Details on the Governor's Budget Proposal

Overview from the PA House Appropriations Committee (opens PDF)

• General Fund Spending
- Proposed 2013-14 General Fund spending is $28.44 billion.
- General Fund spending at the proposed amount represents a $678 million or 2.4 percent increase over 2012-13 available funds.
- The proposed General Fund spending growth falls below TABOR allowable growth rate of 2.54 percent.

• General Fund Revenue
- FY2013-14 General Fund revenues are estimated to grow by 1.5%. This amount includes proposed General Fund tax and revenue modifications totaling $46.8 million (see Proposed Tax and Revenue Modifications section for details).

Governor’s Budget Proposal At-A-Glance

$90 million increase for Basic Education Funding line
• Overall PreK-12 Education increase of $338 million, providing the most state dollars for basic education ever
• All higher education lines are level funded
• Corrections budget is increased by $60 million or 3 percent
• 905 positions under the Governor’s jurisdiction are eliminated
• The appropriation for general obligation debt service is reduced by $28.7 million or 2.6 percent.
• Funding added for 290 new State Troopers and 90 new dispatchers
• DPW spending increased by $315 million or 3 percent—driven by caseload and some rate increases
• Within DPW, $19.867 million is added to provide for an additional 380 individuals on the waiting list, 700 special education graduates and 100 individuals currently residing in state centers.

Corporate Net Income Tax
- NOL Cap – Increase the NOL cap to the greater of $4 million or 25% of taxable income for tax year 2014 and the greater of $5 million or 30% of taxable income for tax years 2015 and thereafter. (Revenue reduction of $11.4 million in FY2013-14)
- Rate Reduction – Reduce the rate to 9.89% for tax year 2015. The rate is further reduced by 0.2 percentage points each tax year for the period 2016 through 2018. For the tax year period 2019 through 2025 the rate is reduced 0.33 percentage points each year with the rate being fixed at 6.99% for tax years 2025 and thereafter. (No impact until FY2014-15)
- Market-Based Sourcing – For tax years 2014 and thereafter the sales of services and intangibles will be sourced to the location of the customer. (Revenue increase of $7 million in FY2013-14)
- Non-Filer Penalties – Creates a $500 non-filing penalty for C-corporations. (No impact until FY2014-15)

Capital Stock and Franchise Tax
- The CSFT phase-out continues and will be eliminated for tax years beginning on or after January 1, 2014.

Personal Income Tax
- Like-Kind Exchanges – Allows for deferral of a gain or loss when property held for productive use in a trade or business is exchanged for property of a like-kind and is held for productive use in a business. This aligns PA law with Federal law. (No impact until FY2016-17)
- Start-Up Business Deductions –Allows for a deduction of $5,000 from taxable income in the year a business is established beginning with tax year 2014. This aligns PA law with Federal law. (No impact until FY2014-15)
- Resident Credit for Taxes Paid to Foreign Countries – Eliminates the credit for taxes paid to foreign countries beginning with tax year 2014. (No impact until FY2014-15)

Corporate Loans Tax
- Eliminates the corporate loans tax to coincide with the elimination of the capital stock and franchise tax for tax year 2014. The corporate loans tax is levied on the taxable indebtedness of domestic and foreign corporations having PA corporate treasurers. The tax is imposed on resident individuals, who hold debt, but the corporations who issue, assume or pay interest on the debt must withhold and remit the tax to PA. (Revenue reduction of $0.7 million in FY2013-14)

Realty Transfer Tax
- Expands the circumstances when transfers of ownership interest in a real estate company are subject to taxation. (Revenue increase of $4.3 million in FY2013-14)

Tax Credit Repeals and Tax Simplification
- Streamlines and simplifies the tax code for underutilized and obsolete provisions. This includes repealing tax credits, obsolete tax provisions and obsolete administrative provisions. (Revenue increase of $0.5 million in FY2013-14)

Administration and Enforcement
-  Provides additional filing requirements and enforcement initiatives for pass-through entities such as partnerships, LLCs and S-corporations. (Revenue increase of $2.6 million in FY2013-14)

Transfers and Other Enhancements
- Proposed transfer of funds from the PA Race Horse Development Fund to the General Fund of $15 million. Act 1-2010 transferred the equivalent of 2% of GTR, approximately $50 million, to the General Fund in FY2009-10 through FY2012-13.(Revenue increase of $15 million in FY2013-14)
- Redirects vehicle code fines and subsequent distribution from the Motor License Fund to the General Fund. (Revenue increase of $29.5 million in FY2013-14)

Spreadsheet detailing Governor's 2013-14 budget proposal
Complete Summary & Analysis from PAHouseGOP Appropriations Committee