The LuLac Edition #45, July 29th, 2006

GOOD MORNING AMERICA SNUBS SNEDECKER…..Good Morning America snubbed local weathercaster Joe Snedecker on the Friday edition of their program from New York City. The popular weather guy who makes an annual bike trek for the St. Joseph’s Festival had an expectation that he was going to be given a short interview on nationwide TV to talk about the center and his annual effort. WNEP management had made arrangements with the staff of GMA and judging from the content of the show, there was time to accommodate Snedecker. But instead, producers ignored him, relegating him to a back row as a cooking demonstration on ribs droned on and on. A few local residents have said area TV viewers should boycott GMA. I have a better idea. Let WNEP get a new network. It’s been done in Philadelphia and truthfully WNEP is much stronger locally than any network group. WNEP has dominated the local news ratings by over 55% the last 30 years. GMA and ABC dumped Joe, WNEP TV/New York Times should dump ABC.

L.A. TARONE SHOW DEBUTS………….The L.A. Tarone Show debuted this week on WLYN Channel 35. L.A. was fabulous. Look for his show Thursdays at 530PM on Service Electric Channel 21 in Wilkes Barre.

PENNSYLVANIA BUDGET………..On L.A. Tarone’s inaugural show, he mentioned that Governor Ed Rendell raised spending in his first term by about 26%. Here is a consensus on where that money will go and what will be the long term ramifications of this year’s budget. (Source: ISSUES: PA. Pa. Economy League) .


Pennsylvania’s new budget features a larger-than-average and higher-than-inflation increase in spending. What does this mean in terms of spending this year – and budgeting next year?
(July 2006) Pennsylvania’s 2006-07 budget was late by Constitution standards, yet on time for practical purposes. And it seems few are complaining about the finished product. Noteworthy is Pennsylvania’s larger-than-average and higher-than-inflation 5.9% spending increase, but it’s still balanced without any tax increases. This allows legislators running for re-election to boast new money for their districts without the black cloud of a tax increase. At the same time, this combination raises concerns for next year’s and future budgets. IssuesPA examined this new budget and what it might portend for the future. What is the revenue picture? Much better than expected. It begins with a one-time infusion of funds left over from 2005-06. In February, the Governor predicted an excess of $363.7 million in revenue collections compared to his original estimate a year ago. This number grew steadily. By June 30, the state Department of Revenue reported collections of $864.4 million more than anticipated. A required contribution to the Rainy Day Fund ($171.4 million), required tax refunds, and the need to pay some of last year’s unanticipated bills ($342.4 million) reduced the amount that could be applied to the new budget to $514 million – still a sizable amount. Similarly, revenue receipt estimates for 2006-07 have improved. Governor Ed Rendell’s proposed budget estimated $25.4 billion. The budget as passed predicts $26.8 billion in taxes and other revenues. The difference, added to last year’s surplus, provided significant elbow room to meet various spending priorities during the negotiating process. Revenue estimates for 2006-07 would have been even higher without tax cuts passed as part of the budget. The following table summarizes those cuts:


Tax Source
Tax Change
Amount of Cut
Primary Beneficiary
Capital Stock and Franchise Tax
Accelerate existing phase out of tax by 0.1 mill
Exempt certain small businesses
Raise the exemption for all businesses to $150,000
$21.7 million
$7.2 million
$1.6 million
Most businesses
Single-member Restricted Prof. Cos.
Most businesses
Corporate Net Income Tax (CNI)
Increase the Sales Factor for CNI apportionment to 70%
Increase the per business cap for Net Operating Loss Carry-Forward by $1 million to $3 million or 12.5% of taxable income
$14.1 million
$21 million

In-state companies that pay the CNI
Companies that lose money in their first few years, e.g. technology companies and other large companies that lose money

All Business Taxes
Increase the R & D tax credit limit to $40 million
$10 million
Business with approved R and D spending
All Business Taxes
Education Improvement Tax Credit
$10 million
Support for education programs by business
Personal Income Tax
Exempting contributions to qualified tuition accounts
$25 million
Parents and others saving for children's higher education
Personal Income Tax
Health Savings Accounts
$4 million
People with health savings accounts
The business tax cuts take effect January 1, 2007, lessening the impact on revenues in the current budget. In addition to tax reductions enumerated in the table, the Capital Stock and Franchise Tax rate will be reduced one mill in January 2007 as the next step of a previously-approved schedule to phase-out the tax by 2010. The combined scheduled rate reduction and the additional changes approved as part of the budget total $279 million in business tax reductions. What about spending? The $1.4 billion spending increase meant good news for a variety of those receiving state money and services. Here’s what happened. Education. The headliner is the increase allotted to the state Department of Education. Not only does the Department (and, therefore, local school districts and higher education institutions) benefit from the largest dollar increase of any major department, it also received a larger-than- average percentage increase. The budget for the Department of Education devotes the bulk of the overall $736.8 million increase to supporting public schools. The $574 million or 7.4% increase will be used to support a variety of ongoing and new education initiatives. [Click here for more details] Most higher education institutions received healthy increases (4-5%), even though the growth rates are below those for the education and overall General Fund budgets. Community and economic development. Overall, the state Department of Community and Economic Development will see a 29.2% increase in its budget. Much of the extra $150 million shows up as significant increases in a number of existing flexible grant programs administered by the Department. The budget cuts the Community Revitalization program, the traditional home of many legislatively-designated initiatives, $12.5 million or 22%. In addition, a new World Trade PA program is established with $15 million to expand and promote current trade and foreign investment in Pennsylvania activities. Public welfare. For once, the health care cost driven programs of the Department of Public Welfare aren’t the center of attention. While the numbers remain big, an increase of $235 million – or 2.6% – appears to be acceptable to many affected interest groups. State debt. General obligation debt service increased again this year. The $136 million or 19% increase is the result of new debt already incurred. The upward trend likely will continue into the future as capital projects and programs already authorized move through the borrowing stage. Long-term implications?
Many questions remain unanswered. Here are several:
Can Pennsylvania’s economy, and therefore its tax system, sustain adequate growth rates to maintain this level of spending, especially considering slower revenue growth than this past year, a less than $500 million in expected surplus, and the absorption of the full-year cost of business tax cuts?
How much will rising health care costs, which aren’t front and center in this budget, influence future budget decisions?
Will the higher levels of support for public education continue to grow and, if not, will the recently-passed property tax reduction and referendum provisions play a bigger role in local school taxes than many now anticipate?
Will the rising cost of debt service become more of a concern than the occasional mention it gets now?
Has Pennsylvania found a new way to disguise legislative initiatives by loading up flexible grant programs with new money?
The answers will have to wait until this budget and the upcoming November general elections run their course.