RadioPA Roundtable

Radio PA Roundtable 01.04.13

On this week’s Radio PA Roundtable, Brad Christman and Matt Paul bring you Governor Tom Corbett’s take on his lawsuit against the NCAA; we review the fiscal cliff deal in Washington and its impact on PA; and we have a preview of the 97th Pennsylvania Farm Show which begins Saturday.

Radio PA Roundtable is a 30-minute program featuring in-depth reporting on the top news stories of the week.

Click the audio player below to hear the full broadcast:


Sen. Casey Pushes for Gift Card Protections

Gift cards may be popular holiday presents, but – if you’re not careful – you could be stuck with nothing more than a lump of coal.   With that in mind, US Senator Bob Casey (D-PA) is pushing for action on the Gift Card Consumer Protection Act, which would ban all gift card expiration dates and user fees.

“It’s billions of dollars that are sometimes wasted when you have these arbitrary rules about deadlines,” Casey tells Radio PA, calling it a major & a timely issue.  “It’s really an economic issue for consumers, but it’s really a broader economic issue for our larger economy.” 

Consumer Reports surveys show that a quarter of Americans who receive gift cards during the holidays have at least one lying around ten months later.  Casey’s office also cites a financial services firm, which found that consumers left $2.5-billion worth of gift-card value on the table in 2010.

With so much “fiscal cliff” work that must be done before the end of the calendar year, Casey says he will work to attach this language to a larger financial bill that could be on the move.  If the job can’t get done during this holiday season, Casey wants to revisit the issue in 2013. 

The Act, which was introduced by Sen. Dick Blumenthal (D-CT), would also bar bankrupt companies from selling gift cards, and protect consumers from being stuck with worthless cards after a company goes out of business.

Prepping for another Tough Budget Season

The Corbett administration’s third budget season may be its most difficult yet, according to Budget Secretary Charles Zogby.  The 2012-13 Mid-Year Budget Briefing projects the state will end the current fiscal year $85-million dollars in the black, but $1.3-billion in mandatory cost drivers await in the new fiscal year. 

For instance: pension obligations ($511-million), Medical Assistance ($650-million) and debt service ($89-million). 

Charles Zogby gives reporters a mid-year update on the state budget.

“We’re working very hard in a number of areas – education would be one, health & human services – to not have to make the level of deep cuts that we’ve made in the past,” Zogby told reporters huddled in a capitol conference room. 

Zogby’s not divulging many details ahead of Governor Tom Corbett’s February budget address, but says it will not include any new taxes. 

For now, the budget planning revolves around a hypothetical 3% revenue growth in FY2013-2014, but Zogby knows a lot can change in the next two months.  “Not the least of which is the fiscal cliff,” Zogby says, noting that sequestration alone could have a $300-million dollar impact on the Commonwealth. 

Legislative Democrats have been critical of the governor’s first two spending plans, and they don’t see things changing during the coming budget cycle.  “We have suggested that jobs, education, health care and transportation are things to invest in,” says House Democratic Appropriations Chair Joe Markosek (D-Westmoreland).  “The Governor has suggested that corporate welfare is something that we ought to be investing in.” 

Democrats say it’s showing up in the state’s tax receipts, where corporation taxes are running 18% above projection for the fiscal year, while sales and personal income taxes are lagging.

PA Budget Debate

Closing in on the Fiscal Cliff

The federal government is less than a month away from driving straight off the “fiscal cliff,” but U.S. Senator Pat Toomey (R-PA) believes there’s still time to avoid it.  “The great dangers of the fiscal cliff are the massive tax increases that are scheduled to go into effect on January 1st,” Toomey told reporters on a recent conference call.  “If that were to happen, it would very likely throw the economy into a recession and cost us hundreds of thousands – if not over a million – jobs.”

Toomey is in the thick of Senate discussions, and has been meeting privately with Democratic Senators in an effort to broaden support for a plan he first put forward in last year’s Super Committee.  It would call for lower income tax rates for all – with limitations on deductions, loopholes and write-offs that will raise hundreds of billions of dollars in net revenue over time. 

Inaction will lead to rate hikes on income taxes, estate taxes, dividends and capital gains.  The White House says a median-income Pennsylvania family of four (earning $80,400) could see its income taxes rise by $2,200.  A 2-percentage point payroll tax cut would also expire.      

But that’s just the tax hike side of the equation.  The fiscal cliff also includes $1.2-trillion dollars in federal spending cuts over the next ten years. 

Professor David Passmore with Penn State’s Institute for Research in Training and Development crunched the numbers to see how sequestration alone would affect the Keystone State.  “Pennsylvania’s share would be in the order of 35 – 40,000 jobs; the loss of about $6-billion in total economic output; about $3.5-billion in industry sales; and about $2.1-billion in after tax personal income,” he explains to Radio PA.  The report was first published in Pennsylvania Business Central.   

Like Toomey, Passmore believes the “fiscal cliff” is the recipe for another tough recession.


What Would the Fiscal Cliff Mean for PA?

The fiscal cliff is more than just a federal issue.  The automatic spending cuts called for in federal sequestration could mean $60-million fewer federal dollars for Pennsylvania next year, and that’s just half of this so-called cliff. 

Without Congressional action, a variety of tax increases will also take effect as of January 1st, which could raise a combined $600-billion dollars in federal revenue in 2013.

Those tax increases could have serious implications for the Pennsylvania economy.  “Pennsylvania comprises about 4% of US economic activity, so if we apportion that number to Pennsylvania, a very rough order of magnitude might suggest a tax increase of $22-billion dollars,” Independent Fiscal Office (IFO) Director Matthew Knittel explained on Radio Smart Talk.  “[That’s] a very rough order of magnitude and a worst-case scenario.” 

Knittel believes Congress will take some action by the end of the year, just not full action, so he says a more realistic economic impact on PA would be in the $8 – $20-billion dollar range.” 

The payroll tax cut alone would mean $5-billion fewer dollars for PA taxpayers.  “If one assumes that roughly 70% of that would have been spent, and roughly 40% would have been spent on taxable items, that tax increase suggests a roughly $70 – $80-million dollar reduction in sales & use tax revenues,” Knittel says. 

The potential impact of the fiscal cliff was included in the IFO’s recently-released Economic & Budget Outlook, which projects lackluster growth in the Pennsylvania economy.

Even Anglers would Feel the Fiscal Cliff

The Pennsylvania Fish & Board Commission doesn’t receive any government funding, but even it would feel the effects of the looming fiscal cliff. That’s because their trust fund dollars would be subject to federal sequestration. 

The Sport Fish Restoration and Boating Safety Trust Funds are raised through excise taxes on things like fishing tackle and boat fuel.  The money can’t be spent on anything other than the intended purpose, but Pennsylvania Fish & Boat Commission Executive Director John Arway says that wouldn’t stop the government from sequestering 7.6% next year. 

“I really liken it to someone at a bank, who has access to your account information, and takes 7.6% out of your savings account without your permission to show that they can cover the bad checks that they’ve written,” Arway explains.  “They promise to return the money sometime in the future, but in the meantime you have to find other funds to pay your bills.” 

The shortfall would amount to almost a million dollars for the Pennsylvania Fish & Boat Commission next year, which translates into almost 40,000 additional fishing licenses they would have to sell in order to avoid cuts to programs and services. 

Arway is urging PA’s Congressional delegation to exempt excise tax revenue from sequestration, in the event that the federal government does not avert the fiscal cliff (a potentially devastating mix of tax hikes and automatic spending cuts) on the first of the year.