Sep 25, 2009 6 min read

Local legislators are optimistic that a 2009-10 state budget will be adopted in the next couple of weeks, although some of the details apparently still need worked out. Pennsylvania is the only state in the nation that has not yet adopted a budget for a fiscal year that began July 1. Social service agencies throughout the state have cut programs and instituted layoffs due to lack of funds. School districts have had to take out loans to offset a lack of state subsidy payments.

State Rep. Bill DeWeese, D-Waynesburg, said he anticipates that the budget will be adopted in the next 2 1/2 weeks.

“There are some bumps in the road and we need to decide how to attack it,” DeWeese said.

DeWeese said there is a proposed 20 percent tax on small games of chance like those at the Clarksville Fire Hall or the Point Marion VFW. Also included in the agreement is expanding table games at casinos in addition to the slot machines and video poker machines.

DeWeese said he would have supported a four-tenths of one percent state income tax across the board, “instead of nickeling and dimeing everybody whether they are buying cigarettes or playing bingo.”

DeWeese said he was in favor of a severance tax on natural gas and an income tax increase similar to the ones adopted in 1983 and 1991 that expired after three years.

Instead of a severance tax on the Marcellus Shale formation of natural gas, the budget agreement calls for obtaining money from leases on drilling for the natural gas in state parks.

DeWeese said despite the “bumps in the road” there are “overreaching concerns of funding schools and social programs from foster care and rape crisis centers to domestic violence services and pre-kindergarten that will allow for a final disposition of this fiscal years budget.”

According to the Pennsylvania Budget and Policy Center, Gov. Ed Rendell and the leaders of three legislative caucuses announced a $27.95 billion budget agreement on Sept. 18.

The Senate Democratic and Republican caucuses as well as the House Democrats announced the agreement. The House Republicans, who have said they would not support any new taxes, were not a part of the announcement.

Rendell said that added revenues should produce a balanced budget this year and next. He also said the plan met his requirements on education, health care and economic development funding. The plan includes the $300 million increase in basic education funding that Rendell and many others had supported.

The plan includes several recurring revenues announced a week ago by House Democratic, Senate Republican and Senate Democratic leaders. Rendell said some of the revenue projections on those new tax revenues have changed, and that there are additional revenues, as well.

According to the Pennsylvania Budget and Policy Center, the budget agreement cuts spending from $28.1 billion in 2008-09 to $27.95 billion in 2009-10 and relies heavily on reserves and fund transfers to balance the budget. The agreement includes $1.2 billion in “recurring revenue,” however, some of the revenue sources are temporary.

State Rep. Timothy Mahoney, D-South Union, said he anticipates that sometime next week the General Assembly will debate the proposal and then either pass it or not pass it.

He called the proposal a “bare bones budget” that doesn’t include any Walking Around Money, or WAMs.

“Everyone is tightening their belts,” Mahoney said.

Mahoney said he anticipates that the budget will get passed because of the pressure that has been coming from constituents across the state.

“The most vulnerable people in Pennsylvania are being held hostage,” Mahoney said. “We need something in place. Hopefully our economy will turn around and everyone will start flourishing.”

Mahoney said once a vote is taken, it would likely be only days before the budget takes effect. He said leaders are now working to get the final language worked out for changes, such as expanding gambling to include table games at casinos.

Mahoney said he is in favor of expanding gambling to include table games, saying the state has been losing money to surrounding states for too long.

The Senate was expected to meet in session on Wednesday to begin debating the proposed budget.

The budget agreement must still be approved by the House and Senate and signed by Rendell. A timetable for that to occur has not yet been set.

According to the Pennsylvania Budget and Policy Center, the major components of the revenue plan are:

n $300 million from business tax changes. They include temporarily freezing the capital stock and franchise tax at the 2008 rate for the next three years. The increased revenue is offset by further tax cuts for large businesses. On balance, this will raise $300 million in 2009-10 and $458 million in 2010-11. The tax cuts represent a permanent revenue loss in exchange for a temporary tax increase.

n $200 million for the introduction of table games in casinos. Most of this first-year revenue is for licenses; the revenue declines to $121 million in 2010-11.

n $100 million from lifting the sales tax exemption on admissions costs for theater, dance, concerts and performing arts, as well as museums, historical sites, zoos and parks.

n $171 million by redirecting to the general fund 25 cents of the cigarette tax that was used to help offset doctors’ malpractice premiums.

n $97 million in 2009-10 and $146 million in 2010-11 from a 25-cent increase in the cigarette tax.

n $30 million by adding mini cigars – cigarette-sized cigars – to the state cigarette tax. These products fall under the federal cigarette tax.

n $20 million in 2009-10 and $45 million in 2010-11 from taxing small games of chance.

n $65 million in leases from drilling on state park lands in the Marcellus Shale.

n $40 million in cuts to tax credits.

The plan will also use the following one-time revenues, according to the Pennsylvania Budget and Policy Center:

n All of the $755 million in the “Rainy Day Fund” and $708 million in the health care provider retention account.

n Make one-time changes in tax payments that generate $211 million in 2009-10 and $159 million in 2010-11.

n Transfer $208 million from the Oil and Gas Lease Fund and $150 million from the Tobacco Settlement Endowment Fund.

n Enact a tax amnesty program. Media outlets report the governor agreed to a higher estimate on this item but vary on how much this is projected to generate in 2009-10 – from an estimated $133 million to $190 million.

n Transfer $45 million from existing traffic fines to the general fund.