Highlights of Gov. Tom Wolf's first state budget proposal for the 2015-16 fiscal year



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Highlights of Pennsylvania Gov. Tom Wolf's spending plan for the budget year that starts July 1:

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THE BIG PICTURE

—Increases spending through the state's main bank account by about 3 percent to $29.9 billion. Figure is $33.7 billion, a 16 percent hike, if payments to school pension fund and property tax relief earmarked for 2016-17 are also figured in.

— Raises taxes by over $4 billion on income, sales, natural gas drilling, banks and tobacco. The amount of money generated would rise to more than $5 billion once the higher tax rates are in force for a full fiscal year.

— Delivers new property tax relief of $3.2 billion to school districts for 2016-17, part of an effort to shift burden of public school funding away from local school districts.

STATE TAXES

—INCOME TAX: Increases to 3.7 percent, from 3.07 percent, to raise $2.4 billion. Effective July 1, 2015.

—SALES TAX: Increases to 6.6 percent, from 6 percent. Extends tax to services, and certain other currently exempt transactions, to generate almost $1.6 billion. Exemptions for groceries, clothing and prescription drugs would remain. Allegheny County's sales tax rate would rise to 7.6 percent, from 7 percent; Philadelphia's would stay at 8 percent. Effective Jan. 1, 2016.

—NATURAL GAS: Imposes new taxes on natural-gas production — 5 percent of value, plus 4.7 cents per 1,000 cubic feet of gas — to generate $166 million. Effective Jan. 1, 2016.

—CIGARETTE TAX: Raises per-pack tax to $2.60, from $1.60, to raise $358 million. Extends a 40 percent wholesale tax to sales of cigars, loose tobacco, smokeless tobacco and electronic cigarettes to generate $84 million. Repeal last year's $2 per pack cigarette tax increase in Philadelphia. It would take effect Oct. 1, 2015.

—CORPORATE INCOME TAX: Lowers rate to 5.99 percent, from 9.99 percent, and closes loophole that allows businesses based in other states to avoid the tax on their Pennsylvania operations. It would save businesses $249 million. Effective Jan. 1, 2016.

— CAPITAL STOCK AND FRANCHISE TAX: Eliminates, effective Jan. 1, 2016.

— BANK SHARES TAX: Raises to 1.25 percent, from 0.80 percent, retroactive to Jan. 1, 2014, generating $339 million

PROPERTY, WAGE TAXES

—Provides $3.8 billion, including $600 million in casino gambling revenue, to allow school districts to reduce their portion of property tax bills by 50 percent for the average homeowner. Wolf did not state what home value he was using for the average.

—Adds a new $426 million-a-year benefit to the property tax and rent rebate program to provide $500 rebates to all renting households earning $50,000 or less. Previously, rent rebates of up to $650 were limited to people 65 and older with incomes $15,000 or below.

—Eliminates property taxes for nearly 270,000 homeowners 65 and older, or one-third of the total. Some of those homeowners may have already had their property tax bills eliminated by rebates already in place.

—Reduces Philadelphia's wage tax to 3.48 percent for residents, 3.11 percent for non-residents in 2017.

EDUCATION

— Adds $400 million to public school operations and instruction, a 7 percent increase, to $6.1 billion.

— Cuts a projected $160 million in school district payments to cyber charter schools by capping the per-student subsidy at $5,950.

— Adds $120 million in early-childhood education funding, an 88 percent increase, to more than $256 million.

— Adds $100 million in special education funding, a 9 percent increase, to $1.15 billion.

— Adds $160 million for higher education, including state system universities, state-related universities and community colleges, a 9 percent increase to nearly $1.8 billion.

DEPARTMENT SPENDING

—EDUCATION: Raises 12 percent, to $13 billion (including $ 1.75 billion school pension fund payment.)

—HUMAN SERVICES: Raises 6 percent, to $11.9 billion.

—CORRECTIONS: Raises 7 percent, to $2.3 billion.

ECONOMIC DEVELOPMENT

— Borrows $675 million, with $350 million to recapitalize business development loan programs; $325 million to expand clean energy programs; $50 million for energy efficiency programs; $50 million for solar energy; $25 million to extend natural gas utility lines. Up to $55 million a year from new taxes on Marcellus Shale natural gas drilling would be used to pay off loans.

— Borrows $500 million through the Pennsylvania Infrastructure Investment Authority, or PENNVEST, for water and sewer system projects. Borrowing would be repaid by the authority's loan income.

PENSIONS

—Proposes that $3 billion in bonds be issued to refinance public school employees' pension liability, for $8 billion in savings over 24 years. Starting in 2017, debt service would be paid by up to $185 million a year in profits from planned modernization of the state wine and liquor store system. An estimated $80 million would also be drawn from modernization profits to help school districts reduce their pension costs next year. Refinancing would save school districts an estimated $370 million and the state $900 million over five years.

—Calls for the boards of the Public School Employees Retirement System and State Employees Retirement System to cut investment management fees by 0.6 percentage points, or $200 million annually.

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