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Legislative Update

Week Ending April 21, 2006

• Week in Review
• Political News & Notes
• Fajt Outlines Compliance Initiatives to Legislators
• Property Tax Relief Plan Unresolved
• Corbett Appoints New Consumer Protection Chief
• DPW Proposes New Nursing Facilities Payment Rates
• Pennsylvania Higher Education Report Released
• Making Tax Reform a Reality
• Primary Election: Are You Ready to Vote?

Week in Review

Another meeting this week of the House-Senate conference committee on property tax relief came and went with no agreement. Under the tentative plan that still has details to be ironed out, all state homeowners would get a modest tax reduction each year once the slots revenue begins coming in within about two years. The panel is trying to give about 250,000 more senior citizens additional relief, either through reduced property taxes or rent rebates. They meet again on Monday, April 24.

Senate Democratic Appropriations Chairman Vince Fumo announced this week the Commonwealth will end the fiscal year on June 30 with a huge increase in tax revenue over what had been forecast by the Rendell Administration. March produced $213-million more than had be predicted for that month bringing the Fiscal Year-to-date total to $505-million more than the original estimate. Fumo now says that in the fourth quarter of the current FY, the overall bulge in the revenue surplus will hit $670-million.

Political News & Notes

Money, money, and more money. Pennsylvania U.S. Senator Rick Santorum raised an additional $3.4-million in campaign funds in the first quarter of this year while the favored Democratic candidate Bob Casey raised $2.2 million in the first quarter. Santorum's federal reports have his candidacy with $9-million cash on hand while Casey has $4.5-million. U.S. Senator Hillary Clinton headed up a Chicago fundraiser for Casey recently and those dollars and funds collected for Santorum at a recent President Bush-featured fundraiser have yet to be reported.

He's baaack. Seasoned and successful political guru, Mark Holman, has left his D.C. lobbying job with the Philly-based law firm Blank Rome to join the Swann for Governor campaign staff as a full-time senior campaign advisor. Back in 1994, Holman masterminded the statewide campaign of then unknown Tom Ridge and subsequently went on to serve as the former governor's chief of staff. Holman will be involved in all aspects of the campaign but will chiefly focus on statewide and national fundraising for Swann. 

Fajt Outlines Compliance Initiatives to Legislators

Suggesting that the Commonwealth could see revenues increase by more than $40 million, Revenue Secretary Greg Fajt outlined his Department's compliance initiatives at an April 19 hearing of the House Finance Committee. These initiatives will focus on use and cigarette tax compliance, voluntary disclosure of abusive tax shelters, and business license information sharing.

All individuals and businesses that reside in Pennsylvania have a legal obligation to pay taxes, and about 98 percent of Pennsylvanians pay their taxes on time, according to Fajt. He said the Department believes it is very important to bring delinquent taxpayers into compliance, especially when businesses that do not pay taxes gain an unfair financial advantage over their law-abiding competitors.

Under the Use Tax Voluntary Compliance Program, Fajt argued that when the use tax is not paid, responsible Pennsylvania businesses are placed at a financial disadvantage. He offered that the Department's first step in maintaining and increasing compliance is through education and awareness. He suggested that once taxpayers become aware of their responsibility the Department can assist and provide opportunities for businesses that are not compliant to become compliant. The Department will use its ability to strategically audit noncompliant businesses, said Fajt.

In addition, the secretary offered that the Department is pursuing a cigarette tax compliance program because retail inspections have revealed that one in five cigarette retailers are in possession of contraband products. He noted that the Department is receiving information about online transactions through disclosure provisions of the federal Jenkins Act.

On the topic of tax shelters, the secretary said that the Department is working closely with the IRS and other states to identify taxpayers who profit from abusive tax shelters and underreported income. He suggested that for Pennsylvania purposes, an abusive tax shelter would be defined as a tax avoidance scheme identified and listed by the IRS. Legislation will be introduced for the voluntary compliance initiative, he added.

The Department has begun a Business License Information Sharing Program, Sec. Fajt stated. He explained that under the program, delinquent taxpayers must pay legitimate taxes due before they are licensed to ensure they meet their obligations.

Sec. Fajt was asked if the Department will be targeting the business community first because they are the biggest targets. Secretary Fajt said yes, adding that businesses are the largest purchasers of use tax items. He noted that that the Department will also go after individuals because people buy cigarettes over the Internet or use abusive tax shelters. The state is losing about $600 million each year, $120 million of which is from cigarette sales, said Fajt.

Asked about the Streamlined Sales Tax Project (SSTP) and Pennsylvania's involvement, the secretary explained that the SSTP would create a set of rules to be used over the states, but it is difficult because of the difference of the tax systems in the 50 states. He noted that 20 states have entered into the SSTP, but Pennsylvania has not. He added that no other big states have joined because they will have to bear much of the cost of the program. He remarked that he doesn't see Pennsylvania joining soon, adding that the SSTP may not last because it has a number of problems.

Sec. Fajt closed by saying these initiatives will generate additional revenues that can be used for a variety of purposes. He added that the Department proposals are about "leveling the playing field," and currently businesses located in Pennsylvania are at a competitive disadvantage as people are buying products from out-of-state.

