Governor's budget includes $2.5 billion in tax hikes

Consumers would pay more for retail purchases, utilities

Harrisburg - Senator Bob Robbins, R-50th District, said he was extremely disappointed with Governor Rendell's request for $2.5 billion in new and increased taxes as part of his proposed 2007-08 Fiscal Year state budget.

"I am very disappointed that the Governor is asking the General Assembly to consider increasing the tax burden on Pennsylvania's working families," Senator Robbins said. "It took years for Pennsylvania's economy to recover after Governor Casey's tax increases and this request is even larger than that was. We will really need to look at this in depth."

Governor Rendell's budget for Fiscal Year 2007-08 includes proposed tax increases (including a 16-percent increase in Pennsylvania's Sales and Use Tax) totaling more than $2.5 billion on an annual basis. Further, a new tax projected to cost employers $60 million in FY 07-08 would cost nearly $2 billion annually after four years.

The $27.2 billion general fund budget for FY 07-08 includes nearly $1 billion ($947.9 million) in new spending, which represents a 3.6 percent increase over the $26.3 billion state general fund budget for FY 2006-07. However, with adjustments for $211 million in supplemental appropriations, the budget total is $27.4 billion, a 5.25 percent increase in spending over the current fiscal year.

The budget proposal also attempts to mask a large funding gap created after four years of following the Governor's economic priorities. Estimates put the size of the gap at nearly $2 billion.

"I hoped that Governor Rendell would have exercised more fiscal restraint considering the financial situation that the Commonwealth finds itself in," Senator Robbins said. "We should be looking at new ways to save money, not spend it."

The Governor requested an increase in Pennsylvania's sales tax, from 6 percent to 7 percent statewide, a 16-percent increase in the tax rate. Philadelphia and Pittsburgh would see their sales tax rate increase from the current 7 percent to 8 percent. Under the Governor's request, the sales tax increase would cost Pennsylvania consumers an additional $1.24 billion in FY 07-08. The Governor proposes to use more than $800 million of that money for general state spending with the remainder being used for property tax relief.

"This is a serious issue, especially for businesses located near the borders of the Commonwealth," Senator Robbins said. "Only New Jersey has a 7 percent cent sales tax and that came about last year after a heated budget battle. We can't afford to make Pennsylvania's businesses noncompetitive with our neighboring states."

A proposed mass transit/oil tax is expected to cost oil companies $760 million. An energy use tax, based on electric usage, will cost consumers $75 million, while a $2.75 per-ton municipal waste disposal fee will take an additional $61.4 million out of Pennsylvanians' pocketbooks.

The Governor also wants tobacco users to pay more taxes. An additional 10 cents-per pack tax on cigarettes is projected to cost smokers $61 million annually, while new taxes on smokeless tobacco, loose tobacco, and cigars is estimated to cost consumers $30.3 million annually.

The budget includes a 3.5 percent increase ($166.6 million) for basic education subsidies for a proposed total of $4.95 billion in FY 07-08. Special Education funding would increase by $29.4 million (3 percent) for a proposed total of just over $1 billion in FY 07-08.

The budget includes a proposed $100 million increase in the Department of Education's Accountability Block Grant Program for a total of $350 million. Of that new money, the Governor is proposing $25 million be used for full-day kindergarten and $75 million go to pre-K programs.

State System of Higher Education universities will see a 3.5 percent ($16.4 million) increase for a proposed total of $483.9 million. Community colleges would see a $9.2 million (3.5 percent) increase to $273.8 million, while Pennsylvania's state-related universities would receive an additional 2 percent each: Penn State, $5.1 million ($263.5 million total); University of Pittsburgh, $3.2 million ($164.3 million total); Temple University, $3.3 million ($172.4 million total); and, Lincoln University, $270,000 ($13.7 million total).

State funding for the Pennsylvania Higher Education Assistance Agency (PHEAA) is proposed to remain at the current year level.

The Governor is also proposing to lease the Pennsylvania Turnpike, which he anticipates would generate $965 million annually for the bridge and highway program.

Contact:

Michael Hengst
(717) 787-1322