On Friday night, Sept. 18, Senate Republican and House Democratic leaders and Gov. Ed Rendell announced they had reached an agreement on a General Fund budget for the 2009-10 fiscal year. Enactment could come in a week to 10 days, ending the nearly three-month long impasse.

Legislative leaders had spent the week working out various details of a tentative budget agreement announced on Sept. 11 in order to secure the Rendell administration's support. The parties had remained at odds over differences of opinion about revenue gaps and revenue projections.

Changes to the original agreement that garnered the governor's approval include $380 million in new revenue sources through a new sales tax on various museum and performing arts tickets that had previously been exempt; a new tax on cigarillos; revised revenue estimates for a tax amnesty program; and $100 million in surplus funds from the MCARE account.

The proposed $27.945 billion budget is more than $1 billion less than what the governor had originally requested.

The agreement keeps in the place the originally announced increase in the Capital Stock and Franchise tax, as well as the change in the sales factor ratio for the Corporate Net Income tax and the improvement to the treatment of business tax losses. The proposed budget also contains no Personal Income Tax increase; no health insurance premium tax (MCO assessment); no natural gas severance tax; no sales tax on business services such as accounting, legal and financial, and no elimination of the sales tax vendor discount program.

Positives for business in the tentative budget plan would:

• Increase the Net Operating Loss cap to $3 million or 15 percent in fiscal year 2009-10 and $3 million or 20 percent in 2010-11.
• Increase the Corporate Net Income tax Sale Factor weight to 85 percent in fiscal year 2009-10 and 90 percent in fiscal year 2010-11
• Change the CSFT valuation deduction to $160,000 from $150,000

Some of the revenue sources in the proposed budget include:

• A net of $300 million from an increase in the Capital Stock and Franchise Tax. The CSFT will be set to 2.89 mills for 2009 through 2011. The phase out will continue in 2012.
• $200 million for the addition of table games
• $133 million from a tax amnesty program
• $65 million from Marcellus Shale leases
• $97 million from 25-cent-per-pack cigarette tax increase
• $30 million from a new tax on cigarillos
• $100 million from new sales tax on museum and live performance tickets
• $170.9 million: Redirecting cigarette tax funds from HCPRA to the General Fund
• $39 million this year and $75 million next fiscal year in reductions to various tax credit programs
• $211.4 million: accelerating the due date for sales tax collections
• $159.1 million: accelerating the due date fro personal income tax collections

To read the PA Chamber's press release on the initial budget agreement, click here.