Governor Corbetts 2013-2014 Budget and The Department of Revenue - - PowerPoint PPT Presentation

Governor Corbett’s 2013-2014 Budget and The Department of Revenue

Dan Meuser Secretary of Revenue

Governor Corbett’s Mission

Three primary goals for the commonwealth:

1.A stable and reliable financial future 2.A job available for every Pennsylvanian that wants one 3.A trained and educated workforce ready for the jobs of today and tomorrow

…Helping all Pennsylvania Families

• 100 percent bonus depreciation
• Restarted capital stock/foreign franchise tax phase-out
• Job creation tax credit programs, including PRM tax credit
• Property tax reform
• Tort and regulatory reform
• E-commerce fairness
• Appeals reform
• Inheritance tax relief for farmers
• 100 percent single sales factor
• Unemployment compensation reform
• Energy – jobs proposal

Tax Reform in Gov. Corbett’s First Two Years

Impact of Marcellus Shale

Workforce Impact

Jobs

• 29,810 employed in core industries (first quarter of 2012)
• 177 percent increase since the first quarter of 2009
• 204,201 employed in ancillary industries (first quarter of 2012)
• Increase of 7.2 percent since the first quarter of 2009
• 150,616 new hires from the fourth quarter of 2009 to the second quarter of

2012

Revenue

• Total business taxes – $303 million in 2012
• Added funding from impact fees total $206 million

Job Growth In Gov. Corbett’s First Two Years

Private Sector Jobs:

• Up more than 100,000 since Gov. Corbett took office

Manufacturing Jobs

• Up 7,200 since Gov. Corbett took office

Public/Government Jobs

• Down 6,800 over the last year
• Down 35,800 since Gov. Corbett took office

Labor Force

• In January 2013 the Pennsylvania labor force reached an all-time high of 6,553,000
• The labor force has increased by 103,000 since January of 2011
• Labor force growth is an indicator that not only have more Pennsylvanians

found jobs, but also that PA’s unemployed have renewed faith in the economy and are looking for jobs once again.

Fiscal Year Actual Estimate Deficit/Surplus % 2006-07 27,449.30 26,799.50 649.8 2.4% 2007-08 27,928.10 27,760.60 167.5 0.6% 2008-09 25,529.80 28,784.40

• 3,254.60
• 11.3%

2009-10 27,648.20 28,824.70

• 1,176.50
• 4.1%

2010-11 27,497.20 26,711.70 785.5 2.9% 2011-12 27,678.00 27,840.8

• 162.8
• 0.6%

2012-13 28,590.00 232* 0.8%* 2013-14 29,254.00

*Estimated

(in millions)

General Fund: Collections Compared to Estimate

2013-14 General Fund Revenue Sources

Personal Income Tax, 40.2% Sales and Use Tax, 32.0% Corporate Net Income Tax / Capital Stock and Franchise Tax, 9.6% Gross Receipts Tax, 4.4% Cigarette Tax, 3.5% Non-Tax Revenues, 1.8% Other Taxes, 8.5%

Nearly three- quarters (72 percent)

• f General Fund

revenues are derived from the Personal Income Tax and the Sales and Use Tax.

2013-14 General Fund Budget - $28.4 Billion

Pre K-12 Education $9.55 B 33.6% Medical Assistance and Long-term Living $6.49 B 22.8% Higher Education $1.81 B Corrections/ Probation and Parole $2.07 B Debt Service $1.20 B All Other$2.84 B 10.0% 4.2% 7.3% 6.4%

Spending on Education, Human Service programs, Corrections and Debt Service comprises 90 percent of total General Fund

• bligations.

Spending on Education, Human Service programs, Corrections and Debt Service comprises 90 percent of total General Fund

• bligations.

Other Human Services$4.4 8 B 15.7%

2013-14 Budget Highlights

• Governor Corbett’s plan provides a balanced budget that keeps

spending in line with available revenues and does not raise taxes on Pennsylvania families and businesses.

• Spends $28.4 billion – 2.4 percent increase over FY 2012-13.
• Major reform initiatives:

– Sell the state liquor system to invest in education – Modernize Pennsylvania’s transportation infrastructure – Overhaul the state pension systems – Comprehensive tax reform

• Enhanced support for basic education, public safety, older

Pennsylvanians, and individuals with disabilities.

Fiscal Discipline in the 2013-14 Budget

• Governor Corbett’s plan provides for a balanced budget that keeps

spending in line with available revenues and does not raise taxes on Pennsylvania families and businesses.

• Continues reductions in administrative spending, now down a total
• f 6.3 percent since 2010.
• Eliminates more than 900 positions, including about 400 layoffs.
• Keeps most agency general operating budgets at level funding

despite increases in salary and benefit costs.

