Budget Address

NOTABLE NEWS ITEMS FROM THIS WEEK: Governor Rendell Delivers His Budget Address
On Tuesday, Gov. Ed Rendell delivered his eighth, and final, budget address outlining the Commonwealth’s spending plan for 2010-11. The Governor, who is renowned for introducing a wide variety of priorities and initiatives, presented a much more modest proposal this year, a $29 billion budget, representing a spending increase of 4.1 percent over last year, with no new broad-based tax increases. Furthermore, while the Governor acknowledged that his plan is estimated to exceed state revenues by $525 million, he is counting on additional sources that would cover these overruns. Themes of the proposed budget are: (1) continuing to meet the State’s health and safety responsibilities, (2) investing in Pennsylvania’s children’s education, (3) keeping the cost of State government down, and (4) preparing for future challenges. Almost 42 percent of the budget is dedicated to education, a total of $12.3 billion. The Budget would rely upon Federal American Recovery and Reinvestment Act stimulus funds, $2.7 billion for 2009-10 and approximately $2.8 billion for next year. Furthermore, the budget calls for new taxes on cigars and smokeless tobacco, a severance tax on oil and gas extraction, and the removal of almost all of the current exemptions under the State’s sales tax. 74 items that are currently exempt, such as advertising, candy, gum, textbooks, firewood, dry-cleaning, catering, legal fees, newspapers, personal hygiene products, and many more would be subject to the new proposed rate of four percent (lowered from the current six percent). Food, clothing, and medicine would continue to be exempt. Furthermore, the Governor called for a reduction in overall State spending, to stay below the rate of inflation of previous years’ budgets, and to reduce the total complement of authorized Commonwealth employee positions. Spending in all areas, except Education, Public Welfare, Aging, Corrections, Probation and Parole, and debt service would be cut by one percent. Response to the budget was as expected, mixed. Social and education advocates were largely supportive. Pro-business groups criticized the Governor’s plan to impose taxes on business services and goods, such as closing the “Delaware loophole” that allows businesses based in other states to avoid certain taxes on their Pennsylvania operations Many legislators, both Republican and Democrat, bristled at the speech, with most criticisms directed at the proposed restructuring of the State sales tax. Republicans see the change as a tax increase and did not buy into the Governor’s portrayal of restructuring that would “help families at the expense of special interest.” Senate President Pro Tempore Joseph Scarnati (R-Jefferson) said of the sales tax plan, “Quite frankly, an increase is an increase…I don’t think the general public can withstand it.” He added later, “It is dead on arrival.” Senate Majority Leader Dominic Pileggi (R-Delaware) continued by saying that spending must be held at last year’s budget’s spending level or even reduced.

NOTABLE NEWS ITEMS FROM THIS WEEK:

Governor Rendell Delivers His Budget Address

On Tuesday, Gov. Ed Rendell delivered his eighth, and final, budget address outlining the Commonwealth’s spending plan for 2010-11. The Governor, who is renowned for introducing a wide variety of priorities and initiatives, presented a much more modest proposal this year, a $29 billion budget, representing a spending increase of 4.1 percent over last year, with no new broad-based tax increases. Furthermore, while the Governor acknowledged that his plan is estimated to exceed state revenues by $525 million, he is counting on additional sources that would cover these overruns.

Themes of the proposed budget are: (1) continuing to meet the State’s health and safety responsibilities, (2) investing in Pennsylvania’s children’s education, (3) keeping the cost of State government down, and (4) preparing for future challenges. Almost 42 percent of the budget is dedicated to education, a total of $12.3 billion.

The Budget would rely upon Federal American Recovery and Reinvestment Act stimulus funds, $2.7 billion for 2009-10 and approximately $2.8 billion for next year. Furthermore, the budget calls for new taxes on cigars and smokeless tobacco, a severance tax on oil and gas extraction, and the removal of almost all of the current exemptions under the State’s sales tax. 74 items that are currently exempt, such as advertising, candy, gum, textbooks, firewood, dry-cleaning, catering, legal fees, newspapers, personal hygiene products, and many more would be subject to the new proposed rate of four percent (lowered from the current six percent). Food, clothing, and medicine would continue to be exempt.

Furthermore, the Governor called for a reduction in overall State spending, to stay below the rate of inflation of previous years’ budgets, and to reduce the total complement of authorized Commonwealth employee positions. Spending in all areas, except Education, Public Welfare, Aging, Corrections, Probation and Parole, and debt service would be cut by one percent.

Response to the budget was as expected, mixed. Social and education advocates were largely supportive. Pro-business groups criticized the Governor’s plan to impose taxes on business services and goods, such as closing the “Delaware loophole” that allows businesses based in other states to avoid certain taxes on their Pennsylvania operations

Many legislators, both Republican and Democrat, bristled at the speech, with most criticisms directed at the proposed restructuring of the State sales tax. Republicans see the change as a tax increase and did not buy into the Governor’s portrayal of restructuring that would “help families at the expense of special interest.” Senate President Pro Tempore Joseph Scarnati (R-Jefferson) said of the sales tax plan, “Quite frankly, an increase is an increase…I don’t think the general public can withstand it.” He added later, “It is dead on arrival.” Senate Majority Leader Dominic Pileggi (R-Delaware) continued by saying that spending must be held at last year’s budget’s spending level or even reduced.