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Corbett's budget: No tax hike, lots of spending cuts

HARRISBURG - Gov. Corbett kept his word, at a cost. In unveiling his first budget Tuesday, Corbett stuck by his campaign pledge to not raise a single tax. At the same time, he called for layoffs, wage freezes, and some of the deepest cuts in recent history for public schools and colleges.

HARRISBURG - Gov. Corbett kept his word, at a cost.

In unveiling his first budget Tuesday, Corbett stuck by his campaign pledge to not raise a single tax. At the same time, he called for layoffs, wage freezes, and some of the deepest cuts in recent history for public schools and colleges.

The Republican governor's $27.3 billion spending plan for 2011-12 is 3 percent leaner than the current budget. Another promise kept: He proposed no new levy or fee on natural gas extracted from the Marcellus Shale, and would revive some business-tax cuts suspended by his Democratic predecessor, Ed Rendell.

But no item in the 1,184-page budget epitomized the difference between Corbett's and Rendell's approaches to governing more than aid to schools. Rendell made a point of boosting this figure in each of his eight years as governor; Corbett, in his first year, proposed cutting it.

In his budget speech Tuesday to a joint session of the legislature, Corbett said there must be sacrifices among unionized workforces, and called for eliminating 1,500 state jobs, almost half in mental-health services. He said he would seek concessions in salaries and benefits from unions representing tens of thousands of state employees when contract talks begin this spring.

"To the people of Pennsylvania, the taxpayers who sent us here, I want to say something you haven't heard often enough from this building: We get the picture. It's your money," Corbett said.

"The electorate, its trust scraped to the bone by lies and half-truths, isn't going to stand for another broken promise," the governor added. "I said we'd cut. I'm not asking you to read my lips. I'm asking you to read my budget."

His fellow Republicans, who control both the House and Senate, cheered the new governor for offering a budget that they believe promotes fiscal belt-tightening and a pro-business agenda.

"He did an excellent job reflecting the priorities of the people of Pennsylvania," said Senate President Pro Tempore Joe Scarnati (R., Jefferson).

The spending plan will force government to function "like middle-class" families who are reining in spending in tough times, added House Majority Leader Mike Turzai (R., Allegheny). "It's a budget for its time," Turzai said after the speech. "People are tired of indulgent government."

The words middle class marked critics' reaction as well. Some warned that Corbett's proposal would result in crushing tax increases at the local level to cover school costs, and would raid the pocketbooks of students and the middle class while letting corporations off the hook. Democrats quickly rallied around the battle cry that Corbett's budget spreads the pain unevenly.

"He talked about how we all have to make sacrifices," State Sen. Daylin Leach (D., Montgomery) said, "but then he excluded whole sections of the population. What sacrifice does an energy executive have to make? What sacrifice does someone making $1 million a year have to make? Too many of the sacrifices are weighted toward people on the lowest end of the economic scale or the middle class."

Eric Epstein, founder of the activist group, contended that the beneficiaries of the budget would be Corbett's top campaign contributors - in particular, oil and natural gas interests. "The big winners are corporations with out-of-state addresses," Epstein said.

State law requires the budget to be balanced - a daunting task, given the recession and other factors such as rising health, debt, and public-employee pension costs. In drafting the spending plan, which must be approved by the legislature by July 1, Corbett also had to figure in the loss of $2.6 billion in federal stimulus money in June. All told, he is facing an estimated $4 billion deficit.

He did not choose to push immediately to privatize the state's wine and liquor stores, which would have injected a onetime dose of revenue into the state's cash-strapped coffers. Instead, Corbett - who favors selling the stores - said he would form a commission to examine privatization, and relied primarily on cuts to plug the deficit.

In education, Corbett's budget would wipe out more than $550 million in basic funding - a 10 percent cut from this year - and an additional $260 million in grants to school districts for prekindergarten, full-day kindergarten, and class-size reduction in kindergarten through third grade.