Since Governor Corbett took office in January 2011, filled staffing levels have declined by 2,029 positions, or 2.6 percent (76,663  74,634). Additionally, the Corbett administration has implemented significant reforms to the commonwealth’s fleet and travel programs to enhance program accountability and reduce costs. Since Governor Corbett took office in January 2011, filled staffing levels have declined by 2,029 positions, or 2.6 percent (76,663  74,634). Additionally, the Corbett administration has implemented significant reforms to the commonwealth’s fleet and travel programs to enhance program accountability and reduce costs.

• Decreased general government operations budget (non-personnel) by more

than 15 percent ($5.7 million) between 2010-11 and 2013-14:

• Postage/printing reductions
• Telecommunication savings
• Modifying IT contracts, including initial savings from Revenue Modernization

Project

(These savings assume legislative approval of proposed electronic filing and payment mandates, as well as internal efficiencies including and discontinuing printing of PA-40 books.)

• Reduced complement by 7.5 percent (127 positions) between 2010-11

(actual) and 2013-14:

• Includes 16 percent reduction in administrative positions (clerical, scanning,

mailroom, forms handling)

• Will continue to capture processing efficiencies as RMP is implemented across

additional tax types

• Consolidated office space returning 18,000 sq. ft. for

the use of other state agencies.

Department of Revenue Efficiencies

Efficiencies Detail

Legislative Internal  Reduce EFT payment threshold from $20,000 to $10,000 for corporation and trust fund taxes ($100,000 annual savings)  Repeal certified mail assessment requirement ($750,000 annual savings)  Provide electronic 1099-G's ($250,000 annual savings)  Discontinue printing/mailing PA-20S/65 booklets ($310,000 annual savings)  Eliminate unneeded phone lines and transition telecom to VOIP ($400,000 annual savings)  Consolidated 2 field offices ($278,000 annual savings)  Consolidated headquarters office space  Revenue Modernization Project ($648,000 savings already due to staffing reductions and data expenditures savings)  Inheritance tax return examinations (reduced assessment turnaround time from 6 to 3 months)  Tax practitioner E-Hotline  Reduce e-file mandate for 3rd party preparers from 50 to 11 returns ($260,000 annual savings)  Reduce EFT payment threshold to $1,000 for corporation, trust fund and personal income taxes ($430,000 annual savings)  Act 46 (2003) expanded enforcement authority: reduce sales tax license revocation appeal period from 90 to 30 days  New 2013 e-filing platforms (2014 processing year; $536,000 annual savings)  Discontinue printing/mailing PA-40 booklets ($150,000 net annual savings)  Discontinue printing RCT-101 booklet ($7,000 annual savings) Accomplished Proposed

Pennsylvania is Open for Business

Governor Corbett, in partnership with the business community, will create a more competitive tax structure in PA through the following:

• Elimination of the capital stock/foreign franchise tax
• Reduction the corporate net income tax
• Increasing the cap on net operating loss deductions
• Providing for like-kind exchanges and start-up business deductions
• Repeal of the corporate loans tax
• Implementation of sales factor market sourcing
• Tax code changes to level the playing field and provide for fair and equitable tax policy
• Repeal of nuisance taxes and obsolete taxation and administrative provisions

IMPACT: 18,000 more jobs over the next 10 years; state GDP increases $2.8 billion by 2030; personal income grows by $1.9 billion by 2030 More than $1 billion in new tax revenue through 2030.

Divesting From Government Controlled State Liquor System Divest of the retail and wholesale functions in a two-step, four-year process

• End state run monopoly and invest in schools
• The Plan:
• Focus government on regulation and law enforcement
• Convenience for Pennsylvanians
• Private sector and market place set price and locations
• Revenue neutrality
• Focus the private sector on sales and distribution
• Protection for current employees
• One time funding of $1 billion for schools

“Selling liquor is not a core function

• f government; education is.” – Governor Tom Corbett

Passport For Learning

$1 billion in proceeds will be used from the divestiture to fund the Passport for Learning Block Grant program for school districts, focusing on:

• School Safety

Training for administrators and educators, enhanced security measures and partnerships with local law enforcement.

• “Ready by 3” – early learning programs

Grant funding that may be used for improvements to quality kindergarten programs aligned with the current academic standards that promote enhanced academic achievement in elementary reading and mathematics.

• Individualized learning

Funding from this grant may be used for start-up costs related to implementing Competency Based Education with a focus on self-paced mastery of a customized learning plan based on student proficiency.

• STEM programs

Enhanced student access to science, technology, engineering and mathematics programming in grades six to twelve.

Investing in Transportation Infrastructure

Proposed reforms include:

• Reduction of the flat liquid fuels tax by one cent in 2013-14 (starting

July 1, 2013) and another reduction of one cent in 2014-15 (starting July 1, 2014). This will reduce the liquid fuels tax from 12 cents to 10 cents, a 17 percent reduction.

