Coalition Seeks Tax Break for Big Oil in Budget

It appears that Pennsylvania will have its budget passed on time without any tax increases for the second consecutive year. The Governor and lawmakers agreed on a spending framework and are now negotiating specific line items.

As a part of a budget deal, some Democratic and Republican policymakers are advocating for a plan set to award Shell Oil a prolonged tax credit in exchange for the construction of a natural gas cracker plant in Western Pennsylvania. Proponents argue that the Shell Plant will bolster the state economy by creating thousands of jobs. However, in reality, Pennsylvania has a long history with targeted tax credits and little to show for it.
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Budget Address: A Small Step Forward

On Tuesday, February 7th, Governor Corbett delivered his second budget address before the General Assembly. By reigning in government spending this past year, the Corbett administration successfully closed a multi-billion dollar budget gap. However, difficulties remain as tax revenues and economic growth continues to be lower than anticipated. The proposed budget is set to resemble last year’s funding with a renewed emphasis on the Governor’s commitments for fiscal restraint and taxpayer protection.

The designation of new Keystone Opportunity Zones was the first component on Governor Corbett’s 2012 agenda. Opportunity zones are areas that receive special state privileges in the form of tax incentives to foster economic growth. Governor Corbett asserts that the expansion of this successful program will bring thousands of jobs to Pennsylvania. The GOvernor’s stand is valid that strong incentives and business friendly policies are important for job creation. However, instead of narrowing the focus on job creation to particular areas across the Commonwealth, the Governor should concentrate efforts in making the entire state an opportunity zone. Pennsylvania ranks amongst the worst in the nation in overall business climate and has one of the highest state tax burdens.

The Governor then proceeded to thank the General Assembly for reaching a consensus regarding a Marcellus Shale natural gas impact fee. The impact fee was designed to provide counties compensation for local government services and additional environmental protection. On close examination, the impact fee agreement supports a tax on drillers, as the fee is partly determined by the price of natural gas. More than 40 percent of tax revenues are to be utilized for statewide initiatives with several unrelated to the industry. It is disappointing that the Governor endorses this legislation as he so eloquently proclaimed in his speech, “Every dollar taken in tax is one less dollar in the hands of a job holder or job creator. Every dollar spent by government is one dollar less in the sector that creates real prosperity.” In this instance, the action does not coincide with the principled rhetoric.

The Governor also announced his comprehensive Jobs First PA package, which is dedicated to improving the state labor market. Components of the proposal include creating a single point of access between entrepreneurs and the government to reduce barriers to entry and accelerate the incorporation of new businesses. Jobs First also allows unemployed workers to maintain benefits while being retrained for a new job. Additional components of the package include a statewide jobs matching service and increased grants offered to trade school students preparing for high demand occupations. Securing Pennsylvania as a right-to-work state is another vital labor market initiative that demands the Governor’s focus. Together, these policies will strengthen Pennsylvania’s employment outlook.

In regards to public education, Corbett announced that there will be no budget cuts. Rather than imposing bureaucratic mandates from Harrisburg, Governor Corbett proposes the usage of block grants which give local school districts the autonomy to make necessary adjustments based on their individual and unique needs. The administration’s hold on the four decade long expenditure expansion in education is a vital component in restraining government spending. To safeguard taxpayers against increased property taxes, the Governor signed a property tax reform bill to limit annual increases. In addition to tackling the issue of education spending, the administration has also sparked discussion on the important issue of poor educational performance. The Governor advocates educational competition through the avenue of school choice.

The Governor’s second proposed budget petitions a degree of fiscal responsibility that has long been forgotten in Harrisburg. For the first time in over a decade, the administration successfully produced and delivered the first budget within the allotted time constraints. They also managed to scale back the size of government for the first time in 40 years. Coupled with taxpayer protection, these accomplishments were made possible through difficult decisions and cuts that are necessary to turn the tide on an unsustainable government binge. While the Corbett administration has succeeded in several arenas, pressing issues such as the state’s deteriorating infrastructure and rapidly increasing unfunded pension liabilities lacked mention. While a promising start, prudent budgeting along is insufficient to address the challenges that lie ahead. It is now time to focus on the many necessary reforms.

Governor Corbett’s Budget Address

Yesterday, Governor Corbett gave his second budget address. If you were unable to watch the speech live, you may view the address below. Keystone Liberty will release an overview and analysis at the beginning of next week.

 

Senator Judy Schwank delivered the Senate Democratic response. To watch Senator Schwank’s response, visit www.pasenate.com.

Penn Turnpike Financial Woes Worsen

Like PennDOT, the Pennsylvania Turnpike is yet another government agency that is experiencing a worsening financial situation. The Turnpike Commission has been attributing their financial woes to declining revenues and increasing costs. Despite increased tolls, Moody’s credit rating agency foresees an ongoing struggle for the turnpike. A Republican representative is now advocating for the allocation of Marcellus Shale natural gas taxes to ease the toll road’s funding burden of nearly half a billion dollars in state transportation funding. While this may offer a short-term increase in funds, the underlying problems associated with the turnpike commission remain. A superior policy alternative would be to lease the turnpike.

