Week Ending June 25, 2021

Jun 25, 2021

Wolf, Lawmakers Agree on $39.8 Billion FY 2021-2022 State Budget

Gov. Wolf and state lawmakers on Friday agreed to a $39.8 billion General Appropriations budget for the 2021-2022 fiscal year (FY) that begins July 1. The plan supports core government services, makes historic investments in education, and prioritizes Pennsylvania’s most vulnerable citizens. Additionally, the budget provides significant funding to Pennsylvania’s nursing homes and other long-term care facilities, and ensures transportation infrastructure projects can continue. The governor is expected to sign the budget this week.

Join Peter Calcara, PICPA vice president, for an in-depth look at the 2021-2022 state budget and related legislation on PICPA’s Legislative Update webinar scheduled for July 15 at 9:00 a.m.

“Our economy has weathered the pandemic, and now is roaring forward. We are a commonwealth on the comeback,” said Gov. Wolf. “This budget will help our state move forward and rebuild a strong, equitable economy that works for Pennsylvanians. It provides the largest education funding increase in state history so our students can get the education and training they need for good jobs and to enjoy a successful life in Pennsylvania. And it isn’t any ordinary increase in funding – it is new funding specifically and equitably targeted at the most underfunded districts that disproportionately serve students of color, students in poverty, students with disabilities and English learners.

Sen. Pat Browne, chair of the Senate Finance Committee, noted, “This budget takes into consideration lessons we learned from the Great Recession by ensuring we are responsible, not only with how we use federal stimulus money, but also with the decisions we are making here today to put us on as solid fiscal ground as possible heading into those years when the stimulus money runs out and the threat of a fiscal cliff is real. With that in mind, however, this budget still provides essential funding increases to help our students, as well as necessary long-term and critical care assistance for our older population and our citizens with disabilities.”

Public education is once again the big winner. The plan calls for spending an additional $416 million, which includes $200 million increase to the fair funding formula and $100 million for Level Up, a new initiative providing more equitable funding to the 100 most underfunded districts and the students they serve.

The budget raises the cap for the Educational Improvement Tax Credit (EITC) program from $185 million to $225 million, a $40 million or 21.6 percent increase, with the entire increase going toward the scholarship organizations program, which benefits private school students.

Lawmakers resisted calls to spend the state’s surplus. This budget will deposit over $2.52 billion into the state’s Rainy Day Fund, while holding over $5 billion of American Rescue Plan (ARP) funds in reserve to be used in future budgets.

Lawmakers also finalized and gave approval to the other legislative components of the budget, namely the Fiscal Code (House Bill 1348), the Administrative Code (House Bill 336), the Tax Reform Code (House Bill 952) and the Public School Code (Senate Bill 381) bills.


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Proposal Would Close Pennsylvania Sales Tax Loophole

State Reps. Sara Innamorato (D-Allegheny) and Malcolm Kenyatta (D-Philadelphia) introduced legislation that would close a loophole in the Pennsylvania sales tax law.

House Bill 1656 would require online sales in Pennsylvania to be finalized at the address of the purchaser, rather than the address of a retailer’s warehouse. Kenyatta noted this bill would allow for fairer competition among online retailers and physical stores located in the community.

The legislators say major online retailers such as Amazon calculate taxes based on “location of fulfillment,” which is typically a warehouse. Two Pennsylvania counties where Amazon does not currently operate a warehouse – Philadelphia and Allegheny – are the only counties in Pennsylvania that levy a local sales tax on top of the statewide tax.

Because Amazon does not operate warehouses in Philadelphia or Allegheny counties, the lawmakers argue that they do not collect or remit local sales tax for orders purchased in those counties. This denies those communities important tax revenue and gives the company a pricing advantage over local businesses.

House Bill 1656 has been referred to the House Finance Committee.


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House Lawmakers Introduce Fair Share Tax Plan

Philadelphia Democratic state Reps. Chris Rabb, Elizabeth Fiedler, and Rick Krajewski and their western Pennsylvania colleagues Reps. Sara Innamorato and Summer Lee introduced a bill to update Pennsylvania’s tax code.

“Our legislation seeks to … fix a broken system and, in so doing, generate funds from the ultra-rich – who are equipped to pay a little more – that can be invested into worthwhile expenditures, like removing lead pipes, growing in clean energy, and supporting child and senior care programs,” says Rabb.

