HOMER CITY — The recently announced budget proposal by Gov. Tom Corbett is a starting point of discussion and compromise, and is not the final word in how Pennsylvania’s finances will be handled, state Rep. Dave Reed, R-Indiana, repeatedly reminded those who attended a town hall meeting Wednesday evening at the Homer City Borough building.
“The important thing to understand about the governor’s budget proposal is it’s a starting point, not an ending point,” Reed said. “As you’ve seen over the years, the ending points have been much different than the starting points.”
Several heated discussions erupted during the meeting on topics ranging from local taxes to liquor privatization as Reed fielded questions from Homer City residents as well as some out-of-county visitors.
A big topic was Corbett’s proposal on the privatization of liquor in the state. One person asked Reed what his personal stance on the issue is.
“What I would like to see in Pennsylvania is to be able to go to a grocery store and get wine and beer,” Reed said. “To be able to go to a convenience store and pick up a six-pack if you wanted to do so. That could happen through privatization, that could happen through modernizing the current system we have today. But I think that’s the public’s expectation when talk we about privatization.”
According to Reed, the concept of privatization is popular in Pennsylvania, and has support in all political parties.
“The most important part in the equation, in my mind, in no way should it be a revenue loser to the state,” Reed said.
No proposal should include selling the system for short-term financial gain while losing money in the long term, he said. Pennsylvania could see proposals that will keep state stores open while providing opportunities to buy alcohol at other stores.
One attendee mentioned that people don’t realize how much money comes in to liquor stores. Should those stores go away, that revenue will go away as well.
But Reed said that 75 percent to 80 percent of the revenue is from sales tax. That money comes back into the state regardless of who is selling the product.
The issue of rising local taxes was also a concern, especially in the Homer City/Center Township area. Citizens wanted to know what they could do to get property taxes lowered.
Reed explained that property taxes are becoming a state issue. In the past, the state didn’t have the authority to levy property taxes; it was always a change made by the municipality or school district. It’s becoming an issue now that funding to schools is changing, he said. Should a school property tax disappear, the state must make up that money somehow.
“If you want to replace the school property tax, you have to come up with about $14 billion in revenue,” Reed said. “That’s how much money local school districts raise through property taxes throughout the commonwealth.”
Unless the state wants to cut $14 billion in school programs, teachers, textbooks and the like, they need to come up with the money somewhere. Sales taxes and income taxes are two areas that can offset that money, he said.
The issue with increasing the sales tax or income tax is that it is difficult to find a balance between the two because different areas of the state are unwilling to budge on one or the other. A workaround, he said, is to start looking at how to bring additional revenue to an area such as Homer City.
Reed also briefly touched upon the state-directed study that is under way to consider the merger of Homer City Borough and Center Township.
The study gathers information about municipalities and helps the township and the borough weigh the pros and cons of the situation.
Should a merger be approved, it would result in a single area with a larger population.
As a population increases, the municipality becomes eligible for more state and federal funding.
The idea that there would be more grant opportunities available is one of the major driving forces behind a merger.
Reed outlined some of Corbett’s proposal to the audience:
- Spending under the plan would be $28.44 billion, a $678 million increase over the current year, or 2.4 percent.
- More than 40 percent of the revenue in Pennsylvania comes from personal income tax. The second-largest revenue producer is the sales tax, at 32 percent.
- The largest part of spending is public welfare at more than 38 percent, followed by public education spending at 35 percent.
“This year the governor has taken a different route in proposing a state budget,” Reed said. “In the first two years, Gov. Corbett proposed a budget whether you liked it or disliked it, it basically stood on its own. This year the governor took an approach similar to what (former) Gov. Rendell took during his years in office — he linked the budget to a number of other major public policy initiatives.”
These policies are new transportation funding, reforms to the state pension system and the privatization of the state liquor system.
Transportation changes include phasing out the cap on the oil company franchise tax over the next five years, reducing the liquid fuels tax by 1 cent over the next two years, changing vehicle registration to a biennial cycle and driver’s license renewal to a six-year cycle and creating a new multimodal transportation fund to support aviation, freight, ports and waterways.
Pension changes include reducing the 2013-14 pension limits by 50 percent, a reduction from 4.5 percent to 2.5 percent. This change would save the state approximately $190 million, Reed said. Possibly the most controversial part is a proposal to further restrict payments into the pension system.
The liquor privatization plan is projected to generate $1 billion in revenue for state. These funds have been dedicated to a four-year education block grant called “Passport for Learning,” and would be used for school safety programs, to promote reading and math in K-3 programming, individualized learning and initiatives that deal with engineering and math.