Despite tolls being raised by 20 percent in 2009, the Pennsylvania Turnpike has still lost $2.4 billion. In 2012, the commission has ordered another 10 percent increase in an attempt to balance the budget. The turnpike’s debt has escalated by more than 180 percent, or $5 billion, since 2007. The additional debt will be accompanied by more than $11 billion in interest payments over the course of the next several decades. This will place a significant burden on taxpayers. The turnpike commission is exacerbating Pennsylvania’s state of fiscal instability. The history of the Pennsylvania Turnpike Commission has been rifled with deficits, toll hikes, labor strikes, and corruption.

Unfortunately for Pennsylvanians, lawmakers continue to support the Turnpike Commission and all of its failures. A Republican representative is calling for natural gas taxes to be utilized to alleviate the turnpike’s funding of statewide transportation. This proposal is a common big government maneuver in which one program or revenue stream is utilized to fund another program. While the turnpike tolls are designed at funding the state roadway, its tolls on motorists are being directed to state transportation and mass transit. This is similar to immense alcohol markups by the PLCB that supplement the general fund instead of strictly financing law enforcement and regulation of the industry. Directing natural gas taxes towards state transportation initiatives is a similar ploy. These revenues should be earmarked solely for environmental regulation of the industry.

There is an alternative to the billions of debt and makeshift attempts by politicians geared toward raising new revenues on industries to fund troubled programs. Leasing the turnpike will flush the state with cash while improving the roadway for Pennsylvania motorists. If the Commonwealth would have proceeded with the lease agreement suggested by the Rendell administration, Pennsylvania would have received nearly $12 billion upfront and accrued a billion dollars in interest annually. In the leasing contracts, the state would have the autonomy to control toll hikes, receive payment for state police coverage and no longer be responsible for maintenance costs.

The Pennsylvania Turnpike continues to be a burden to taxpayers. The government owned roadway accrues billions of dollars in debt for taxpayers while continually raising tolls on motorists. Siphoning of funds from Marcellus Shale to turnpike commitments is only a short-term fix that maintains the status-quo. The Republican majority must take the lead and release the turnpike in order to turn the roadway form a costly liability to a profitable asset.

Democrats Condemn 2011 as “GOP Failure”

Before adjourning for Christmas recess, Democratic leaders issued a press release lambasting Gov. Corbett and the Republican legislature for their “extreme ideological crusade” and “no leadership on jobs.” The scathing critique included overtones of commonplace class warfare rhetoric accusing Republicans of attacking workers’ rights and the middle-class. Representative Dermody, D-Allegheny, went as far as saying that Republicans made Pennsylvania’s job climate worse coupled with failures in transportation and Marcellus Shale tax policy.

Despite Democratic claims, Republicans accomplished several achievements for Pennsylvania’s job climate. The Corbett budget reduced spending and did not raise taxes. The Corbett administration no longer had federal stimulus funds and made substantial cuts. An end to the state’s runaway government spending brought tax stability for job creators and Pennsylvanians. In order to successfully curb Pennsylvania’s onerous tax burden, Republicans passed legislation to reduce loopholes in school district property tax hikes without voter referendum. Republicans refrained from imposing large Marcellus Shale taxes which will keep the industry booming. According to Democratic philosophy, taking action on jobs equates to more government spending. In stark contrast, Republicans are trying to keep spending and taxes low so that the private sector can prosper.

Senator Hughes, D-Philadelphia, asserts that budget cuts are “reverse investments at a time when we should be investing more in our roads, bridges, mass transit, and our workers.” Governor Corbett’s transportation report in August agreed that the state of Pennsylvania’s infrastructure is deteriorating. Third party state rankings report that Pennsylvania’s roadways and bridges are amongst the worst in the nation despite being at the top of the leader board in roadway spending per mile. Additionally, fuel taxes, which fund the roadways, are amongst the highest in the nation. Instead of raising fuel taxes which increase the burden for Pennsylvanians at the pump, there must be reforms dedicated toward getting more value for the current funding. Senate Republicans passed SB 344 which established more public-private partnerships in transportation. More efficient infrastructure spending means more projects, more jobs, and better roadways.

Lastly, state Democrats protested against the Republican’s impact fee on Marcellus Shale natural gas drilling. Democratic leaders contend that the tax on drilling companies is not high enough for companies to “pay their fair share.” Democratic legislators criticize Pennsylvania for having the lowest tax on natural gas drillers in the nation. For many Democrats, the economic boom associated with the natural gas industry equates to more revenue for government spending. Republicans must proactively highlight the billions of dollars in capital investments, royalties given to local landowners, and taxes generated from the industry. The industry is successfully providing jobs and cheap energy to Pennsylvanians. Taxing the industry will ultimately reduce its investment and growth potential, and impose higher energy costs on already struggling consumers.

Democrats continue to lash out at GOP leadership in an effort to score political points and defer blame of the stagnant, faltering economy. Republicans must keep focused and press forward to reduce the growth of government, provide tax relief, and create a business friendly climate for job creation.