Phoenixville Chamber of Commerce

Last evening, the General Assembly adopted a state budget for the 2010-11 fiscal year, the first time since Gov. Ed Rendell took office that the budget was approved by the June 30 deadline.

The $28.05 billion budget was adopted without broad-based tax increases, as lawmakers rejected new taxes on smokeless tobacco and cigars, as well as the implementation of combined reporting, which would have been a tax increase for many Pennsylvania businesses. The governor's proposal to lower the state sales tax rate from 6 percent to 4 percent while expanding the base to include business services, had been taken off the table prior to the recent weeks' budget negotiations. The final budget also maintains the sales tax vendor collection allowance, which reimburses businesses a portion of the costs associated with essentially serving as tax collector for the state.

"The Commonwealth faces some sobering fiscal challenges, many which still require attention," PA Chamber Vice President Gene Barr said. "Our members recognize the difficult decisions elected officials needed to make in crafting this budget. Facing repeated cries from some groups to spend more and raise taxes, it's reassuring that a majority of lawmakers knew that placing that burden on the backs of business at a time when economic concerns persist and job creation remains sluggish would only make things worse."

The budget includes a $250 million increase for basic education and $600 million in borrowing for economic development programs. However, numerous state agencies and programs received funding cuts, including:

* Department of Environmental Protection, 9 percent
* State parks, 7 percent
* State forests, 31 percent
* Department of Conservation and Natural Resources, 11 percent

The Rendell administration has said that the budget could result in the elimination of up to 1,000 state positions.

The budget also potentially leaves the legislature with unfinished business. One tax not included in the new budget but still on the table is a proposed natural gas severance tax. According to the budget agreement reached between the governor and leaders of the four legislative caucuses, lawmakers face an Oct. 1 deadline to pass a severance tax bill, the details of which have yet to be ironed out. Some lawmakers want the revenue from such a tax to go to local communities, environmental remediation programs and Growing Greener II.

The PA Chamber is urging lawmakers to carefully and responsibly consider the severance tax to ensure that Pennsylvania doesn't hamstring the Marcellus Shale industry and hinder the tremendous economic benefits the industry is already bringing and can bring to Pennsylvania.

And despite the welcome news that the budget does not increase taxes, concerns remain; among them a potential $850 million funding gap if Congress fails to approve FMAP welfare funding. The budget assumes approval of those dollars. Lawmakers could be forced back to the negotiating table to make up for the shortfall.

"The budget is not perfect, but the bottom line is that government has to live within its means just like individuals and families have had to do," Barr said. "That's not always easy. In fact, it can be quite painful. But in these economic times, it can't continue to be business as usual where taxpayer dollars are concerned."

The governor has not yet signed the budget bill, indicating he would wait until all related bills are passed in the next day or two.

(This information suppied to us by the Pennsylvania Chamber of Business and Industry.)