After considerable back-and-forth, Gov. Ed Rendell signed into law a state budget for the 2009-10 fiscal year, ending a 101-day impasse.

The general appropriations bill funds $27.8 billion in state spending. A partial list of appropriations that made it into the bill is available here.

As in the original handshake agreement and subsequent budget plans since, the new budget unfortunately reverts the Capital Stock and Franchise tax back to 2008 level of 2.89 mills retroactive to Jan. 1, 2009. The 2.89 rate would be effective through 2011. The change would amount to $373.9 million this fiscal year and $550.6 million in 2010-11.

The budget includes some additional progress on two of the unified business community's top business tax priorities. It increases the cap on Net Operating Loss Carryforwards from $3 million or 12.5 percent of taxable income to $3 million or 15 percent in 2009 and $3 million or 20 percent through 2013; and changes the Corporate Net Income tax apportionment formula from 70 percent sales, 15 percent property and 15 percent payroll to 85 percent sales, 7.5 percent property and 7.5 percent payroll. The formula will then become 90 percent/5 percent/5 percent in 2010-11.

The budget rejects the broad-based 2 percent tax on health insurance premiums opposed by PA Chamber members, calling instead for an extension of the Gross Receipts Tax on Medicaid-only managed care organizations. However, the budget includes a mechanism that would result in the termination of the GRT if the tax is found to be an impermissible taxing scheme
for the purposes of receiving federal funds.

The tax code bill requires the bi-monthly remittance of the Personal Income Tax and Sales Tax, which could potentially increase red tape for companies that are accustomed to uniform rules among other states with regard to tax remittance timelines.

The plan also calls for an increase in the cigarette tax and a new tax on small cigars; revised revenue estimates for a tax amnesty program; and $100 million in surplus funds from the MCARE account.

The budget also transfers $755 million from the state's Rainy Day Fund, depleting that account. Another $60 million in revenue will come from leasing state land for natural gas drilling. A new tax on natural gas extracted from the Marcellus Shale is not included in the budget.

A number of tax credits are also reduced, including the Education Improvement Tax Credit and Research and Development Tax Credit.

Still to be resolved is gambling expansion, which is set to bring in $240 million. Until that legislation passes, "non-preferred" allocations – the four state-related universities and some museums and medical institutions – will not receive funding.