State of the Budget July 2, 2008

Governor Rendell and state legislative leaders agreed on the framework for a state budget agreement on the evening of June 28. According to news accounts, the 2009-10 fiscal plan will reduce the Governor’s February request by somewhere around $130 million through a 1.3% across the board cut in the proposed budget for most programs. Programs that had expected increases will see the increases diminish, while flat funded programs will see a real cut from 2007-08 levels.

The sharp about face came in response to June revenue numbers, which  came in $159 million below estimate. On July 1, the Revenue Department reported $27.9 billion in total revenue for Fiscal Year 2007-2008, leaving the state with a year end surplus of $159.4 million, far less than the $433 million surplus projected in February.

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Historic Education and Health Care Reforms Remain Bargaining Chips in Budget Negotiations

The calendar is closing in on June 30, the end of the 2007-08 fiscal year with legislators and the Governor furiously trying to reach agreement on a spending plan for 2008-09. PBPC surveys the situation in a new Budget Watch.

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House Earned Income Tax Credit Bill Turns into Tax Cut Frenzy

Combined Cost of "Christmas Tree" Full of Tax Cuts Rises to Estimated $3.8 billion

On Wednesday, January 16, the Pennsylvania House of Representatives took up legislation sponsored by Representative Dwight Evans to establish a refundable state earned income credit (EIC). Set at 15% of the federal EIC in the first year and 30% in year two and beyond, the bill would provide targeted tax relief to working families with annual incomes up to $35,000. The House Appropriations Committee estimates the legislation would cost $25 million in year one and $250 million in year two.

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PBPC Details Cost Estimates of Amendments to House Bill 377

On January 17, 2008, the Pennsylvania House passed a variety of admendments to House Bill 377 which will have a significant impact on state government revenues over the next few years. PBPC has produced a table detailing the costs associated with the various amendments that can be downloaded in PDF format.

download analysis summary (pdf)

Earned Income Credit Again Advances in PA Leglislature

A bill to establish a Pennsylvania Earned Income Credit (EIC) is scheduled for a vote in the Pennsylvania House the week of January 14th. House Bill 377 (sponsored by Rep. Dwight Evans) would create a state EIC set at 15% of the federal Earned Income Tax Credit beginning in Tax Year 2008 and 30% of the federal credit beginning in Tax Year 2009 and beyond. Working families with children would be eligible for the credit, which is an alternative to the state’s current Tax Forgiveness program.

A state EIC would make the state’s tax system more fair, and would return almost $1000 to a single parent family earning $12,000 a year, and $900 to a family of four earning $15,000 a year, in addition to tax forgiveness. This income would help to offset other taxes and provide much needed resources to the Commonwealth’s poorest working families.

More than 15 amendments have been added to the bill and will be debated on the floor. Proposed amendments would eliminate the state inheritance tax, reduce the state personal income tax rate, repeal the telephone gross receipts tax and reduce business tax liabilities. Each of these amendments would add substantially to the cost of the legislation and provide little or no benefit to low-income working families.

PBPC released a revised analysis of the EIC bill on January 16th.

download PBPC's analysis of the EIC bill (pdf)