Wolf Presents $34 Billion State Budget
Gov. Tom Wolf presented his budget priorities for the new legislative session to a joint session of the General Assembly. The governor’s plan invests in workforce and education initiatives, and increases opportunities for the state’s agriculture industry, and supports substance use disorder treatment, intellectual disabilities and autism services, and enhanced care for seniors. Wolf’s 2019-2020 fiscal year budget spends $34.1 billion, an increase of $927 million, or 2.79 percent, over the current year’s budget.
The proposal calls for no new broad-based taxes, but it does include a plan to lower the state’s corporate net income tax rate by implementing combined reporting, a method of apportioning the income of corporations among the states in which they do business. The reduction in corporate tax rates over the next several years will occur as follows: calendar year 2020, 8.99 percent; calendar year 2021, 8.29 percent; calendar year 2022, 7.49 percent; calendar year 2023, 6.99 percent; and Jan. 1, 2024, and thereafter, 5.99 percent.
Other budget highlights include the following:
- Creation of the Keystone Economic Development and Workforce Command Center
- Continued investments in education, including …
- $200 million in basic education funding
- $50 million in special education funding
- $50 million for Pre-K Counts and Head Start
- $8 million for Stay in PA
- $10 million for PAsmart
- $7 million for Pennsylvania State System of Higher Education (PASSHE)
- Modernization of compulsory school and dropout ages
- Additional training opportunities for teachers
- $15 million for infants and toddlers on waiting lists for high-quality child care
- $10 million to incentivize quality child care for infants and toddlers
- $5 million for Parent Pathways
- $5 million for expanding home visiting services
- $2 million to establish the PA Agricultural Business Development Center
- $3 million to expand the Resource Enhancement and Protection (REAP) tax credits
- $15 million to serve an additional 765 individuals with intellectual disabilities and autism currently on the waiting list through the Community Living Waiver and 100 individuals through the Consolidated Waiver
- Funding for individuals transitioning out of special education programs to be covered as soon as they graduate
- $6.8 million to provide a 3 percent rate increase to infant/toddler early intervention providers
- $1.5 million for naloxone to continue to fight the opioid epidemic
House and Senate appropriations committees will convene public hearings over the next several weeks as lawmakers thoroughly review the details in the $34 billion spending plan. The new fiscal year begins July 1, 2019.
For more information on the 2019-2020 state budget visit www.budget.pa.gov. Also, there’s still time to register for PICPA’s Legislative Update Webinar with Peter Calcara, PICPA’s vice president of government relations, on Feb. 13. It's free for PICPA members!
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DOR Modernization Project Launches myPATH
The Department of Revenue (DOR) launched myPATH (My Pennsylvania Tax Hub) on Feb. 4. Initially, this e-services portal will support taxpayers with obligations to the department’s Bureau of Motor and Alternative Fuels Taxes.
The intuitive, online system allows certain taxpayers to register, renew, file returns, pay balances, and manage accounts online in a way that was not possible before. Prior to myPATH’s launch, DOR had implemented GenTax, a commercial, off-the-shelf tax administration solution from Fast Enterprises LLC that included implementation of Fast Enterprises’s solution for taxpayer online self-service. DOR’s version of this portal is myPATH.
The myPATH project helps the department achieve its goal of updating its technology and computer systems and replacing legacy tax systems that have been in use for decades.
As part of its rollout, the myPATH system is available for the following:
- International Fuel Tax Agreement (IFTA)
- Motor Carrier Road Tax (MCRT)
- Motor Fuel Tax
- Alternative Fuels Tax
- PA Fuel Transporter Reports
Other taxes will be added to the system as the DOR moves forward with its modernization. Work has begun on a second phase that will modernize the realty transfer tax and the inheritance tax administration system.
A third stage will allow Pennsylvanians to use myPATH for personal income tax returns and property tax/rent rebate (PTRR) program applications. The new system is expected to allow users to seamlessly file tax returns and PTRR applications, receive refunds and rebates faster, and access more information online. Delivery of this third phase is expected in 2020.
DOR’s implementation of GenTax and myPATH will increase efficiency, reduce risk of system failure, facilitate improved tax collection, reduce administrative costs, and allow the department to respond more quickly to ever-changing tax laws while improving overall taxpayer service.
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PA Senate Urges Court to Slow Down on Adopting Venue Rule
The Pennsylvania Senate voted 31-18 in favor of a measure calling for a study of the impact of venue choice in medical professional liability actions on access to medical care and maintenance of the state’s health care systems. The Pennsylvania Coalition for Civil Justice Reform (PCCJR), of which the PICPA is a member, urged senators to support the resolution.
Senate Resolution 20, sponsored by Sen. Lisa Baker (R-Luzerne/Pike/Susquehanna/Wayne/Wyoming), chair of the Senate Finance Committee, asks the Legislative Budget and Finance Committee (LBFC) to study the impact of the proposal to change venue rules and urges the state Supreme Court to delay any action on rules changes until the study is complete.
The resolution requires the LBFC to hold at least one public hearing and report its findings no later than Jan. 1, 2020.
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Browne Introduces PIT Conformity Measure
PICPA member Sen. Pat Browne, CPA (R-Lehigh), introduced a bill that will conform Pennsylvania’s personal income tax to the federal Opportunity Zones Program, which was enacted as part of the federal Tax Cuts and Jobs Act of 2017.
