Pennsylvania Governor Tom Corbett has proposed a FY2014-15 state budget that includes no new taxes and no mainstream tax increases. This would preserve the phase-out of the Capital Stock and Franchise Taxes on the stretched-out schedule adopted last year:
Tax Year Beginning In Tax Rate
2013 0.89 mills
2014 0.67 mills
2015 0.45 mills
2016 0.00 miils
While no tax increases are included in the proposal, the Governor did propose a shortening of the general Abandoned and Unclaimed Property (Escheat) holding period from 5 years to 3 years. This would produce a one-time revenue increase of $150 million.
In addition, the Governor has proposed to allow additional leasing of state forest and park lands for the purpose of natural gas drilling. This drilling would occur by horizontal drilling from pads outside the state forests and parks. This leasing activity is estimated to produce an additional $75 million in FY 2014-15.
The Commonwealth’s total operating budget (including federal funds and miscellaneous funds) would be set at $71.8 billion. The General Fund budget would increase by 3.3%, to $29.4 billion. General Fund spending would break down as follows:
Spending Category Amount /Percentage
Pre K-12 Education $10.3 B / 35.0%
Medical Assistance & Long-term Care $6.7 B / 22.8%
Other Human Services $4.7 B / 16.0%
Higher Education $1.6 B / 5.5%
Corrections / Probation & Parole $2.2 B / 7.5%
Debt Service $1.2 B / 4.1%
Other $2.7 B / 9.1%
The Governor’s Office estimates total General Fund revenues for FY2014-15 at $30.5 billion. The revenue sources break down as follows:
Revenue Source Percentage of Total Revenues
Personal Income Tax 40.5%
Sales & Use Taxes 31.1%
Corp Net Inc / Cap Stock & Franchise Taxes 9.5%
Gross Receipts Tax 4.3%
Cigarette Tax 3.1%
Non-Tax Revenues 2.6%
Other Taxes 8.9%
One factor which could have a major impact on whether or not the Governor’s proposals under go substantial changes in the legislative process is whether or not the General Assembly follows the Governor’s lead on pension funding. According to the Governor’s Office, without any changes, contributions to the state employee and school pension funds would increase by more than $600 million in FY2014-15. The Governor proposes adjustment of the funding formula to generate savings of $170 million for the Commonwealth and $131 million for local school districts and other local education agencies. “Kicking the can down the road” may seem an appealing proposition in an election year, but it remains to be seen whether this proposal will be able to garner majority support in the Pennsylvania House and Senate.
Additional information on the Governor’s budget proposal is available at: www.portal.state.pa.us/portal/server.pt/community/current_and_proposed_commonwealth_budgets/4566.