Statement on Governor's 2010-11 Budget

HARRISBURG (February 9, 2010) - Sharon Ward, Director of the Pennsylvania Budget and Policy Center, issued the following statement in response to Gov. Ed Rendell's 2010-11 budget proposal today:

"The recession is continuing to take a toll on Pennsylvania, and nowhere is this more evident than in the austere budget proposed by Governor Rendell today.
 
"There is not a lot to celebrate in this budget. Additional cuts will impact libraries, children's programs, agricultural funding, state parks, behavioral health services, workforce training, and a host of other services.
 
"Still, given continuing economic uncertainty, we believe the Governor has proposed a responsible budget that looks ahead to the fiscal challenges facing the Commonwealth in the coming years. It is now up to lawmakers to decide whether they will engage with the Governor on his proposals to meet those challenges or leave the hard decisions for another day.
 
"The Governor's plan would increase General Fund spending in three areas - education, health care, and public safety. Combined, these three items account for more than 80% of the total General Fund budget.
 
"Most of these increased costs are unavoidable. Rising prison populations continue to drive up the public safety budget. Enrollment in health care programs has skyrocketed in the wake of the recession and costs continue to rise. Health care spending is important to children, seniors and people with disabilities, but it is also the lifeblood of many Pennsylvania communities. Each dollar of Medical Assistance spending results in $2.77 in economic activity in local communities, preserving jobs. Trimming this spending would worsen unemployment and threaten the fragile recovery.
 
"The Governor has proposed an increase in education spending to continue a new school funding formula first adopted in 2008. These investments allow school districts to maintain evidence-based education reforms that have improved student outcomes measurably over the past four years. Pennsylvania must be poised to grow when the economy recovers, and that growth is predicated on an educated populace and an educated workforce. We can't afford to take a step backwards on education.
 
"The Governor identified two critical fiscal challenges facing the Commonwealth: the end of federal recovery funds in 2011 and the expected increase in state pension contributions. In confronting those issues, the Governor set forth revenue options that are worthy of debate.
 
"Many of those proposals - like closing corporate tax loopholes, enacting a natural gas extraction tax, modernizing the sales tax, and applying an excise tax to cigars and smokeless tobacco - will make our tax system more consistent and equitable.
 
"We have voiced strong support over the past year for enacting a natural gas tax that will bring Pennsylvania in line with other energy states. Extraction taxes are common across the United States to ensure that producers, not taxpayers, pay for the public costs of natural gas drilling. Contrary to industry protests, this tax will not slow development of gas reserves in the Marcellus Shale, but it will ensure that development is done responsibly.
 
"We also strongly support the Governor's call to close corporate tax loopholes. Multi-state companies use these loopholes to avoid state taxes by shifting Pennsylvania profits to mailbox subsidiaries in no- and low-tax states like Delaware. Closing these loopholes must be a component of any business tax reform plan. Other corporate tax changes, such as lowering the tax rate, will only add to the revenue shortfall, if companies can continue to game the system.
 
"The Governor's plan to modernize the sales tax is long overdue. The tax is outdated, largely based on the taxation of goods, but over the past 50 years, personal consumption has shifted away from goods toward the purchase of services. Modernizing the tax would make it more equitable and strengthen the Commonwealth's ability to pay for public investments over the long term. Reducing the rate would make the state's overall tax system fairer, by reducing the impact of this regressive tax. The Governor's proposal merits careful consideration.
 
"During his speech, the Governor challenged lawmakers opposed to new revenue measures to identify exactly what services they would cut to balance the budget. We echo that challenge.
 
"The General Assembly made cuts in the current-year budget that directly impacted the most vulnerable Pennsylvanians. Social Security supplement payments for 340,000 low-income elderly and disabled Pennsylvanians have been reduced, jeopardizing their ability to pay for food or medical care. An 80% hike in premiums for the state's adultBasic health care program is making coverage unaffordable for thousands of uninsured Pennsylvanians. School children have less access to libraries as hours are reduced and branches are closed.
 
"The Governor has taken a balanced approach with his proposed 2010-11 budget, preserving essential services, finding savings and increasing revenues. The Legislature should do the same."