Federal stimulus
Lawmakers are concerned about the certainty of federal stimulus money, which the governor is relying on to fund his proposed 2010-11 state budget. Budget Secretary Mary Soderberg said that the current allotment of federal stimulus money is set to expire on Dec. 31, but noted there has been vigorous discussion about continuing the Federal Medical Assistance Percentages (FMAP) funds for the next calendar year.

FMAPs are used to determine the amount of federal matching funds for state assistance payments for certain social services, and state medical and medical insurance expenditures. The Social Security Act requires the U.S. Secretary of Health and Human Services to calculate and publish the FMAPs each year.

Soderberg said President Barrack Obama has included two full quarters of FMAPs in his budget, for a total of $850 million. She also said 42 governors have signed a letter requesting a FMAP extension. Soderberg said most states have included these funds in their budgets and they are optimistic it will be passed. However, several lawmakers expressed concerns that the governor’s budget relies too much on federal funds that might not materialize.

Public pension crisis
In responding to questions about the looming public pension crisis, Soderberg said the administration is asking for an “incremental, predictable strategy” for funding the Commonwealth’s pension obligations. She said there will be a $3.5 billion increase in contributions in 2012, and the administration is asking for a $400 to $700 million contribution each year in order to lessen the burden in the next few fiscal years.

Some lawmakers pointed out that it doesn’t make sense for the Department of Education to ask for a $350 million increase in spending when none of it will be directed toward pension obligations.

Other lawmakers expressed concerns with the governor’s plan to address the pension crisis. The administration’s budget calls for several tax increases on business, the revenues of which would be placed into a reserve account to be used in 2011-12 to meet pension obligations. The PA Chamber believes focus should be placed on addressing some of the contributing factors that helped to create the funding crisis.

Film tax credit
During the Revenue Department hearing, House Appropriations Committee Minority Chairman Bill Adolph, R-Delaware, asked Acting Revenue Secretary Dan Hassell why the Film Tax Credit is proposed to increase at a time of economic downturn and when the Education Improvement Tax Credit is being decreased.

Hassell said the education tax credits were not reduced, but fixed in the October budget.

Adolph stressed that the education tax credit has been a successful program, and said he believes that with less money available for the program, more children will attend public schools, which will place a greater strain on the system.

Combined reporting
Lawmakers also inquired about the revenue that would be generated by adopting combined reporting. Hassell said combined reporting is estimated to generate $400 million to $500 million in revenue with the current base, but noted there could be other factors in proposed legislation that could change the exact amount of revenue generated. Hassell said he is aware of the business community’s concerns with combined reporting, and expressed his desire to work with the General Assembly to make combined reporting “as painless as possible.”

State Rep. Gordon Denlinger, R-Lancaster, said contrary to the governor’s argument, under combined reporting, 60 percent of corporations would still be non-taxpayers. He cited as reference at letter from former Revenue Secretary Thomas Wolf. Hassell said the number of non-taxpayers would go down, even if slightly. However, upon further questioning from Denlinger, Hassell said he did not have an updated list of active C-corporations in the Commonwealth.

Article courtesy of the Pennsylvania Chamber of Business & Industry

                          

Taxes, followed by reduced spending and debt/budget concerns, ranked No. 2 and 3 on the list.

In the race for U.S. Senate, health-care was cited as the single most important issue, followed by economic issues, including employment and the federal stimulus.

The state economic forecast and ideas for job creation were also on the agenda for the House Appropriations Committee, which held a hearing on the topic this week in Harrisburg.

Jim Diffley of Global Insight, the state’s economic forecaster, predicted that the national economy will grow at 5 percent in the final quarter of the current fiscal year, but noted that Pennsylvania is not expected to return to previous peak employment levels until July 2012. He also noted that when recovery hits the Commonwealth, the state will be facing a public pension shortfall of $5 billion.

Private sector job creation is a priority for the PA Chamber and its members, as the private sector has suffered most in the recession.

In his economics and finance blog, University of Michigan School of Management professor Mark Perry notes that since private sector employment peaked at almost 116 million jobs in December 2007 at the onset of the recession, more than seven million private sector jobs have disappeared, while during the same time period government jobs increased by almost 100,000. Perry notes that the disproportionate adverse effect of the recession on the private sector can also be seen in differences in jobless rates between the private and public sectors.

The Chamber’s message to federal and state lawmakers is simple: job creation depends on American free enterprise, and the continued ability of the private sector to effectively and efficiently operate is the key to true and lasting economic recovery and job growth. To help deliver this message, the PA Chamber supports the U.S. Chamber’s “American Free Enterprise. Dream Big” campaign. For details on how you can bolster the campaign, visit http://www.freeenterprise.com/