As we delve more deeply into the details of the Corbett budget, there is a broad approach to economic development and environmental protection.
Setting the Commonwealth on a Path to Prosperity
With this budget, Pennsylvania is set to once again be the standard of excellence that other states are measured against in providing individual opportunity through business growth, job creation, agriculture, transportation, tourism, energy production and education. Our commonwealth’s financial challenges provide an opportunity to reassess our state government and choose a course that will renew the principles upon which that government was founded. In reflecting upon those principles, this budget moves to realign government spending and priorities to those core functions of government that protect our life and liberty, allow for the pursuit of happiness and support the educational needs of our citizens and communities.
This budget focuses the public investment of tax dollars in the core functions of government: protecting the public, supporting the education of our citizenry, protecting our most vulnerable populations and supporting free enterprise. Limiting the size and scope of government allows the public a better understanding of their investments. In addition, the details of this budget and future budgets will be more transparent, and the public can judge the value and return on those investments. This transparency will result in greater accountability on the investment and how we manage those investments.
Central to maintaining fiscal discipline is recognizing that our citizens know best how to spend their own money and refraining from imposing any additional tax burdens. To that end, this budget contains no increase in taxes. It reinstates the phase-out of the Capital Stock and Franchise Tax, easing a significant burden for industries in the commonwealth and allowing them to create jobs and greater economic opportunities for our citizens. Respected national studies consistently conclude that those states that are fiscally well-managed and constrain spending and cut taxes are also the leaders in economic performance and job creation. This fiscally responsible budget lays the foundation for additional job-creating tax cuts in future years, such as the reduction in the Corporate Net Income Tax, elimination of the Inheritance Tax, and elimination of the cap on the Net Operating Loss allowance.
Further, this budget eliminates 103 budget line items, cutting nearly $850 million in annual spending. Many of these line items could be characterized as legislative initiatives, discretionary accounts, earmarks or “walking around money” (also known as WAMs). Total spending in this budget is reduced 3.1 percent from the previous year’s enacted budget, and this budget resets overall state spending near 2008-09 levels.
Government Reform and Limited Government
Pennsylvanians deserve to have confidence in their government. To that end, Pennsylvania’s taxpayers deserve to know how their tax dollars are being spent and what the return is on their investment. As part of this year’s budget introduction, we unveil an online budget dashboard on the commonwealth website. This dashboard provides budget information by revenue source and department spending by appropriation and program. This is the first step in making virtually all state financial information available online to our citizens. The governor’s entire budget is also available online.
The development of the 2011-12 budget entailed a line-by-line review of every expenditure and appropriation from a zero base. This zero-based approach will be used year after year to ensure that programs do not simply grow with inflation but are actually achieving their desired purpose while building in improvements and efficiencies. Further, all programs are expected to prove their effectiveness, and that effectiveness will continue to be reported through our performance measures. This budget reduces the cost of doing business by more than 4 percent and begins the effort to reduce the overall cost of doing business by 10 percent over the next four years.
As promised, this budget launches efforts to streamline state government and achieve efficiencies. The commonwealth is already eliminating per diems for state employees; a number of complementary services have been consolidated; reviews of existing boards and commissions have begun; and the vehicle fleet is being reduced. These efforts, however, are only the beginning. Our plans to refocus and improve government investments and operations will need to accelerate in the years ahead.
Core Functions of State Government
This budget refocuses the investment of taxpayer dollars in the core functions of government, which will result in private-sector job creation and economic opportunities. Those core functions of government include: supporting free enterprise in the commonwealth, providing educational opportunities for our youth, protecting public safety, and providing a helping hand to those most in need and moving people toward self-sufficiency. Budget initiatives addressing these core functions are discussed more fully in the following sections of the Budget in Brief.
Setting the Commonwealth on a Path to Prosperity
Pennsylvania, like most other states, is facing a protracted economic recovery and one that will take considerable time and effort to work through. We arrived at our current place after years of spending at a rate greater than our revenue. During that time, we relied on one-time funding gimmicks and non-recurring federal funds to feed our desire to spend. That approach has brought us to a defining moment where we can continue as we have done or choose to reset government to focus on its core functions and responsibilities and lay the foundation for future growth and prosperity.
Through fiscal discipline, this budget begins the climb to economic prosperity. This budget reduces the size of state government, it does not raise any taxes, and it protects the public safety and Pennsylvania’s most vulnerable citizens. However, this budget is only a first step and will not eliminate all of our challenges. Throughout the next year, we will aggressively analyze all of our spending, assess if all of our assets are achieving the greatest efficiency and return on our investment and implement innovative approaches to providing government products and services.
This budget is responsive to fiscal realities and addresses our challenges head on. This budget demonstrates our commitment to taking ownership of our financial burdens and not passing them on to the next generation. This budget is presented with honesty and transparency, and we will be accountable for the results. This budget embraces the great opportunity we have before us to reset state government and choose a course that will renew the founding principles of our democracy’s covenant.
Free Enterprise – An Agenda for Jobs
The 2011-12 Governor’s Budget embraces five core components to create jobs: expanding Pennsylvania’s economy through innovation, reforming Pennsylvania’s job climate, developing a world-class workforce, growing small business in Pennsylvania and expanding Pennsylvania worldwide. This budget restructures the Department of Community and Economic Development, including new initiatives designed to support businesses and communities and create new jobs.
