S H A R O N W A R D

E P L C F I N A N C E S Y M P O S I U M

N O V E M B E R 1 6 , 2 0 1 2

A New Dawn? What to Expect in 2013

Who We Are

• The Pennsylvania Budget and Policy Center (PBPC) is a statewide, non-partisan policy research project.

• PBPC provides budget and fiscal analysis and public education in support of policies that improve the economic and social well-being of low and middle income Pennsylvanians.

• www.pennbpc.org

The Bottom Line

Budget cuts to schools were not reversed in 2012 legislative session.

Cuts had serious consequences: to students and to the economy.

Legislature pulled away from Governor in 12-13 budget: willing to spend revenue, create distance from cuts.

Serious challenges and threats that need to be overcome.

New configuration in legislature cause for hope?

E D U C A T I O N C U T S T A K E T H E I R T O L L

Lasting Impact

Education Gains Wiped Out in 2011-12

$6.896

$7.165

$6.593 $6.564 $6.516

$6.000

$6.200

$6.400

$6.600

$6.800

$7.000

$7.200

$7.400

2009-10 2010-11 2011-02 2011-12 2012-13

Bil

lio

ns

FEDERAL ARRA FUNDS RESTORED FOR PRISONS- NOT FOR SCHOOLS

$-

$2,000

$4,000

$6,000

$8,000

$10,000

$12,000

$14,000

2010-11 2011-12

$ m

illi

on

s

ARRA

State

$11.6

$10.6

$-

$200

$400

$600

$800

$1,000

$1,200

$1,400

$1,600

$1,800

$2,000

2010-11 2011-12

$ m

illi

on

s

ARRA

State

$1.84 $1.87

Education Cuts Left Intact in 2012-13

Education Funding (in $ millions)

2010-11 2012-13 % Change

Education - Classrooms $6,090 $5,506 -9.6%

Education - Total PreK-12 $9,686 $9,661 -0.3%

Education - Higher Education $1,888 $1,587 -15.9%

PA 8th Largest Cuts in the Nation in 2011-12

-8.8%

15,600

(21,000)(25,000)

(20,000)

(15,000)

(10,000)

(5,000)

0

5,000

10,000

15,000

20,000

Mining and Logging Government

Since the beginning of 2010, the 15,600 jobs gained in Mining and Logging have been entirely offset by the loss of 21,000 jobs

in the public sector (mostly in education).

Source. PennsylvaniaBudget and Policy Center based on Current Employment Statistics data

Education Cuts Drag on Economic Recovery

Cuts In the Classroom

51 percent of school districts responding increased class size. 70 percent did so in 2011-12.

32 percent of school districts reduced or eliminated programs that provide extra help or tutoring for struggling students. 35 percent of had decreased tutoring/additional instruction time in 2011-12.

21 percent eliminated their summer school programs in 2012-13. Nineteen percent eliminated summer school in 2011-12.

8 eliminated/reduced pre-k six full-day kindergarten.

30% furloughed employees, 24% wage freezes, 52% prior year.

Approval Below 50%

Quinnipiac Poll Results, November 15 2012

Do You Approve or Disapprove of the way the Governor is handling his job?

High Low

Nov 15 June 27 Jun 12 Mar 15 Sept 29 June 27

2012 2012 2012 2012 2011 2012

Approve 40 35 36 41 50 35

Disapprove 38 50 47 38 32 50

Don’t Know 23 15 17 22 18 15

2 0 1 2 - 1 3 B U D G E T

Getting Back on Track

The economy is getting better …slowly

2007-08 2008-09 2009-10 2010-11 2011-12 2012-13b 2013-14e 2014-15e 2015-16e 2016-17e

Estimate $27.8 $28.8 $28.8 $26.7 $27.8 $28.6 $29.2 $30.0 $31.0 $31.8

Actual $27.9 $25.5 $27.6 $27.5 $27.7

$20.0

$22.0

$24.0

$26.0

$28.0

$30.0

$32.0

$34.0

$ B

illi

on

s

General Fund Revenue ( Minus ARRA) 2007-08 to 2016-17

General Fund Spending Increased in 2012-13

$25,000

$25,500

$26,000

$26,500

$27,000

$27,500

$28,000

$28,500

2007-08 2008-09 2009-10 2010-11 2011-12 2012-13

General Fund Expenditures

Three Years of Budget Surpluses

$-

$200

$400

$600

$800

$1,000

$1,200

2010-11 2011-12 2012-13

Year End General Fund Balance

$1,073

$659

$220 (In

M

illi

on

s)

