Governor's budget and Legislative Reaction: The Small Business Impact

Date: March 13, 2017

Legislature may look back at 2016-16 budget for answers

Budget Hearings Conclude in Harrisburg

Hearings on Governor Wolf’s 2017-18 budget proposal concluded this week in the House and Senate.  Unfortunately, many critical questions remain unanswered as the Governor’s cabinet struggled to provide adequate details regarding some of the most controversial components of the Governor’s plan.

 

Many feel it is positive that the Governor intends to look for savings through consolidations and other reductions.  However, the Governor overstates his reductions and claims to cut $2 billion while his budget increases spending over last year by $800 million.  Questionable “savings” include:

  • Transferring $165 million from the Workers Compensation Security Fund;
  • $200 million from taking out a loan on the Farm Show Complex;
  • Moving $110 million in grants out of the General Fund and issuing bonds (debt) to pay for them;
  • $95 million in supposed revenue from raising the minimum wage to $12;
  • $63 million tax increase on municipalities that use state police coverage; and
  • $250 million from an expansion of gambling that has yet to be approved.

 

The Governor is also asking for $1 billion in tax increases that will fall squarely on businesses and ultimately consumers:

  • Sales tax on computers services and custom programing ($330 million);
  • Sales tax on commercial storage ($154 million);
  • Natural Gas severance tax ($294 million);
  • New taxes on health insurers ($142 million); and
  • Cuts in the ability to carry forward losses under corporate taxes ($81 million).

 

The House will be back in session next week and plans to report a budget bill (HB 218) out of committee to start the process.  HB 218 is largely based on the 2015-16 budget, not the Governor’s plan. While this will likely be amended, it will serve as a starting point for negotiations.  The House plans to send a budget bill to the Senate in early April.

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