Sen. Blake Says New PA Budget Undermines PA’s Credibility With Business Community

HARRISBURG, July 1, 2014 – The $29.1 billion Pennsylvania budget that Republicans and the Corbett administration pushed through the legislature late Monday night could compromise the commonwealth’s credibility in the business community and place Pennsylvanians in greater fiscal peril, state Sen. John Blake said today.

Because the 2014-’15 spending plan has been balanced using unreliable assumptions about future state revenues and one time transfers, the Democratic chairman of the Senate Finance Committee said that state lawmakers may have to completely rewrite the state budget in the first quarter of 2015.

“This budget relies on nearly $2 billion in one-time budget transfers that will virtually assure a $2 billion structural deficit heading into the next fiscal year,” Blake said after a thorough review of the spending plan adopted on a mostly party-line vote. “There were better choices that we could have made, and we could have crafted a much better fiscal plan for the citizens and the business community of this commonwealth.”

Two obvious choices that would have advanced a better spending plan, he said, were Pennsylvania’s entry into the federal government’s expanded Medicaid program and a modest severance tax on Marcellus Shale drillers.

“Simply expanding Medicaid would deliver $400 million in savings to the state General Fund and create 35,000 jobs in healthcare and human services while insuring 500,000 Pennsylvanians who now go through their day without the security of affordable health care coverage,” Blake said. “A modest 3 percent Marcellus Shale tax would have netted Pennsylvania $350 million in this fiscal year and enabled recurring revenues to avert future broad-based tax increases.”

Sen. Blake said a great concern of his is the new budget’s negative impact on state programs designed to help manufacturers and small businesses.

“The budget decimates the commonwealth’s capacity to leverage funds for community and economic development. The $200 million transfer from the Machinery & Equipment Loan Fund, or MELF, and the Small Business First program, or SBF, at the Department of Community and Economic Development will totally incapacitate those programs,” Blake said.

“The MELF transfer is particularly egregious because that economic development funding capacity has been building up for years. The MELF program recently offered a more favorable interest rate to Pennsylvania businesses to foster investment and growth through the purchase of new machinery and equipment. The promise of those funds now disappears as a 35-year endowment has been wiped out to balance this year’s budget,” the senator said.

Blake noted that these decisions underscore the fact that the Corbett administration sees no role for the state in fostering economic development and it further explains why we’ve dropped from 8th to 48th in the nation in job growth over the past four years.

“The credibility of the commonwealth with its business community will be severely compromised in that tens of millions of loan commitments currently pending but not closed may be reneged by the commonwealth due to the diversion of these funds as one-time transfers to balance the budget,” Blake said.

“The Small Business First fund is a life-blood program for small businesses and it is a program that is administered in Northeastern PA by the NEPA Alliance in strong coordination with the region’s lending community,” Blake said. “The $100 million transfer out of SBF will virtually end small business lending through that program.”

Finally, and importantly, Blake criticized the final budget plan because it transfers nearly $100 million in new gaming revenues that were meant to provide property tax relief to balance the budget.

“With the extraordinary pressures on property owners, and particularly our seniors, in meeting school property taxes, this one time transfer is particularly harmful,” Sen. Blake said.