The General Assembly sent Governor Tom Corbett a $27.83 billion budget without plans he had supported to privatize liquor, increase transportation funding and reform the public pension system. After signing the budget, Corbett said he was optimistic that more progress could be made on the three big-ticket items in the fall. The state House of Representatives did approve liquor privatization and the Senate transportation funding earlier in the year.
On the tax front, the budget again delays the phase-out of the capital stock and franchise tax (CSFT).
“We were told that they needed the revenue from the CSFT to pay for pension funding,” said Gene Barr, president and CEO of the Pennsylvania Chamber of Business and Industry. “Taxpayers are going to have to expect more of this unless we get real reform.”
The pension systems covering the state teachers and state employees carry an unfunded liability of $47 billion.
The CSFT tax was scheduled for elimination in January 2014. Instead, the rate of 0.89 mills drops to 0.67 mills in 2014 and to 0.45 mills in 2015. In 2016, it drops to zero and is abolished from the tax code.
The budget contains language that reforms the business tax appeals process, a process that David W. Patti, president and CEO of the Pennsylvania Business Council, said could lock up money for 10 years.
“It’s a maddening process where the state is deprived of private investment and the government of revenue with the money in dispute being locked into this seemingly never-ending process,” Patti said.
The plan also contains a change in the carry-forward provision by increasing the cap on losses businesses can write off from $3 million in 2013 to $4 million in 2014 and $5 million in 2015.
Finally, the budget directs $5.5 billion for basic education, the primary line of aid for public schools. The amount represents a $122 million increase.
Special education is slated to get $1 billion, and there is more money available for early intervention and pre-kindergarten programs.
— John L. Kennedy, for the Law Weekly