Gov. Signs Budget Without Increasing Taxes

Nate Wardle

Gov. Tom Corbett Friday signed the 2011-12 budget which cuts government spending, does not raise taxes, includes property tax reform, and restores common sense to the state spending process.
The $27.15 billion budget cuts overall government spending by more than $1 billion.

“This reality-based budget marks a return to the Constitutional principles that must guide Pennsylvania’s fiscal policy,” Corbett said. “It spends no more than we have and it doesn’t pretend we have more than what we have budgeted.

“I was elected last November to change the culture of state government and that means not only must government be honest, it must be fiscally responsible,” Corbett said. “The Senate and House join my administration in making these standards a reality.”

The legislature also agreed to a key economic proposal for school districts — a referendum on any property tax increase that exceeds the rate of inflation, known as Act 1. Under these changes, any property tax increase above the rate of inflation must be approved by the local voters. Taxpayers in each district will be empowered to decide whether they want a property tax increase to fund a particular program

“This puts taxing and funding decisions where they belong — in the hands of the voters who are footing the bill,” Corbett said. “Who knows better how to spend money in our communities than the citizens who live there?

“Pennsylvania taxpayers are reclaiming the budget process, not just for today, but for years to come,” Corbett said. “Together, we have built a solid framework for future budgets.”

The budget is part of a larger Corbett administration initiative that also includes tort reform — signed into law on June 28 — which reforms how damages are recovered in civil lawsuits, ensuring an equitable framework for litigation in the future and improving Pennsylvania’s business climate.

Highlights of the 2011-12 budget include:

  • State spending is cut by 4.1 percent, or $1.17 billion, from 2010-11.
  • The enacted budget eliminates 66 appropriation line items, cutting $822 million in annual spending. It reduces funding for more than 226 appropriations and consolidates an additional 52 items, to streamline government.
  • Administrative spending is reduced by 4 percent and more than 1,000 positions in state government are eliminated. These reductions are achieved in large part by consolidating programs, targeting inefficiencies and reducing or eliminating discretionary financial grants, commonly known as Walking Around Money, or WAMs.
  • This marks the start of a commitment to reduce the cost of running state government by 10 percent over the next four years. It is a change in the culture of taxing and spending that has caused the state’s economy to decline.

“No budget is worth the trouble if it doesn’t do something to grow the economy and create jobs,” Corbett said. “The budget is here to serve the people — not the other way around. This budget gets things in the right order and takes another step toward clearing away the tangle and overgrowth of government.”

  • This budget consolidates and streamlines economic development programs to focus on job creation and attracting businesses to Pennsylvania. In spite of the many difficult choices, this remains a pro-growth budget, built on the proven theory that lower taxes stimulate investment and jobs.
  • The budget honors Corbett’s commitment to reinstate the phase-out of the Capital Stock and Franchise Tax. That tax was levied on goods and equipment that a company kept in store, even though it had not been sold or put to use. By eliminating this regressive tax, the governor has given more than 100,000 job creators an estimated $70 million in tax relief. The phase-out of this tax will continue until it is completely eliminated in 2014.
  • At the same time, the budget has maintained important tax credit programs. These are the Job Creation and Film Production tax credits. The budget also increases the Research and Development Tax Credits from $40 million to $55 million.
  • The budget brings state tax policy into line with the federal tax code. It increases the bonus depreciation deduction to 100 percent for property placed into service before January 2012. This gives businesses room to expand and raises the potential for a surge in purchases for Pennsylvania businesses.

“State government has a solemn duty to provide for public safety,” Corbett said. “If the state is a ship, public safety is the hull and we cannot cut there, only spend wisely. This budget spends wisely and will make Pennsylvanians and their children safer.”

  • It maintains funding for Pennsylvania’s public safety programs, including an increase in total funding for the Department of Corrections and the Board of Probation and Parole. It also provides funding for the Pennsylvania State Police to maintain troopers on our highways and in our communities, as well as the state’s emergency management agency.
  • The budget supports our military and veterans programs, keeping our nation’s promise to those who served to defend us.

“The most vulnerable Pennsylvanians — our children — are well protected in this budget,” Corbett said. “It also targets waste and fraud so that the truly deserving are no longer cheated by those who ‘game’ the system.”

  • This budget increases total funding by $6.2 million for the Children’s Health Insurance Program, provides $405 million for children’s Early Intervention Services and $1.4 billion in county child welfare services.
  • In the area of long-term living, the budget provides $4.6 billion for home and community-based services and nursing home care for persons with disabilities and older Pennsylvanians.
  • The budget includes $262.3 million in total funds to provide prescription drug coverage for 360,185 older Pennsylvanians, an increase of 1,950 people.

“This budget includes $5.4 billion for Basic Education. It is part of a larger effort to make education not only accessible, but more flexible as we strive to improve student performance. This budget is based on my firm belief that the order of priorities is child-parent-teacher,” Corbett said.

  • Basic education funding has been increased $128 million from Corbett’s original proposal, which was at the 2008-09 pre-federal stimulus level. This results in an average annual increase of 3 percent in funding over the past 10 years.
  • The budget provides nearly $1.7 billion in total funds for higher education programs, including $381 million in the Pennsylvania Higher Education Assistance Agency for the Grants to Students program for students seeking financial assistance for higher education opportunities.
  • The enacted budget also includes $7.1 million in new funding to continue Educational Assistance Program tuition grants for members of the Pennsylvania National Guard enrolled at degree-granting colleges.

Corbett praised those teachers, administrators and other school employees in a small number of school districts across the state who followed his suggestion to forego pay raises, in an effort to help their communities control local finances in this difficult economy.

“They serve as stellar examples of the shared sacrifice we all need to make to restore our state to fiscal stability,” Corbett said.

“This budget — built on fiscal discipline and effective government — supports free enterprise and job creation,” Corbett said. “It’s a step toward making Pennsylvania a national leader among states in economic success once again.”