Morning Must Reads: Governor Corbett, Legislative Leaders Agree on State Budget, Cracker Tax Credit

The big news this morning is that Governor Tom Corbett and state legislative leaders have reached agreement on the framework for a $27.65 billion state budget. The framework was announced after reports of an expected revenue surplus in June of $100 million. (The Pennsylvania Budget and Policy Center noted last week that the state's revenue outlook has improved significantly in recent months.)

Budget negotiators are keeping mum on the details of the plan until rank-and-file lawmakers can weigh in. The overall budget framework is a step up from the cut-heavy plan the governor unveiled in February. But as The Associated Press reports, it is still likely to include a 10% cut to county human services, the elimination of a modest benefit for temporarily disabled adults who are out of work, and new tax cuts for businesses.

The newly agreed-upon spending plan appears to be nearly identical to one put forth to Corbett by lawmakers. If so, it will include no new taxes while raising spending less than 2 percent and leaving about $267 million in reserve a year from now.

Aid for public schools and 18 state-supported universities would remain flat, at least. Budget negotiators also discussed adding a $50 million zero-interest loan program for school districts nearing financial collapse and an additional $100 million in tax credits on business-sector donations to subsidize scholarships for low-income children in the state's worst-performing schools. But it was not clear whether money for those programs was included in the agreement.

Meanwhile, the plan would cut business taxes by $275 million while slashing money for county-run social services by 10 percent, or $84 million, and eliminating a $150 million cash benefit called General Assistance for temporarily disabled adults who are out of work.

The $200-a-month cash benefit, which dates back to the Great Depression, has been on Republicans' chopping block despite appeals from advocates for the poor and homeless, as well as the AARP, the United Way and religious groups representing Catholics, Methodists, Lutherans, Unitarian Universalists and Jews.

The governor also announced on Wednesday that a deal has been reached with legislative leaders to create a manufacturing tax credit that is part of the administration's effort to woo Shell Chemical to build an ethane cracker plant in Western Pennsylvania.

Corbett's proposal calls for Shell to receive $66 million a year in tax credits over 25 years, beginning when the so-called "cracker" plant is scheduled to open, in 2017. Neither the governor nor legislators were offering details Wednesday night of whether the numbers had changed in budget negotiations.

Finally this morning, state Representative Jesse White has introduced legislation that would allow the state to create the tax credit for Shell's cracker plant, without draining needed tax funds for schools, health care and other services.

State Rep. Jesse White's legislation (H.B. 2493), would impose a small surtax on the production of natural gas for a new Energy Employment Legacy Fund. That fund would pay for tax incentives to industries that use ethane in manufacturing processes, including Gov. Tom Corbett's $1.6 billion tax credit proposal for Royal Dutch Shell ...

"This revenue-neutral legislation is a perfect way to demonstrate that we strongly support the concept of the ethane cracker and its impact on job creation while adopting a fiscally responsible approach that avoids passing $1.6 billion in debt onto Pennsylvania taxpayers," White said in a release. "The taxpayers have already created a tax-free Keystone Opportunity Zone for the proposed site of that ethane cracker, so the private sector producers who will greatly benefit from an increased customer base and a shorter supply chain should also do their part."

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