• Uncapping of the average wholesale price used to calculate the oil

company franchise tax over five years – one-third uncapping on July 1, 2013, January 1, 2015 and January 1, 2017 (fully uncapped).

• Transition vehicle registration renewals to a biennial cycle beginning July 1,

2014.

• Transition driver license renewals to a six-year

cycle beginning July 1, 2014. The budget proposes $5.4 billion in funding over five years to address the needs of Pennsylvania’s aging and fragile transportation infrastructure. The budget proposes $5.4 billion in funding over five years to address the needs of Pennsylvania’s aging and fragile transportation infrastructure.

Investing in Transportation Infrastructure

Transportation Mode Investment Year 1 (est.) Investment Year 5 (est.) State Roads and Bridges

$300 million $1.2 billion

Public Transportation

$40 million $250 million

Local Roads and Bridges

$80 million $200 million

PA Turnpike Expansion Projects

$30 million $85 million

Multi-Modal Fund

$60 million $80 million

TOTAL

$510 million $1.8 billion Investment Component*

*Based on the current wholesale value of gas.

Pension Crises

In 2001, pensions were raised by 25 percent for state/school employees. In 2001, pensions were raised by 25 percent for state/school employees.

Pension Reform

No Changes

• Current retiree benefits
• Benefits already earned by current employees

New Employees enrolled in a 401(a) defined contribution plan Current Employees – Changes to Future Service Only

• Actuarially adjusted future monthly payments for employees who withdraw pension

contributions at retirement

• Today negligible adjustments to pension payments when withdrawals are taken
• Redefined final salary – average of the last five years (today for the highest three years)
• Future pension benefits to be calculated with a lower multiplier (.5 lower) – from 2.5 to

2.0 for most state employees

Tapered Pension Collars – reducing annual employer contribution from 4.5 percent to

2.25 percent for 2013-14 (resumes to 4.5 percent over time)

• $175 million in General Fund savings between SERS and PSERS
• $138 million in savings for school districts and other local

education agencies

Education Innovation in Pennsylvania

Increased Basic Education Funding: $5.5 billion for Basic Education

Funding – including a $90 million increase – to support local school districts, the highest level of basic education funding in state history.

Investments in Early Childhood Education

• Pre-K Counts – an increase of $4.5 million, or 5.4 percent, to serve 580

additional children in proven pre-kindergarten programs.

• Head Start Supplemental Assistance – an increase of $1.9 million, or 5.1

percent, to serve 210 additional children.

• Early Intervention – an increase of $5 million, or 2.3 percent to provide

services to 1,500 additional children from ages 3 through 5.

Higher Education

• Level funding for the State System of Higher Education, State-Related

Universities, Community Colleges, and Thaddeus Stevens and Pennsylvania Colleges of Technology.

• Level funding for Grants to Students and PHEAA

Health, Human Services & Public Safety

Expanded Services for Individuals with Disabilities: attendant care services for individuals and home- and community-based services for individuals with intellectual disabilities, individuals in state mental hospitals and state intellectual disabilities centers, adults with autism spectrum disorders and through Medicaid waiver programs Increased Access to Health Care: access to CHIP coverage for 9,330 more children; community-based health care subsidiaries for clinics serving the uninsured or underserved areas of PA; funding for health care professionals committed to working in underserved areas of the state; modernized state health care centers Human Services Reform: expand human services block grant state-wide; improved quality and access to child care; funding increases to rape and domestic violence programs; juvenile justice reinvestment Enhanced Public Safety: three new PSP cadet classes; 90 more troopers on patrol when equal number of civilian police communication operators are hired; 35 additional parole agents; cost savings and improved capacity and safety with opening of Benner State Correctional Institute

Lottery Private Management Agreement

• Population growth of older Pennsylvanians exceeds projected growth of

Lottery funding for senior programs.

• The plan is to hire a business growth manager for the Lottery.
• We are not selling the Lottery (forbidden by federal law).
• Lottery currently has many multi-million dollar contracts with private

firms, but none of these private contracts are performance based. This agreement is.

• $200 million security provided upfront by the winning bidder provides

downside protection to the commonwealth.

• $1.3 billion in incremental growth – above and beyond Lottery

projections – in funding for programs benefiting older Pennsylvanians

• ver the next 10 years.

Department of Revenue Priorities for 2013

• 1. Improve customer service and build trust with all stakeholders.
• 2. Create efficiencies, reduce redundancies, lower costs and improve

productivity.

• 3. Enhance the equitable collection of taxes due, through clarity of

compliance, education of tax obligations, and leveraging technology, data and information so as to enforce the tax laws equally for all taxpayers.

• 4. Align Revenue’s initiatives with the priorities of the Governor.
• 5. Attract, develop and retain skilled and motivated employees by

fostering job satisfaction and creating a productive work environment.