On Tuesday, July 21, the state House voted to reject Senate amendments added to a House-passed budget bill (H.B. 1416), meaning work to adopt Pennsylvania's 2009-10 fiscal year budget now heads to a conference committee. Leaders from the four legislative caucuses will now attempt to work out an agreement on the budget, which was constitutionally required to be adopted on June 30.

The Senate amendments would have reduced state spending by a modest 3.6 percent; rely on various one-time revenue sources to address the deficit from the 2008-09 fiscal year; and not raise taxes.

The proposal was vastly different than what the House passed and sent to the Senate on Friday, July 17.

The House's budget would have spent nearly $300 million more than the budget originally offered by Gov. Ed Rendell and included various tax increases, including a 2 percent tax on virtually all health insurance plans in the Commonwealth, and retroactively increasing the Capital Stock and Franchise tax back to the previous rate of 2.89. The increase means that businesses that have paid the 1.89 mill rate would have to make up the difference between that amount and 2.89 mills.

PA Chamber members oppose a "freeze" in the CSFT because it is a tax increase, as well as the 2 percent health insurance premium tax, believing that other options that don't lead to higher health-care costs should be considered to replace a federal Medicare-only premium tax set to expire in October.

The original $29.1 billion version of H.B. 1416 would have spent more than proposed by the governor even with the absence of funding for community colleges and colleges and universities within the State System of Higher Education. Lawmakers' plan was to vote separately on higher education funding, raising the possibility of a potential Personal Income Tax hike.

The Senate amended budget plan proposed to spend $27.1 billion, and did not include tax increases.

"It's well past time for Pennsylvania to resolve its budget crisis," said Gene Barr, PA Chamber vice president of government and public affairs. "The legislature had an opportunity to do so by approving a proposal that holds the line on taxes and makes responsible cuts in spending at a time when our economy dictates that state government tighten its belt, just like families and businesses have had to do."

Forty of the 47 states that have already adopted their budgets for the 2009-10 fiscal year have done so without a broad-based tax increase. California appears to be the latest that may do so as the governor and legislative leaders there announced an agreement on a budget that calls for no tax increases despite a staggering deficit of $26 billion.

"House Bill 1416 as amended by the Senate was a responsible spending plan that would help sustain the Commonwealth during a weakened economy and raise prospects for eventual recovery," Barr said. "Pennsylvania's business community urges the conference committee to do the right thing for families, individuals and job creators and agree on a fiscally responsible budget for the state."