Property Tax Relief Plan Unresolved

State House and Senate members of the conference committee commissioned with the task of providing property tax relief to Pennsylvanians have yet to reach a compromise. Having met twice this week-once on Monday and again on Wednesday-the six conferees determined that, although they had made considerable progress toward an agreement, they were not prepared to draft a conference report to go to the House, Senate and finally Governor for approval. The committee will meet again on Monday, April 24, to try and iron out a consensus, and hope to finalize a plan for property tax relief before the month is out.

Currently being considered by the bicameral committee is Special Session House Bill 39, as amended in the Senate, which would use slot machine revenue to reduce property taxes and give local voters the option of shifting more of those taxes to an earned income levy. The plan would be of particular benefit to low-income senior citizens, however, the House and Senate are still at odds in determining the overall cost of the program. House members are seeking an additional  $45 million in funding, whereas the Senate believes the state can only afford $20 million.

Once the committee has produced a final compromise, the plan must still be passed on both House and Senate, and then signed by Governor Rendell before the program can be put into motion. Although the Conference Committee announced their hope that the report will reach the governor's desk before May, Senate members expressed certain doubts that this timeline would be feasible given the current disparity between chambers.

Corbett Appoints New Consumer Protection Chief

On April 17, Attorney General Tom Corbett announced the appointment of Linda Williams as Chief Deputy Attorney General of the Bureau of Consumer Protection. Williams has served as head of the Attorney General's Health Care Section and prior to that served as Deputy Attorney General in the Attorney General's Charitable Trusts and Organizations Section.

As head of the Bureau of Consumer Protection, Williams will oversee and enforce numerous consumer-related statutes including: Pennsylvania's Unfair Trade Practices and Consumer Protection Law; Telemarketing Registration Act; "Do Not Call" law; "Lemon Law," and debt collection statute.

Williams will also represent the Office of Attorney General on 15 Pennsylvania Department of State licensing boards, including the State Board of Accountancy. Additionally, Williams will represent the office on the Pennsylvania Bar Association's Unauthorized Practice of Law Committee.

Prior to working in state government, Williams was in private practice in Lancaster County and Massachusetts.

DPW Proposes New Nursing Facilities Payment Rates

In two notices published in the April 15 Pennsylvania Bulletin, the Department of Public Welfare is proposing to adopt final-omitted regulations to change the methods and standards for payments of Medical Assistance (MA) for county and general nursing facilities beginning with Fiscal Year 2006-2007.

The change in payment methodology to county nursing home facilities will effectively allow the Department to recognize the full allowable MA costs incurred by county nursing facilities as MA Program expenditures and enable the Commonwealth to draw down additional Federal matching funds on county costs that are now considered unallowable solely because of the operation of the Department's rate-setting methodology.

Under the second proposal, the Department is proposing amendments that will refine the case-mix payment system so that it can achieve its original intended objective of serving the needs of the Commonwealth's MA nursing facility residents while providing for reasonable and adequate payments to MA nursing facility providers. In addition, the amendments will support the balancing of long-term care by encouraging consumer choice in long-term care services and the right-sizing of nursing facilities.

Pennsylvania Higher Education Report Released

A new report released this week shows that overall Pennsylvanians enjoy increasing access to higher education, however, a marked gap between educational attainment in majority and minority populations remains. Young adults in rural communities remain a significant disadvantage, and the state's shortage of technically proficient workers is likely a result of inadequate secondary education - particularly in the areas of science and mathematics.

The report, A Rising Tide: The Current State of Higher Education in the Commonwealth of Pennsylvania, by the Education Policy and Leadership Center and the Learning Alliance for Higher Education at the University of Pennsylvania, focused on four main questions: 1) Who is and is not being served by higher education in the Commonwealth? 2) Is a Pennsylvania college education still affordable? 3) Are institutions in Pennsylvania graduating enough scientists and engineers to fuel a growing Pennsylvania economy? and 4) Is the need to remediate large numbers of students driving up costs and, hence, prices?

Making Tax Reform a Reality

The PICPA's Greater Philadelphia Chapter Committee on Local Taxation and Legislation will be presenting its first Outstanding Achievement in Tax Reform Award on May 12 at their Making Tax Reform A Reality Program. This is an excellent opportunity to demonstrate the profession's interest in local tax reform and to open dialog with attending business leaders, appointed and elected officials, and your clients. A sample client letter invitation is available, and printed brochures can be ordered by contacting chapters@picpa.org.

Primary Election: Are You Ready to Vote? 

Sometimes it's difficult doing research on the Primary candidates because there are SO many, and sometimes the information is buried in news stories. The Pennsylvania Prosperity Project, (P2) has found a solution to that problem. In addition to listing the candidates running against the incumbents in the 2006 Primary, the P2 site provides a picture and a brief biography for almost every candidate you'll find on the ballot on May 16. Of course, there are some candidates who have not received much media attention and/or do not have a website, so information can be limited. You can access the candidate guide here.

P2 is a non-partisan effort that assists businesses in learning about the people and policies that impact their jobs and industries. The Pennsylvania P2 is managed by Pennsylvanians for Effective Government (PEG) in cooperation with partner associations, like the PICPA. Pennsylvania is one of 25 state-based P2 affiliates with state-specific content. Pennsylvania content is provided by PEG; federal content is provided by the Business Industry Political Action Committee (BIPAC).