Senator Wayne D. Fontana | News & Views: April 5, 2011

Senator Fontana joined Greg Herb, Legislative Committee Chairman of the PA Association of REALTORS®, from the left, and Representatives Sue Helm, Dick Stevenson and Garth Everett at a panel discussion about the REALTORS®’ Top 3 Legislative Issues. The panel was part of the REALTORS®’ Public Policy & Political Affairs Seminar held in Harrisburg last Tuesday and Wednesday.

Negotiations Between Port Authority and Its Union Continue

I was glad to hear that the Port Authority and its union (Amalgamated Transit Union Local 85) picked up talks again on Friday afternoon and are bargaining over concession proposals to be able to restore the service reductions that took place on March 27th. The giveback offer is historic and I am hopeful that, through continued negotiations, real progress can be made in addressing future legacy costs for retired employees, primarily health-care expenses, which is one of the big cost drivers in the Port Authority.

In his remarks before County Council this past week, Port Authority Executive Director Steve Bland told members that the future of the authority depends on the willingness of the state to provide a dedicated source of funding that is guaranteed inflation-adjusted. He also laid out several steps that he thought would make a case for that funding, including additional funding from the County and the creation of a special committee on public transportation, but noted that solving the problem depends on the willingness of the state legislature to provide a dedicated source of funding.

Contrary to Mr. Bland’s remarks, the state legislature has provided two direct sources of funding to the Port Authority. The first was Act 44, which established a funding source that provided for automatic increases, a stable source of funding and performance-driven funding. Clearly, the denial of the I-80 tolling by the federal government has impacted those increases and stability, but the state legislature has ensured that the Port Authority still receives as much as possible under the current funding stream. The Governor has indicated that he will not increase taxes or fees, but his Acting Secretary of Transportation, Barry Schoch, has announced that the Governor is in the process of forming a task force to make recommendations on how to finance transportation in the Commonwealth.

The second direct source of funding is in the hands of the County. The legislature gave the County the ability to impose a car rental and drink tax in 2007 with the intent that the funds be used to increase the county support for transit. Although capped at 10% for the drink tax and $2 per day for the car rental tax, the County’s current rate is only at 7% for the drink tax (reduced in December 2009). In 2010, the drink tax brought in $27.4 million and the car rental tax brought in $5.6 million for a total of $33 million.

I cannot speak for all members of the state legislature, but my recognition of the importance of public transportation and the need to have dedicated funding has not wavered. It is absolutely a priority – it relates to jobs, economic development, and the health and well-being of our community. The proof that the state legislature does recognize its importance is reflected in the fact that 63% of the Port Authority’s budget is provided by the Commonwealth – that is a higher percentage than even the Southeast Pennsylvania Transit Authority (SEPTA) receives.

That funding level is also one of the reasons that I have introduced legislation that would change the Port Authority Board’s make-up to ensure that the Commonwealth has a seat at the table. Senate Bill 926 (SB 926) amends the Second Class County Port Authority Act to require that one member of the board shall be a member of the Senate and one shall be a member of the House of Representatives. Additionally, one member shall represent labor and one member shall be a member of the transit council. The bill also retains the representative from County Council.

I don’t believe that having representation at the table will solve all of the problems, but I do believe that designating these specific members will provide a clearer picture of the state’s responsibility and capability to address funding and to identify options available locally. It is time for the county to expand the board’s perspective for its local funding decisions and options.

2011-12 Budget

Last Thursday, the Senate Appropriations Committee finished its budget hearings and the gathering of information from the many Departments and agencies that are funded by the Commonwealth. Now, the hard part comes. While we await a bill from the House of Representatives (it is rumored that it will be introduced after Easter), the Senate Democratic Caucus is still meeting and have ongoing conversations about our priorities and what can be done to address those priorities in this budget process.

As I have mentioned previously, many of the concerns that our Caucus had appear to have been shared by the Republican members of the Senate if the hearings were any indication. In fact, we have seen some bi-partisan support of efforts to restore education funding as well as imposing a Marcellus shale tax. How those efforts play out over the next few months will say a lot about what this process will look like in the coming years as well.

Many of you have contacted me directly on the budget and the issues with which you have a concern. Please be assured that I am with you and am going to be your voice on these issues in Harrisburg, but – as I have asked before - we need the voters to tell Governor Corbett that his budget is not their budget. The Republican members of the House and Senate need to hear that same message. We all understand that we must live within our means, but there is much work to be done at the negotiating table. The budget process is always a difficult process. We must work within the parameters that have been set and giving more money in one area means taking away money from another – or identifying new revenues. I don’t know what all of the answers are, but I am going to continue to look for them and fight to protect my constituents.

