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Gov. Corbett Lays Out PA Budget Proposal

Gov. Corbett Lays Out PA Budget Proposal

HARRISBURG, Pa. (AP) - An ambitious budget proposal by Gov. Tom Corbett would boost state spending by nearly 3 percent while increasing support for public schools, cutting business taxes and counting on long-term changes to public pensions.

The Republican's budget plan released Tuesday for the fiscal year that starts July 1 sets spending at $28.4 billion. It would also boost spending this year by about $100 million.

Corbett warns that aid for crucial programs, such as public schools, would have to be cut unless lawmakers adopt his plan to change public pensions. But it's a risky legal and political strategy.

In addition, Corbett is calling for a wholesale tax increase on gas to pay for improvements to highways, bridges and mass transit systems. Corbett pledged not to raise taxes when he ran for governor.

THE BIG PICTURE:

- Increases overall state spending by nearly 3 percent to $28.4 billion.

- Raises $28.4 billion through taxes, fees and other revenue sources.

- Does not increase the sales tax or personal income tax.

TAXES

- Phases in an increase on the wholesale tax that gas stations pay on gasoline, the Oil Company Franchise Tax, over five years by uncapping the average price used to calculate the tax. The increase would help finance a five-year, $5.4 billion transportation initiative for roads, bridges and mass transit and would be partially offset by a phased-in reduction in the liquid fuels tax from 12 cents per gallon to 10 cents per gallon over two years.

- Phases in, beginning in 2015, a reduction in the corporate net income tax rate from the current 9.99 percent to 6.99 percent by 2025. Also increases the maximum net operating loss deduction from $3 million to $4 million in 2014 and to $5 million in 2015.

- Continues the phase-out of the Capital Stock and Franchise Tax by reducing the rate from 1.89 mills to 0.89 mills this year and eliminating the tax altogether in 2014. The tax is levied on the supplies and goods job-creators need to make their products.

PENSIONS

- Reduces future benefits for current state workers and school employees by reducing the "multiplier" used to calculate benefits, reducing annuity payments to employees who withdraw their contributions and capping pensions at the Social Security wage base. Employees willing to pay higher contributions could retain the current multiplier.

- Requires that new hires be automatically enrolled in a proposed 401(a) defined-contribution retirement savings plan. They would be required to contribute at least 6.25 percent of their salary and the employer would make a 4 percent contribution.

- The increase in the employers' (taxpayers') share of funding the state's two major pension funds would be limited to 2.25 percent, instead of 4.5 percent, yielding savings that the administration has already subtracted from agencies' 2013-14 budgets. The annual increase would be allowed to rise by no more than 0.5 percent until it reaches 4.5 percent or the annual required contribution rate.

- Maintains current benefits for retirees.

EDUCATION

- Increases funding for public school instruction and operations by $90 million to nearly $5.5 billion.

- Maintains spending for higher education at this year's $1.2 billion level.

- Finances a proposed Passport for Learning block grant program for public schools with $1 billion over four years from the sale of licenses under Corbett's sweeping liquor-privatization initiative. Grant money could be used for kindergarten programs; customized learning plans; science and math programs and equipment in grades six through 12; or school safety.

JOBS

- Consolidates eight existing revolving-loan programs under the Pennsylvania Business Development Authority into a single pool totaling $1.1 billion to streamline the process for businesses seeking capital.

- Increases funding by $10 million for the PA First program, which helps businesses that plan to create jobs in Pennsylvania.

MISCELLANEOUS

- Includes nearly $15 million for three new state police cadet classes that are expected to train 290 troopers, plus $6 million for 90 new civilian police dispatchers.

- Provides nearly $40 million to expand home- and community-based services for people with intellectual and physical disabilities.

- Changes certain motor-vehicle rules, including the authorization of a fee option in lieu of license suspension for driving without insurance. Moves vehicle registration renewals to a biennial cycle, instead of once a year, and moves driver license renewals to a six-year cycle instead of the current four-year cycle.

- Outlines the administration's pending contract with the British national lottery operator to take over management of the Pennsylvania Lottery. The company pledges $34 billion in profits to the state over the next 20 years.

- Summarizes the far-reaching, but purportedly budget-neutral, plan to replace the more than 600 state liquor stores with twice as many privately run liquor and wine stores. It also would allow beer and wine sales by retailers that include big-box stores, grocery stores, pharmacies and convenience stores.

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Sources: State budget documents, Corbett administration.