PBPC on the PA Budget: This Is NOT a Budget for the People

Marc Stier |

July 7, 2022

Contact: Kirstin Snow, snow@pennbpc.org

To: Members of the PA General Assembly, State Legislative Staff, Political reporters, Editorial Board Writers, and Columnists

From: Marc Stier, Director, PA Budget and Policy Center

Statement on Proposed Budget: PA Budget & Policy Center – This is NOT a budget for the people

The new Pennsylvania Budget is a deep disappointment for Pennsylvania. At a time when the state is flush with cash, the Republican-led General Assembly has failed to meet the immediate needs of the vast majority of Pennsylvanians or invest enough in our future. Yet the budget does include an unnecessary and costly long-term cut in corporate taxes causing a one-year loss of $250 million in revenue in the current fiscal year will grow, to $2.25 billion per year at the end of eight years. Yet the state will still not ask wealthy, multinational corporations to pay anything for the services they receive from our government.

(Two welcome small changes in the corporate tax law that clarify the economic nexus justifying PA taxation of corporations and that clarifies the single sales factor for intangible goods. These two provisions will  add perhaps $30-$50 million in state revenues this year and in future year. But the additional due to these provision will be swamped by impact of the rate cut.)

Over the long term, this corporate tax cut, on top of the $4 billion per year in tax cuts corporations have received over the last fifteen years, will lead to tax increases on working and middle-class Pennsylvanians. And it will make it impossible for us to fully and fairly fund education at all levels, to help all Pennsylvania families secure a decent standard of living, to fix our infrastructure, and to protect our environment and guard against climate change.

The huge corporate tax cut reveals the Republicans’ pose as guardians of responsible budgeting to be a bad joke. They claim credit for putting $2.1 billion in the Rainy Day Fund. Yet that’s less than the revenues that will ultimately be lost, year after year, when the corporate tax cut provisions are fully in place.

Almost nothing was done in the budget to provide relief for families struggling with the post-pandemic rise in prices for necessities like gas, child care or housing. There is a small tax credit to help low-income families pay for child care. The cost of that tax credit is $24 million, or about one-tenth of the $250 million in corporate tax cuts.

There is one positive note in the budget as it relates to K-12 education. There will be $850 million in new funding for K-12 education with $525 million added to the Basic Education Fund; $225 million for a second Level Up supplement for the 100 most underfunded school districts in the state; and $100 million for new special education funding. And there is an additional $100 million for school mental health. While this new funding is welcome, it is less than half of what Governor Wolf asked for and far less than the accumulated state surplus of over $12 billion would have allowed.

In return for additional spending on K-12 education, Republicans have demanded that the budget include a 41% increase in the Education Improvement Tax Credit program (EITC)—the largest increase in the program’s history. This would allow businesses to reduce their taxes further by providing funds to private schools. Many of those schools educate the children of the wealthy. Many others provide inadequate education. And none of them are subject to sufficient state oversight.

Another bright spot, however, is new funding for higher education. An additional appropriation of $75 million in the budget and $125 million in American Rescue Plan funds for the State System of Higher Education keeps the promise the General Assembly made last year. PHEAA Grants to Students is wisely increased by $20.6 million, or 6.6%, increase to provide a maximum grant award of $5,750 per student, while Ready to Succeed grants for college students are increased by $18.4 million.

But the budget still doesn’t include the Nellie Bly program—or any other initiative—to reduce tuition to Pennsylvania’s state colleges, which are among the most expensive in the nation. Nor is there sufficient new investment in job-related worker training. This failure will undermine opportunities for our children and the state’s economic future, which is dependent on an educated workforce.

While funding for the state-related universities has been approved, the Republican attempt to block the University of Pittsburgh from conducting research involving fetal tissue has been shunted into a separate piece of legislation that Governor Wolf will veto.

In health-related matters, there are four positive initiatives.

  • Funding for nursing homes increases by $150 million and $250 million is provided from ARP funds for long-term living programs.
  • $18 million is added to the Intellectual Disabilities – Community Waiver Program appropriation, which will help 832 individuals on emergency waiting lists for services.
  • The budget includes a $4.2 million increase to local health department programs to increase the per-capita amount of funding to $6 or 50% of local health department costs, whichever is less. This increase, however, will still leave Pennsylvania public health spending per capita far below the national average.
  • The budget also includes $35 million for student loan relief for nurses. Sadly, that is the only group of indebted students the General Assembly has agreed to help this year.

One additional very welcome provision is $125 million for the whole home repair program initiated by Senator Saval. This is likely to be a program that is very helpful for low- and moderate-income families throughout the state.

Finally, there are two over-due initiatives to fix long-term budget problems. First is a reduction in the amount transferred from the Motor License Fund to the General Fund. This will make more money available for investment in highways and bridges across the state. Second, the state is planning to make expedited payments to Medical Assistance managed care organizations, which will better align payments with the provision of services.

The huge accumulate surplus gave the Republican-controlled General Assembly an extraordinary opportunity to make a difference in the lives of everyday Pennsylvanians. Sadly, they failed to take advantage of it. Given a choice between helping working people who vote for them and the corporations who give them campaign contributions, they chose to help the latter.

Note: This statement is based on preliminary budget figures. The final budget may be different. We will update this statement on our website as we learn more.