Governor Wolf Delivers 2017-2018 Budget Address

Yesterday Governor Tom Wolf delivered his third annual budget address to members of the Pennsylvania General Assembly.  For weeks, the media has reported the Governor’s proposed plan would look very different from his first two proposals.  In part, that suspicion was confirmed as the 2017-2018 budget proposal incorporates $2 billion in cost savings and spending cuts via eliminating and/or consolidating redundancies and streamlining efficiencies.  The budget proposal, however, also proposes a $1 billion non-broad based tax package.  Together this combination attempts to address the state’s projected $3 billion structural deficit.  Governor Wolf’s budget totals $32.34 billion, a 1.8% increase over the 2016-2017 budget.

Key budget highlights that may be of particular interest to the business community include:

“Jobs that Pay”

Increase the state minimum wage to $12.00 per hour from $7.25 per hour, which the budget claims will also increase personal income tax (PIT) revenue

“Schools that Teach”

Increased funding for education
– $100 million increase for basic education
– $75 million increase for Pre-K/Head Start
– $25 million increase for special education
– $8.9 million increase for the Pennsylvania State System of Higher Education (PASSHE)

“Government that Works”

Over $2 billion in Savings through prioritizing agency expenditures and cost efficiencies; prudent fiscal management; revenue enhancements; eliminating and reducing programs outside Commonwealth’s Core Mission; complement (staff) controls; consolidation and coordination; facility closures, lease management and facility downsizing
– Government restructuring through the consolidation of state agencies, i.e. creation of the new Department of Health & Human Services and Department of Criminal Justice
– Creation of a block grant program for all of the state’s tax credit programs

Miscellaneous

6.5% severance tax on Marcellus Shale
$25 per capita fee on local municipalities that utilize the Pennsylvania State Police as their primary law enforcement agency
Capping the Net Operating Loss (NOL) at 30% beginning in 2018
Reduce the Corporate Net Income Tax (CNI) to 6.49% by 2022 with the adoption of combined reporting beginning in 2019
Close loopholes related to the Insurance Premiums Tax
Noticeably absent from the Governor’s proposal is any mention of state pension reform.

This list leaves many more issues needing further explanation, deeper discussion, and healthy debate.

To view the 2017-2018 Proposed Executive Budget and its supporting documents, visit http://www.budget.pa.gov.