The Governor’s 2011-12 Economic Development and Job Creation Agenda:
• CSFT – Setting the Foundation for Future Tax Cuts and Improved Economic Climate – This budget reinstates the phase-out of the Capital Stock and Franchise Tax, improving the economic climate for 101,000 job creators throughout the commonwealth. This budget assumes the phase-out will continue on schedule until it is completely eliminated in 2014.
• Discovered in PA, Developed in PA – $10 million for small business and entrepreneurial assistance. Regional experts will proactively seek out businesses and direct them to the technical or financial assistance they need.
• Liberty Loan Fund – A new economic development financing partnership, created by pooling the commonwealth’s existing economic development financing resources (loan funds and Commonwealth Financing Authority assets) to leverage new private dollars and create flexible financing tools that will quickly adjust with changing economic conditions.
• Ben Franklin Technology Development Authority – $14.6 million to continue to advance technology-based and technology-intensive industries in Pennsylvania. The authority funds a series of programs that work together to create a flexible, dynamic framework that is proactive to markets and changing industry sectors.
• Tax Credits to Incentivize Business Investment and Growth – To facilitate the expansion of research and jobs, this budget increases the Research and Development Tax Credit to $55 million, a $15 million increase from the current program.
Other tax credits included in this budget for job creators:
- Film Production Tax Credit – $60 million
- Neighborhood Assistance Tax Credit – $18 million
- Coal Waste Removal and Ultra Clean Fuels Tax Credit – $18 million
- Job Creation Tax Credit – $10.1 million
- Resource Enhancement and Protection Tax Credit – $10 million
• Pennsylvania First – $25 million for this program, the primary economic development tool for the department and the Governor’s Action Team, for competitive grants for job creation or retention, infrastructure projects and workforce development.
• Legal and Tort Reform – Excessive and frivolous lawsuits hinder job growth and hurt Pennsylvania taxpayers by increasing costs for businesses, healthcare, and consumer goods and services. Legal reform is critical to improving Pennsylvania’s job climate and allowing entrepreneurs to focus on creating jobs. Addressing legal and tort reform issues will help protect innovative entrepreneurs and businesses and lower the cost of doing business in Pennsylvania, improving the state’s global competitiveness and creating jobs.
• Regulatory Reform – Friction-free processes for state government interaction with job creators are critical to maintain economic momentum and competitiveness. To address permit approval and backlog issues, PennDOT and the Department of Environmental Protection have begun auditing all of their permit processes to make them more responsive to the needs of job creators. In addition, the secretary of the Department of Community and Economic Development is empowered to expedite any permit or action pending in any agency where the creation of jobs may be impacted.
• World Trade PA – $6.3 million to promote Pennsylvania goods and services in key international markets.
• PennPORTS – $3.7 million for the operation and maintenance of the commonwealth’s ports.
Free Enterprise – An Agenda for Jobs
• Industry Partnerships – $1.6 million in continued funding for Industry Partnerships, consortiums of companies or industry clusters with similar workforce needs, to develop the human capital required to support our growing industry sectors.
• Partnerships for Regional Economic Performance – $12 million to encourage regional coordination in economic development efforts, yielding improved customer service to the business community, especially small businesses.
• Keystone Communities – $12.5 million for consolidated community revitalization activities, with a focus on creating thriving downtowns as places of commerce, recreation, culture and entertainment.
• Infrastructure and Facilities Improvement – $23.4 million to continue grants for infrastructure and facility improvement projects.
• Life Sciences Greenhouses – $3 million in continued operational support for these programs, which have created approximately 6,000 new life sciences jobs.
Key Environmental Programs:
• Oil and Gas/Marcellus Shale Oversight – This budget maintains current permit fees, fines and penalties for DEP’s oversight to ensure that oil and gas continue to be produced in an environmentally responsible manner. This budget maintains current staffing at 202 positions. The new oversight offices in Williamsport and Scranton will remain open and fully functional.
• Oil and Gas Drilling Oversight – This budget maintains the current staffing level in the Department of Conservation and Natural Resources to plan and monitor Marcellus Shale drilling, protecting the important balance of uses of the forest and ensuring forest health for future generations. It also maintains the 27 new positions added to the Bureau of Forestry in 2010-11 for monitoring and field work.
• All State Parks Will Remain Open – This budget maintains Department of Conservation and Natural Resources parks funding at current levels so that all parks will remain open to our citizens for affordable getaways and to attract visitors. It provides $65 million in Oil and Gas Lease Fund revenue generated from gas leases on state forest lands to offset State Parks and Forests operating costs.
• Black Fly and West Nile Virus Programs – This budget provides targeted funding to continue these valuable programs. The black fly spray season will be adjusted to ensure adequate spraying in July and August 2011 to treat 1,600 stream miles. The West Nile Virus program will aggressively treat targeted areas that have the highest infected mosquito counts.
• Farmland Preservation – $28 million from the Agricultural Conservation Easement Purchase Fund to continue Pennsylvania’s ongoing commitment to save farmland.
• Pennsylvania Fairs – $981,000 to continue support for fair events across the commonwealth.
• Youth Shows – $128,000 to continue support for the Junior Dairy Shows, 4-H Club Shows and Future Farmers for Pennsylvania’s young agriculturalists.