Corbett’s budget: Higher spending, pension changes

Corbett: He's been working up a storm of late.
Corbett: He's been working up a storm of late.
Posted: February 06, 2013

HARRISBURG - For the first time since taking office two years ago, Gov. Corbett is pushing a budget plan that doesn't include steep cuts in state spending.

In detailing his $28.4 billion blueprint Tuesday, the governor said he wants to send more dollars to public schools; dedicate more money to helping people with physical and intellectual disabilities; and fund more services for victims of rape and domestic abuse.

But there are big ifs.

Along with the offer of more generous spending and a vow to keep cutting business taxes, Corbett's budget is sure to face political and legal challenges, and carries a big caveat: It will do all of those things as long aslegislators go along with his proposal to sharply rein in the skyrocketing cost of Pennsylvania's public pensions.

If they do not, then lawmakers can expect to spend a long spring and summer holed up in the Capitol finding other items in the budget to cut.

"Now is not the time to be timid in our approach," Corbett told the General Assembly. "Now is not the time to cling to old ideas and the status quo. . . . Now is the time to be bold. Every one of us has come here to make things better for all Pennsylvanians."

Part budget address, part 2014 reelection speech, the Republican governor's words signaled a recognition that neither the legislature nor the public can stomach another year of the spending cuts that were hallmarks of his previous budgets.

The speech also showed he wants to buck past criticisms that he does not have a vision for the state. He laid out an ambitious agenda that, aside from pensions, includes privatizing Pennsylvania's wine and liquor stores (and dedicating the proceeds to public schools), and raising nearly $2 billion for highways, bridges, and mass transit.

He is also taking some big gambles. The pension question, in particular, will be controversial, as it would put all new state employees in 401(k)-style retirement plans and make significant changes in the way future benefits are calculated for current employees.

And on transportation funding, he will have to fend off critics who say his plan will raise the price of gasoline at the pump - a result that would undercut the no-tax pledge he campaigned on in 2010.

Overall, Corbett's budget for the fiscal year that starts July 1 is about 2.7 percent more than the current $27.65 billion budget, and does not call for any increase in sales or personal income taxes. It adds $90 million to basic education funding, and would increase spending on early-childhood education, including a 5 percent bump for prekindergarten programs. Higher education would be funded at this year's levels, still an improvement over the deep cuts of the last two years.

Corbett also proposes to boost funding by $40 million for services that help people with intellectual and physical disabilities live independently, and would expand community health services to help people in rural areas.

Then comes the painful part.

The pension proposal, affecting hundreds of thousands of employees, attempts to tackle escalating costs in two ways: by reducing the annual amount the state is required to contribute to its two retirement funds (one for state employees, the other for public-school teachers and staff), freeing up about $175 million in the next fiscal year; and by reducing future pension benefits for current employees by changing the way those benefits are calculated.

The administration has been adamant that retirees' benefits won't be affected - Corbett said this twice in his speech - and that benefits accrued to date by current employees will also be left intact.

Still, the pension proposal is in for a fight. Even if legislators go for it - a heavy lift, given that they would be cutting their own pensions - it will likely be dragged into court by unions arguing that case law in Pennsylvania bars changing retirement benefits for current employees.

All of which leads to this question: If legislators don't go along, or if the proposal gets bogged down in court, how will Corbett make up for the $175 million in pension costs he estimates the changes would save?

He and his key aides have strongly suggested that if the legislature does not act, they will likely look for cuts in education, setting the stage for a showdown come summer. The budget must be approved by July 1, the start of the new fiscal year.

While several top Republicans in the legislature said they were hopeful for a timely budget, they were in the same breath raising questions Tuesday about Corbett's proposals. They were noncommittal on the pension plan, and skeptical of some other big-ticket initiatives - such as liquor privatization.

Corbett wants to sell the State Stores and allow supermarkets, convenience stores, and big-box stores to sell beer and wine. The $1 billion he expects to raise from that sell-off would go to public schools over four years, to spend on safety, early-learning programs, and other designated areas. The first installment, roughly $200 million, would arrive in the 2014-15 school year.

Senate Republicans, in particular, appeared in no rush to tackle liquor privatization, and wondered whether it was prudent to count on $175 million in pension savings that could easily get put on ice if there were legal challenges.

"It's too early to say which proposal we will be trying to move forward," said Senate Majority Leader Dominic Pileggi (R., Delaware). "I think there's consensus that we need to have a very serious conversation about whether or not our current pension system is sustainable without change."

Democrats, meanwhile, lambasted Corbett for what they labeled a blatantly political budget speech designed to sugarcoat the impact of past cuts to education and social services.

State Sen. Anthony Hardy Williams (D., Phila.) noted that as Corbett was speaking in the ornate House chambers, hundreds of protesters swarmed outside to deride everything from his liquor plan to his vow to keep cutting business taxes.

Said Sen. Vincent Hughes of Philadelphia, the ranking Democrat on the Appropriations Committee: "We are going in the wrong direction. . . . There is nothing in this budget for the average working person."

He and other legislators, including some Republicans, also suggested that Corbett's funding plan for highways, bridges, and mass transit did not go far enough. The plan, which would uncap the so-called oil franchise tax on the wholesale price of gas (now capped at $1.25 per gallon), would produce a projected half-billion dollars in revenue in the next fiscal year.

Sen. John Rafferty Jr. (R., Montgomery), chairman of the Transportation Committee, said he would work with Corbett's office to beef up that proposal.

"We're going to do transportation," Rafferty said. "We're not going to do transportation lite."


Contact Angela Couloumbis at 717-787-5934 or acouloumbis@phillynews.com, or follow on Twitter @AngelasInk.

Inquirer staff writer Amy Worden contributed to this article.

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