Under the federal Opportunity Zones Program, the governor of each state is authorized to designate a certain number of Opportunity Zones into which private investment can flow through Opportunity Funds. The program uses low-income community census tracts as the basis for determining areas of eligibility throughout the state. Investors in the Opportunity Funds are eligible to receive federal tax deferrals/eliminations and other tax benefits on unrealized capital gains associated with these investments.
Senate Bill 180 would ensure Pennsylvania maximizes the benefit of this federal program. By conforming Pennsylvania’s personal income tax to the federal rules that allow for the tax deferral/elimination of only those capital gains associated with the Opportunity Zones Program, Browne believes Pennsylvania can use its tax code to direct private investment where it is needed most while being fiscally responsible at the same time.
The bill is pending before the Senate Finance Committee.
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PA Senate Acts to Strengthen Public Employee Pension Forfeiture Act
A bill that would strip taxpayer-funded pensions from public employees who commit job-related felonies was approved recently by the state Senate.
The Public Employee Pension Forfeiture Act currently requires a public employee to forfeit his or her pension only for certain crimes listed in the act. In practice, this law allows lawmakers and other public employees charged with a forfeiture crime to plead guilty to a different, nonforfeiture crime to avoid the loss of their pension.
Senate Bill 113, sponsored by Sen. John DiSanto (R-Dauphin), would require pension forfeiture if a public employee or public official is convicted, pleads guilty, or pleads no contest to any felony offense related to his or her employment. The legislation also ensures that criminal convictions involving public officials are reported to state pension boards. Under SB 113, courts would now be required to notify state pension systems of all pension forfeiture cases.
SB 113 will be sent to the House of Representatives for consideration.
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Cannabis Legalization Introduced in State House
State Rep. Jake Wheatley (D-Allegheny) has introduced the most comprehensive adult-use cannabis legalization bill to date.
House Bill 50 would legalize adult-use cannabis and levy a tax on it. Auditor General Eugene DePasquale has estimated that legalized marijuana could generate more than $580 million in tax revenue.
Wheatley’s legislation would reinvest the new revenue toward affordable housing, afterschool programs, and student debt forgiveness. Further, the bill would create a framework for social justice reform by expunging criminal records, exonerating anyone incarcerated on cannabis charges, and returning revoked driver’s and professional licenses.
The bill has been referred to the House Health Committee for study.
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House Approves Bill to Help Municipal Authorities Prevent Fraud
The state House passed legislation authored by Rep. Zach Mako (R-Lehigh/Northampton) that requires municipal authorities to create additional financial protections when collecting money.
House Bill 264 would make municipal authorities remove any individual names from municipal accounts, create a standardized procedure for the handling of an authority’s funds, and require annual audits and fiscal reports to be presented to the authority board.
The bill now goes to the Senate for consideration.
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January Revenue Report Shows Some Weakness
Pennsylvania collected $2.9 billion in General Fund revenue in January, which was $113.7 million, or 3.8 percent, less than anticipated. Fiscal year-to-date General Fund collections total $18.2 billion, which is $290 million, or 1.6 percent, above estimate. Since the start of the 2018-2019 fiscal year, overall tax revenue is $957.1 million, or 5.7 percent, more than was collected in the same period of the last fiscal year.
According to the Independent Fiscal Office’s (IFO) January Monthly Trends Report, actual collections were below IFO’s projections by $99 million. The report also shows that January 2019 General Fund revenues of $2.9 billion reflect a decrease of $252 million (-8.0 percent) compared with the same month in the prior year.
Personal income tax (PIT) collections fell below estimate (-$128.3 million) for the month due to a shortfall in estimated payments (-$117.1 million). December/January estimated PIT collections declined 33.2 percent compared with the prior year. Withholding collections for the fiscal year are less than projected (-$18.2 million). Fiscal-year-to-date PIT collections are below estimate (-$197.0 million) due to a shortage in estimated payments (-$191.1 million).
Monthly sales and use tax (SUT) revenues were $31.0 million over estimate. Nonmotor and motor vehicle collections came in 2.8 percent and 6.3 percent over estimate, respectively. Fiscal year-to-date SUT revenues exceed estimate ($205.3 million) with higher than anticipated collections in both nonmotor and motor vehicle collections.
January corporate net income tax (CNIT) collections were below estimate (-$15.9 million). The shortage was driven by both estimated and regular payments. CNIT collections for the year exceed estimate ($191.3 million). Both final and estimated fiscal-year-to-date payments are higher than anticipated.
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Toomey, Casey Lead U.S. Finance Subcommittee
Pennsylvania will be well-represented on the U.S. Senate Finance Committee. U.S. Sens. Patrick Toomey (R) and Bob Casey (D) have landed key subcommittee posts on this important tax-writing committee in Congress.
Toomey will chair the Health Care Subcommittee, while Casey is the ranking member on the International Trade, Customs, and Global Competitiveness Subcommittee. In addition, Toomey will serve as a member of the Taxation and IRS Oversight, International Trade, Customs, and Global Competitiveness subcommittees, and Casey will serve as a member of the Health Care and the Social Security, Pensions, and Family Policy subcommittees.
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