He would also ax $224 million in reimbursements to school districts for money they send to charter schools. The Philadelphia School District is the biggest beneficiary of such funds.

All together, education advocates say, basic education funding would be reduced by more than $1 billion.

"We understand these are difficult economic times for the commonwealth," said James P. Testerman, president of the Pennsylvania State Education Association, the state's largest school employees' union. "But no matter how you look at it, the reality is, direct services to students will suffer."

The governor would also cut $650 million from higher education. The four "state-related" universities, including Temple and Lincoln, would take a big hit, losing more than 50 percent of their state funding. The State System of Higher Education - the state universities - would see its funding cut in half.

To offset the pain of public-school cuts, the governor asked school districts to reopen their collective-bargaining agreements to push for a one-year salary freeze on all personnel, from superintendents to teachers. The administration believes that would save an estimated $400 million, but it is not counting on that money in the budget.

Corbett also is asking school districts to get voter approval on budgets that would raise property taxes above the rate of inflation, and to explore merit-based pay systems and changes to tenure requirements.

He called for changes in the school code that would allow school boards to lay off professional employees if there was not enough money to pay their salaries. At present, layoffs of professional employees for economic reasons are banned.

Wythe Keever, the Pennsylvania State Education Association's spokesman, said that any decision to freeze wages for the next school year would have to be made in each district.

"We are neither encouraging them to do that or not to do that," he said. "We will have more conversations about it in the days ahead."

One agency that saw an increase in overall spending is the Department of Public Welfare, due in part to increasing welfare rolls and higher health-care costs in general.

Still, the details are in the budget's fine print, which includes cuts in state funding of some programs for mental health, domestic-violence prevention, and family services.

Corbett also would cut some optional Medicaid benefits to Pennsylvania's poorest citizens, including dental and pharmaceutical services. His plan would limit dentist visits to once a year and prescriptions to six a month.

The governor would reduce Medicaid reimbursements to hospitals by $150 million, which advocates say will result in the state's losing $183 million in federal matching funds.

"Hospital care is a must-have, not a nice-to-have, for all Pennsylvanians," said Carolyn F. Scanlan, president and chief executive of the Hospital and Healthsystem Association of Pennsylvania. She was referring to a line in the governor's budget speech in which Corbett boasted that his budget "sorts the must-haves from the nice-to-haves."

Other departments taking hard hits in Corbett's budget include the Department of Economic and Community Development. Its funding would be slashed from $337.9 million to $223.6 million - a cut that is sure to rile some legislators. That is because many of the department's programs are so-called "Walking Around Money" grants directed to projects in lawmakers' home districts.

"Some of you are probably scouring the budget just now in search of some pet project, commonly called WAMs - 'Walking Around Money,' " Corbett said, cracking a slight smile. "It's not there, plain and simple."

In other areas, the administration is proposing to resume the phaseout of the capital stock and franchise tax, a levy on companies incorporated in Pennsylvania, which had been suspended under Rendell. The budget also preserves the film tax credit, a popular item with cultural-arts advocates that had appeared destined for doom earlier this month. And it restores cuts made to the Education Improvement Tax Credit for scholarships and other programs for pre-K education and public schools.

Republicans stopped short of fully endorsing Corbett's proposal to slash higher-education funding, saying his plan "sets the parameters" for the debate ahead.

"This is just a blueprint," said Sen. Jake Corman (R., Centre), who chairs the Appropriations Committee and whose district includes Pennsylvania State University.

Mayor Nutter said he was "very, very concerned" about how the Corbett budget would affect Philadelphia.

He singled out the rollbacks in public-school aid as having "a tremendous impact on children," and predicted that the proposed cuts to colleges and Medicaid reimbursements to hospitals would lead to job losses in the city.

Nutter said it was too early to predict whether the cuts would force him to rewrite his own budget plan or contemplate a tax hike.

"It will take time to sort out," the mayor said. "There is pain here, but we already have pain."

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