Gov. Rendell this week proposed his 2010-11 budget locking in last year's 26 percent cut in the Department of Environmental Protection and 18 percent cut at the Department of Conservation and Natural Resources and the additional mid-year cuts. As a result, environmental funding is proposed to be reduced by more than $321 million in next year's budget.
The Governor's budget documents are available online--
-- Proposed Budget Fact Sheets - Highlights, Addressing Future Deficits, School Funding, Childhood Education, Taxing Cigars, Smokeless Tobacco, Natural Gas Tax
Gov. Rendell proposed a $29 billion General Fund budget for 2010-11 that assumes the state will receive $2.75 billion in federal stimulus funds, without a broad-based tax increase (although that's arguable), but he did propose changes in personal and businesses taxes as part of a plan to deal with federal stimulus funds disappearing in FY 2011-12, including a natural gas severance tax.
The Governor would generate revenue for the Stimulus Transition Fund, which could not be used until the 2011-12 budget, by calling on the General Assembly to make several changes to state's tax structure to, he said, make it fairer. He would --
-- Lower the 6 percent Sales Tax to 4 percent by eliminating 74 exemptions now in the law (but not food, clothing and prescriptions) and taxing legal fees and other items, eliminating the 1 percent vendor's discount and expanding the tax to tobacco products;
-- Cut the Corporate Net Income tax from 9.99 percent to 8.9 percent by adopting combined reporting, eliminating the Delaware loophole and eliminating the cap on net loss carry forward; and
-- Proposes a natural gas production severance tax that he estimates will generate about $178.6 million-- $17.9 million to be returned to communities with Marcellus Shale gas drilling impacts and $160.7 million to the Transition Fund. (see separate article on severance tax)
The Governor also plans to take steps to deal with the looming unfunded pension cost spike in 2012-13 by increasing the Commonwealth's employer payments for the State Employees Benefit Fund by $200 million, reamortizing both the State Employee and School Employee Funds over 30 years and increasing employer contributions over the next 10 years, capping annual increases at 3 percent.
Senate Republicans React
Senate Majority Leader Dominic Pileggi (R-Delaware) said the Governor is proposing over $1.1 billion in increased spending at the same time the state is facing a budget deficit of over $500 million. Now, he said, is not a time to radically restructure the state's tax system with the Governor leaving office.
Senate Republican Appropriations Chair Jake Corman (R-Centre) said large sections of the Governor's budget are based on action by the federal government to provide additional federal stimulus funds and on passing health care legislation. It's a budget, he said, based on "a wing and a prayer." "Government spending will not get us out of this recession, jobs will."
Senate President Pro Tempore Joe Scarnati (R-Jefferson) said, "we aren't cowards if we don't raise taxes."
Other Environmental Issues
Gov. Rendell again called for passage of House Bill 80 (Vitali-D-Delaware) and Senate Bill 92 (Erickson-R-Delaware) which would increase the alternative energy mandates under the Alternative Energy Portfolio Standards.
The Governor also said he looked forward to working with the General Assembly on implementing the recently adopted Climate Change Action Plan.
He also repeated his proposal from last week to hire 68 new employees at the Department of Environmental Protection to beef up the Marcellus Shale natural gas regulatory program and made unspecified recommendations on staff increases at the Department of Conservation and Natural Resources to oversee natural gas drilling in State Forests.
Asked about electric rate caps, Gov. Rendell said he still hopes the General Assembly will pass legislation to phase in electric rate increases, even retroactively in the case of PPL where the rate caps came off December 31.
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