Earlier this month, hearings began in the Pennsylvania General Assembly to discuss the Governor’s proposed $36 billion budget for Fiscal Year 2020-2021. Independent Fiscal Office (IFO) Director Matthew Knittel spoke to both the House and Senate Appropriations Committees about the state of the Commonwealth’s economic strength. Knittel expressed confidence in Pennsylvania’s overall economic growth, but cautioned members about Pennsylvania’s aging workforce and the need to attract young workers. For a closer look at the state’s demographics and economic outlook, see the IFO’s full report here.
In addition, members questioned Knittel about the Governor’s proposal to lower the state’s Corporate Net Income (CNI) tax in exchange for implementing combined reporting. The IFO and the Governor’s Budget Office have competing estimates on how the proposed combined reporting requirement would expand the tax base. Governor Wolf estimates that the change to combined reporting would result in $240 million more in taxes to the state. Combined reporting treats wholly-owned companies as a single entity for tax purposes. Proponents of combined reporting argue that businesses with operations in numerous states avoid paying taxes in Pennsylvania by shifting profits to states with low or no taxes.
Members also discussed a constitutional amendment to end the tactic of using supplemental state budgets to cover-up annual cost overruns. This year, it is projected Pennsylvania’s supplemental appropriation will exceed $800 million.
Budget hearings will continue through March. Find the full list of hearings here.