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Governor Signs Budget – Other Initiatives to Fall Agenda

Governor Tom Corbett and 29 members of the state House took part in ceremonies late Sunday night in signing a $28.375 billion state spending plan. This is slightly less than what Corbett had proposed in February, primarily due to a shift long term in revenue projections. The agreed-to budget is a 2.3 percent increase in spending over the current year budget, bringing the state in-line with pre-recession spending limits.

With passage of the fiscal code bill, tax bill and welfare code legislation this afternoon, the Senate concluded its budget related legislation for 2013-2014.  But after the Senate took out a House “payday lending” amendment from the state Fiscal Code the House will have to return to session. The House has a non-voting session scheduled for Monday, which could be changed to a voting session to deal with the issue. The legislation is needed to implement various enabling provisions of the state budget.

Democrats protested that the budget spends too little on education, and ignores the potential of Medicaid expansion, while the House and Senate Republican leaders projected a responsible on time budget. The general fund budget was not a major point of contention among the House, Senate and Administration, with most changes being minor.

In the days leading up to the state budget deadline, talk at the Capitol was dominated not by line items in the budget but by separate bills relating to pension reform, transportation funding, Medicaid expansion and liquor privatization. 

On other major issues of public contention with the budget, the 2013-2014 plan puts $5.52 billion into K-12 education and basic education funding, a $122.5 million increase over last year.

The General Assembly made changes in the state tax system, including a provision targeting the Delaware loophole, through which companies can reduce their Pennsylvania taxes by paying royalties or similar expenses to affiliates in low-tax states. Companies will be required to add to their taxable income any expenses incurred specifically to avoid taxes.  At the same time, the changes in the tax bill will allow companies to deduct more in Net Operating Losses from their taxable income. Most states do not cap net operating loss deductions.

Somewhat surprisingly, the General Assembly also approved an extension of the capital stock and franchise tax, which was scheduled to expire Jan. 1. The tax on business assets was extended two years, though at an increasingly reduced rate.

The House weakened a tax credit that was a key piece of the Senate’s plan, reducing the amount of insurance tax credits that would be auctioned off to fund technology jobs under the Innovate in PA program by $75 million.

Budget Funding Highlights
• DEP – $127.6 million ($2.8 million increase)
• DCNR – $30 million (22.7 million cut – funding expected from the Oil & Gas Lease Fund
• Agriculture – $123.7 million ($5.7 million cut, with $4.5 million returned from Horse Racing Fund)
• DCED – $236 million ($6.9 million increase)
• Health – $195.4 million ($5.58 million increase)
• Insurance – $118.4 million ($4.7 million cut)
• DPW – $10.9 billion ($333 million increase)
• Education – $10.3 billion ($267.8 million increase)
• Higher Education – $10.8 billion ($272 million increase)
• Transportation – $7.77 million ($9.4 million cut – funding expected to be substituted from the “transportation funding plan” in the future)
• PEMA – $17 million ($46 million cut, largely due to nonrecurring items)
• Environmental Hearing Board – $2.1 million ($181,000 increase)
• Commonwealth Financing Authority – $78 million (7.5 million cut)