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Corbett’s third budget will increase taxes for gas, lower payments for pensions, cut business taxes

By   /   February 5, 2013  /   2 Comments

By Eric Boehm | PA Independent

HARRISBURG – Gov. Tom Corbett on Tuesday began pitching his budget to the members of the General Assembly and the people of Pennsylvania.  He will call it a balanced budget that does not raise taxes, but neither of those statements is entirely accurate.

The budget proposes to spend $28.4 billion, a 2.4 percent increase from the current year.

According to Budget Secretary Charles Zogby, who briefed the media on the budget  basics  Tuesday morning, Corbett’s proposal will increase levies on gas stations and drivers in the state by beginning a five-year process of incrementally uncapping the Oil Franchise Tax as part of a plan to spend $5.4 billion over five years on highways, bridges and mass transit.

THE BUDGET MAN: Budget Secretary Charles Zogby briefs members of the media on Gov. Tom Corbett’s budget announcement.

To partially offset that increase, the governor is proposing a reduction in the flat gasoline tax from 12 cents per gallon to 10 cents per gallon.

The budget also tackles a $500-million increase in pension contributions, but does so by reducing the amount the state will contribute to the pension costs and increasing the debt of the state’s two public pension funds.

Those funds already face more than $40 billion in debt.

By artificially cutting the state’s contribution to the pension systems, the budget proposal hopes to achieve $175 million in savings at the state level and $140 million in savings for school districts.

Those savings also are predicated on reforms to current and future employees’ pensions — all future employees will enter a new 401(k)-style retirement plan and current workers will have their future benefits reduced by about 20 percent.

Corbett is proposing adding $90 million to basic education, part of an overall $350 million increase on the education line item that includes some of the costs of the pension increase.

The budget will also propose an $11.4 million increase for early education.

A previously-announced plan to privatize the state liquor stores will fund a $1 billion block grant program during the next four years for school districts.

Corbett also will call for an incremental reduction in the state’s corporate net income tax, beginning in 2015 and continuing for 10 years.  By 2025, the proposal would lower Pennsylvania’s corporate income tax rate from 9.99 percent to 6.99 percent.

Zogby said that tax, applied in Pennsylvania at a higher rate than any other state in the nation, was a key barrier to economic growth.

Corbett also will ask managerial-level state employees to work 40 hour weeks instead of the current 37.5 hours.  They will be paid for the increase, Zogby said.

Lastly, the budget will not include a final decision from Corbett on whether to expand Medicaid eligibility in accordance with the federal health care reform law, though Zogby said the governor “is not intending to expand” eligibility.

Contact Boehm at [email protected] and follow @PAIndependent on Twitter for more.