Their Fair Share Tax Plan would raise $6.09 billion a year by increasing taxes on income from wealth to 12% and decreasing tax on income from wages and interest to 1.9%. Passive income from net profits, dividends, net gains derived from rents, royalties, patents and copyrights, gambling and lottery winnings, and net gains derived through estates and trust would see an increase to 6.5%.

Innamorato says, “The overwhelming majority of Pennsylvanians would pay less in taxes or see no change under our proposal, but it will generate more than $6 billion in additional revenue.”

Lee says, “This legislation would provide relief to the majority of Pennsylvania families while making our commonwealth a fairer place to live, work and play.”


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Elder Abuse Measures Gain Senate Committee Support

The state Senate Judiciary Committee approved two bills addressing crimes against elderly Pennsylvanians.

House Bill 1429, sponsored by Rep. Linda Schlegel Culver (R-Northumberland), would create a new offense for the exploitation of an older adult or care-dependent person. Under the legislation, a person would be guilty of this new offense if that person is in a position of trust and takes, or attempts to take, money, assets, or property of an older adult or care-dependent person.

House Bill 1431, sponsored by Rep. Kate Klunk (R-York), details the offense of abuse of a care-dependent person if a caretaker, with the intent to ridicule or demean a care-dependent person, uses any audio, video, or still image of the care-dependent person in any format or medium on or through any electronic service, wireless communication, or any form of electronic service or wireless communication as pertaining to communication.

The bills are before the full Senate for a final vote.


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Growing Greener III Introduced in Senate

State Sens. John Gordner (R-Columbia, Luzerne, Montour, Northumberland, Snyder) and Bob Mensch (R-Berks, Bucks, Montgomery) introduced legislation to enact a third round of the Growing Greener program. The initiative seeks to provide funding for farmland preservation, Chesapeake Bay clean-up, and a backlog of projects at state parks and forests, as well as provide grants for the Municipal Separate Storm Sewer System (MS4) programs.

Senate Bill 525 would provide $500 million to the Growing Greener fund, with 45% ($225 million) going to the Department of Conservation and Natural Resources, 40% ($200 million) going to the Department of Environmental Protection, and 15% ($75 million) going to the Department of Agriculture. The funds would come from a portion of revenues received from the federal American Rescue Plan of 2021. The bill is before the Senate Environmental Resources and Energy Committee.

Signed into law in 1999, the Growing Greener I program sought to reduce the backlog of farmland-preservation projects statewide. Growing Greener II invested $625 million to clean up rivers and streams; protect natural areas, open spaces, and working farms; and shore up key programs to improve quality of life and revitalize communities across the commonwealth. It was signed into law in June 2005.


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New Heads of Education, L&I Confirmed by Senate

Gov. Tom Wolf’s picks to head the state departments of Education and Labor and Industry (L&I) were confirmed this week by the Pennsylvania Senate. The confirmations were delayed as lawmakers and the Wolf administration fought over the state’s response to the COVID-19 pandemic and mitigation efforts.

Noe Ortega was confirmed as secretary of education by a vote of 44-6 and Jennifer Berrier was approved as secretary of L&I by a vote of 45-5. Prior to his nomination in October, Ortega was deputy secretary and commissioner for the Office of Postsecondary and Higher Education (OPHE) at the Pennsylvania Department of Education. Berrier had been serving as acting secretary since December when former Labor and Industry Secretary Jerry Oleksiak retired.

Wolf is also getting a new budget secretary as Jen Swails will step down to take a job in the private sector. Gregory Thall will assume the role of budget secretary on July 31, 2021. Thall has spent more than a dozen years working in various capacities for the Commonwealth of Pennsylvania, most recently as special adviser to the budget secretary, where he has served since December 2016. Prior to his work in the Office of the Budget, Thall served as deputy general counsel in the Governor’s Office of General Counsel and was senior transition adviser to the Wolf transition team. He also held the position of deputy chief counsel to the Pennsylvania Senate Democratic Caucus.


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IFO Report: Pa. Job Gains Remain in Holding Pattern

The Independent Fiscal Office (IFO) released its Labor Market Update. The new monthly publication tracks conditions in the state labor market. Despite significant federal stimulus and job openings/quit rates at highs, the May payroll jobs data do not reveal a substantial reversal in pandemic-related job losses, according to the report. IFO plans to update the report each month as new data become available.

Additionally, IFO released its official revenue estimate for fiscal year 2021-2022 with updated estimates for fiscal year 2020-2021. 


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