Education Cuts Hit Poorer Districts Harder

Cuts per Student Number of Districts Percent of Students in Poverty

Over $700 29 districts 58.97%

$500 to $700 130 districts 46.99%

$300 to $500 187 districts 34.87%

$150 to $300 103 districts 22.82%

Under $150 51 districts 11.78%

Source. Education Law Center (www.elc-pa.org) Note: Cuts include reductions in Basic Education, Accountability Block Grants, Reimbursement for Charter Schools, and Education Assistance Program from 2010-11.

The Threats Ahead

Federal Budget Cuts Loom

Bush Tax Cuts

Expire in December

Automatic spending cuts:

January

Debt limit ceiling: early

2013

Education 11% of Federal Spending in States

Federal Grants to States and Localities

Corporations Share of General Fund Taxes Drops in Half Since 1972

29.9

16.9 14.2

7.4

0.0

5.0

10.0

15.0

20.0

25.0

30.0

35.0

Co

rp

or

ati

on

Ta

xe

s a

s S

ha

re

of

Ge

ne

ra

l F

un

d

Re

ve

nu

e

Corporate taxes Corp. Net Income Tax

Marcellus Shale Impact Fee shortchanges Pennsylvania

$387

$200

$339

$200

$0

$100

$200

$300

$400

$500

$600

$700

$800

Drilling Tax (WV rate) Corbett Impact Fee

Mil

lio

ns

2012

2009-2011

COST Ranks PA State and Local Business Taxes Below US Average (26th highest in FY10)

5.0%

4.8%

0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 14.0%

AlaskaNorth Dakota

WyomingVermont

MaineWest Virginia

FloridaNew York

MississippiNew Mexico

MontanaHawaiiKansas

Rhode IslandWashington

LouisianaCalifornia

NevadaTexas

ArizonaIllinois

OklahomaUS Average

KentuckyNebraska

New JerseyPennsylvania

South CarolinaAlabama

IowaMichigan

OhioWisconsinTennessee

ColoradoMinnesota

New HampshireArkansas

IdahoMassachusettsSouth Dakota

GeorgiaMissouriIndianaVirginia

UtahOregon

DelawareMaryland

North CarolinaConnecticut

State and Local Business Taxes as Share of GSP

Source. Council on State Taxation (COST), July 2011.

Act 120 Reduces Pension costs

Pension Catch-Up Hits Over 3 Years

2012-13 2013-14 2014-15 2015-16 2016-17

Revenue Growth $912.0 $759.8 $865.9 $960.8 $852.0

Pension Cost Growth $415.0 $554.9 $590.3 $502.8 $298.9

$0.0

$200.0

$400.0

$600.0

$800.0

$1,000.0

$1,200.0

Mil

lio

ns

46%

73%

68% 52

%

35%

Sources. General Fund revenue projections based on Budget Office revenue projections. Pension Cost Growth from Act 120 of 2010 Fiscal Note.

Property Tax Elimination Plans Costly

-$1,509 -$1,691

-$1,878 -$1,948 -$2,023

-$2,500

-$2,000

-$1,500

-$1,000

-$500

$0

2013-14 2014-15 2015-16 2016-17 2017-18

Mil

lio

ns

of

Do

lla

rs

Source. Pennsylvania Independent Fiscal Office Analysis of HB 1776 and SB 1460.

Distressed School Districts

New Revenue Used for EITC/EISC

$49 million increase for distressed districts

Legislators Have Different Priorities

Reason for Hope?

Will Elections Change Things?

New configuration in the Senate

Unpopularity of education cuts

Campaign issue

Close races in a number of districts for Rs and Ds

Gubernatorial race is starting

More revenue, more willingness to spend it

Smart, visible advocacy

Public Wants Fair Tax System

Voters View on Taxes

Voters See the Need for Tax Fairness

Need to reform system to ensure wealthy and corporations pay their fair share

Tax system rigged against the middle class, tax breaks for individuals and corporations

Haven’t fully made the case for new spending

If there is additional revenue should be spent on investments including education, infrastructure

Thank You

Sharon Ward

Pennsylvania Budget and Policy Center

www.pennbpc.org

www.betterchoicesforpa.org

717-255-7156

ward@pennbpc.org