.

The bill, he said, is “essentially an employee paying their boss for the privilege of having a job.”

As Greg LeRoy and Leigh McIlvaine of Good Jobs First explained in an op-ed this week, the “pay your boss to work” approach to economic development is deeply problematic.

It’s one thing to reduce a company’s income tax, property tax or sales tax in hopes of jobs. It’s another to give companies other people’s money.

The name and idea are imported from Kansas, where they have caused enormous controversy. HB 2626 is modeled on the identically named “Promoting Employment Across Kansas,” or PEAK program, which was enacted in 2009.

In the wealthy Kansas City suburb of Overland Park, MIQ Logistics and Dex One Service Inc. — two of the city’s largest employers — have so far received a total of $730,000 of their workers’ taxes through PEAK.

Former Overland Park Chamber of Commerce executive Vern Squier, who worked with Kansas lawmakers to enact PEAK, is now CEO of the Chamber of Business and Industry of Centre County (State College), where he is pushing the copycat HB 2626.

HB 2626’s sponsors say it would bring new jobs to the state. But PEAK in Kansas cannot be called a success. It is plagued by transparency problems and is fueling a bitter zero-sum jobs war with Missouri in the Kansas City metro area.

In the last three years, media-reported deals alone there have moved about 1,900 jobs from Missouri to Kansas and about 2,200 from Kansas to Missouri. Most of the moves were subsidized, often with the personal income taxes of workers (Missouri has a similar personal income tax giveaway).

The costly Kansas City-area jobs war has gotten so bad that 17 prominent business leaders there issued a public appeal last year to Kansas Gov. Sam Brownback and Missouri Gov. Jay Nixon, saying: “At a time of severe fiscal constraint the effect to the states is that one state loses tax revenue while the other forgives it.

“The states are being pitted against each other and the only real winner is the business who is ‘incentive shopping’ to reduce costs. The losers are the taxpayers who must provide services to those who are not paying for them.”

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

2:21 pm in Uncategorized by ThirdandState

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.”

Of course, if you really wanted to grow the pie, you could start by closing corporate tax loopholes and not creating new ones.

While the Corbett diet is high in corporate tax breaks, it is low in investments in human capital. Take, for example, the Harrisburg School District, which thanks in part to state budget cuts is considering eliminating kindergarten.

Duane O’Neal-Sloane longingly watches his older siblings pack their school lunches, wishing he was doing the same and heading off to school each morning.

After perfectly reciting his ABCs, O’Neal-Sloane said next year he even will be able to write, take gym class and eat in the lunch room at Camp Curtin School.

But with the Harrisburg School District facing a $15.8 million budget deficit next year, Duane’s hopes of attending kindergarten at Camp Curtin next fall could be dashed.

To help close next year’s budget gap, school officials are looking to cut Harrisburg’s kindergarten program and other programs the district is not lawfully required to provide…

Harrisburg isn’t the only Pennsylvania school district looking to drop kindergarten due to looming deficits, said Wythe Keever, spokesman for the Pennsylvania State Education Association, which represents teacher unions across much of the state.

York City School District and the Woodland Hills School District in Allegheny County are at least two others considering the same thing, Keever said.

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

9:36 am in Uncategorized by ThirdandState

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:

  • Restores $245 million to higher education;
  • Does not include block grants for county human services or basic education;
  • Reduces the county human services funding cut from 20% to 10%;
  • Restores $50 million to Accountability Block Grants (which fund quality pre-kindergarten and full-day kindergarten);
  • Restores $14 million in cuts to early childhood education;
  • Reduces the transfer from the Keystone Recreation, Park and Conservation Fund (Key ‘93 Fund) from $38 million to $19 million;
  • Cuts PHEAA by $8 million rather than the $19 million proposed by the Governor; and
  • Maintains $59 million for the CURE health research program in the Tobacco Settlement Fund.

Senator Corman, who announced the details, said the Senate wanted to take a step back on the proposed education block grant because “a lot of people are opposed to it” and will wait to get more feedback from school districts. On the human services block grant, Corman said, “we did not get into whether it is block granted or not.”

It’s not clear that a 10% cut in county human services will seem like much of a victory to the folks fighting that battle. And since House leaders had been talking $100 million for Accountability Block Grants, there may be some trading to come. It’s not clear whether we can get a spend number higher than $27.615 billion so there is a lot more work to be done.

Will welfare programs get cut again?

The Senate plan includes $40 million in revenue from “recalculating Social Security and welfare costs.” The Social Security side is what school advocates have identified as double counting on charter school Social Security payment. The $165 million in unspecified spending cuts, plus the welfare savings, could be a cause for concern.

The preliminary revenue estimate released by the Independent Fiscal Office (IFO) last week provided crucial cover to state lawmakers who have been hammered for months in Harrisburg and in the press about the consequences of the Governor’s proposed cuts. The IFO, which was established precisely for the purpose of providing a revenue estimate “independent” from the Governor, projects that Pennsylvania will end the current fiscal year with about a $400 million balance, and raise $400 million more than originally projected in the new fiscal year.

To make the Senate plan more palatable to lawmakers, especially those in the House loathe to spend a dime more even if bridges are falling down around them, Senator Corman argued that the spending plan would meet TABOR targets. That, of course, should send shivers down all of our spines.

TABOR — the Taxpayer Bill of Rights — is the failed experiment in Colorado, which limited state spending to a formula of inflation plus population growth. If tax collections run higher than that, officials are supposed to send the money back to taxpayers as a rebate. In 2005, voters in Colorado passed a referendum suspending this crazy system for five years.

Why would voters turn down a tax rebate check? I guess they tired of the gimmick. The last time I looked, local governments had passed 1,400 tax increases to make up for state funding cuts.

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

9:06 am in Uncategorized by ThirdandState

By Sharon Ward, Third and State

Governor Tom Corbett. Photo by Jenn Grover / Wikimedia Commons.

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.

State lawmakers have been careful so far not to set a hard “spend number” for 2012-13, leaving some wiggle room to increase total spending. This is a welcome departure from the past few years when the Senate or the Governor set a target spending number and stubbornly held to it throughout budget negotiations. With revenues improving in the second half of the fiscal year, lawmakers want to see if they can make the 2012-13 budget less damaging.

Just what will $800 million in additional revenue get us in the budget?

  • $168 million for the Human Services Development Fund
  • $238 million for Higher Education
  • $159 million for General Assistance Grants
  • $100 million for Accountability Block Grants (which funds full-day kindergarten and other early childhood programs)
  • $135 million for the Basic Education Subsidy or Long-Term Care (to help restore research funding out of the Tobacco Settlement fund)

Too Good to Be True?

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