Plan includes historic tax relief, business tax shifts, education, and job initiatives

Harrisburg – March 3, 2015 – Senate Democratic leaders today said that Gov. Tom Wolf’s first budget proposal is a “bold, responsible and necessary” plan designed to address issues confronted by middle class families and it is so compelling that it will command the full attention of lawmakers.

The spending plan was detailed by the governor today before a joint session of the General Assembly.

“The governor deserves credit for proposing an aggressive approach aimed at solving Pennsylvania’s most pressing problems,” Senate Democratic Leader Sen. Jay Costa (D-Allegheny) said about the $29.88 billion spending plan. “It is bold; it is responsible; and, it is necessary in light of the structural deficit that exceeds $2 billion, the gaping education funding hole and jobs deficit that Pennsylvania faces.

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“This is not a plan built on gimmicks – it is an honest, substantial plan that comes with tough policy choices and revenue options that lawmakers will have to carefully weigh.”

The plan calls for $3.8 billion in property tax relief, $1 billion in education investments, $1.675 billion for job creation and restoration of social safety net program dollars all within the context of a modest 2.7 percent increase over the current year budget.

“This is not an incremental budget; it’s a transformational budget and a marked departure from the flim-flam sham budgets of the Corbett years,” said state Sen. Vincent J. Hughes, Democratic chair of the Senate Appropriations Committee. “This is a significant proposal that includes welcomed and long-overdue policy initiatives in education, health care, jobs and fiscal management.

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“We are at the start of the budget process, but the governor has laid down a big bet and a significant marker. Passivity and knee-jerk negativity should be checked at the door when negotiations begin in earnest.”

The new initiatives are paid for by adjustments in the Personal Income Tax, Sales and Use Tax, the imposition of a new gas severance tax, the elimination of tax exemptions and new efficiencies. It also includes tax shifts aimed at helping business such as a slashing of the Corporate Net Income tax and eliminates the Capital Stock and Franchise tax. The governor also called for an increase in the minimum wage to $10.10 per hour.

Hughes said that if the plan is adopted it will immediately change the direction of Pennsylvania and make critical investments. He said the plan has the potential to jump-start job creation, education achievement and health-care choices while restructuring the tax menu for individuals and business.

Costa said that the $3.8 billion in property tax relief coupled with $1 billion more for schools is “historic” and will push Pennsylvania past 50 percent in funding local school costs. The expected average tax relief for property taxpayers will exceed $1,000 per homestead and that the average homeowner will see their tax bill reduced by 50 percent.

“For years, citizens have asked for property tax relief, business leaders have called for cutting the corporate net income tax and schools officials have had to deal with deep cuts in school funding that have resulted in local tax increases, job loss or program elimination,” Costa said. “This budget addresses all those concerns.”

The Democratic leader said that while the plan is bold, it does come with costs and tax changes that must be evaluated in their proper context before final decisions are made.

“The governor’s plan invests in schools, relieves tax burdens, helps businesses and makes critical investments that have been found wanting over the last several years,” Hughes said.

Hughes said that the new $1 billion in education will replace dollars lost to deep Corbett-era cuts. He said that the new spending plan includes $120 million for pre-kindergarten and Head Start, $140 million more for higher education, cyber-charter reforms and a commitment to utilize a new basic education funding formula now being developed by an independent commission.

The Democratic appropriations chair said that many of the pieces of the governor’s plan have been sought by Senate Democrats through their “PA Works” plan and other initiatives.

“The governor has outlined policy proposals that would responsibly invest $1.675 billion in job creation programs,” Hughes said. “Using already approved bond authorization to fund transportation or water and sewer projects makes sense.”

Costa said that he is pleased that the governor has proposed using efficiencies to help balance the books and that his proposal to merge the Department of Corrections with Probation and Parole, transition to traditional Medicaid expansion and phase-in Medicaid long-term care will free up more dollars for even greater investments. The boldness of the plan should be of no surprise to anyone who followed the governor’s thinking, he said.

Wolf proposed using revenues generated from combined reporting to reduce the CNI to 5.99 percent on Jan. 1, 2016 and to 4.99 percent in Jan. 2018 from its current 9.99 percent. His plan calls for increasing the PIT from 3.07 to 3.7 percent and the sales tax from 6 to 6.6 percent plus closing a laundry list of exemptions, but not touching food, clothing or prescription drugs. The plan also calls for reconciling the state’s sales tax rate with Philadelphia’s local sales tax for schools so that the effective rate of the increase will remain uniform.

The budget plan will now be closely reviewed during upcoming hearings by the Senate Appropriations Committee. The deadline to adopt a budget is June 30.