PA Works

The sixth and final component of the PA Works plan is a focus on tax fairness. No one disputes that an improved business tax climate is essential to PA’s economic recovery. What some have failed to acknowledge, though, is that it is not just big business that should have an improved tax climate – but all businesses. Reducing corporate tax rates and implementing principles of tax fairness will make Pennsylvania a more business-friendly, competitive state. The four bills in this portion of the plan identify common-sense reforms that will stimulate economic growth and business development.

The first bill addresses the Delaware Loophole. Large corporations who do business in Pennsylvania park their "paperwork" across the border in Delaware and, as a result, do not pay state taxes here. Thanks to a special exemption in Delaware law, they pay no state income tax there either. This “loophole” only applies to companies that are designated as C Corporations and while it is a completely legal tax strategy, it’s not a very fair one. Smaller businesses must pay the state corporate income tax, in addition to other federal and local taxes. Although the names of companies that utilize the Delaware Loophole are confidential (all information on PA tax returns is confidential), estimates suggest that the loophole costs Pennsylvania $450 million a year and that 75% of all corporations take advantage of this opportunity.

Legislation in the PA Works plan would close the Delaware loophole by implementing combined reporting to require that state tax returns be filed consistently with federal returns to recoup lost revenue. By doing so, the Corporate Net Income (CNI) tax rate could be reduced to 7.5% from its current rate of 9.99% (the second highest in the nation).

A second bill proposes increasing the single sales factor; this method is used to divide business income among states for the purpose of taxation. By allowing taxation to be based solely on sales, home-based Pennsylvania corporations would receive more favorable tax treatment for their PA sales and wouldn’t have increases in staff and property/equipment count against them in determining their taxes due.

The third bill would increase the Net Operating Loss (NOL) ceiling. The NOL is an important tool for new and early-stage businesses that may have suffered income losses in their early years of development. Many technology and health-science companies, which the Pittsburgh region is flush in, find themselves in this situation and are able to use the NOL to reduce their taxable income. The proposal is to increase the ceiling for NOL claims from $3 million to $5 million and from 20% to 25% of taxable income.

Finally, the fourth bill is aimed at exploring other options to modernize the tax system in PA. The Capital Stock and Franchise Tax (CSFT) is an onerous tax that is currently being phased out. Before eliminating it, however, this bill would delay the phase-out until January 1, 2013 and use the $80 million in revenues to capitalize the PA Works fund. When the phase-out is complete in 2015, consideration should be given to an Alternative Minimum Tax to continue the investment in the fund and insure that all businesses continue to make at least some modest annual business tax payment.

Other states such as Ohio have recently addressed the tax fairness issue by making even more drastic changes to their business tax system by instituting a transaction-based rather than a profit-based business tax system. While such an overhaul would take time to implement responsibly, this system and other tax models deserve serious study in an effort to reform our tax code and create a fairer, more affordable and competitive business tax climate here in Pennsylvania.

Brookline – We’ve Moved!

My Brookline Office has moved – right next door! Come and visit our new offices at 932 Brookline Boulevard. My phone and fax numbers, and all other contact information remain the same!

Have You RSVP’d?

Tomorrow evening is the community meeting regarding the IGA Market on Broadway – and we’re holding it in the IGA Market on Broadway! The meeting begins at 7 p.m. Although RSVP’s are not necessary, it allows us to plan for seating so if you have not yet RSVP’d, please do.

Hollywood Theater Opening Again

Have you heard? The Hollywood Theater in Dormont will reopen on May 4th with a showing of “The New Metropolis” hosted by 10,000 Friends of Pennsylvania. I am thrilled to be a member of the Advisory Board of The Friends of the Hollywood Theater and excited to see the planning and efforts going on in this community. Although opening only part-time in May, The Friends of the Hollywood Theater have big plans for later this summer. Stay tuned!

This past week concluded the budget hearings in Harrisburg. On Monday, the Auditor General, the Judiciary and the Department of Labor & Industry appeared before the Senate Appropriations Committee. That morning, a rally was held with several hundred students, faculty and staff of state colleges and universities to support higher education. It’s clear that those most impacted by the proposed cuts understand what it will mean to their education and it was gratifying to hear many of my colleagues, on both sides of the aisle, also speak to their concerns.

Tuesday’s hearings included the Departments of Education, Corrections and Community & Economic Development. There were many tough questions for the Acting Secretaries – and I believe that much more information needs to be provided as we move through this process. Also, on Tuesday, I participated in a Legislative Panel at a PA Association of Realtors conference. I spoke about SB 353, legislation prohibiting private transfer fees, and why I believe it’s a priority for our Commonwealth. Representatives Helm, Everett and Stevenson were also on the panel to address the three legislative priorities that the Realtors have for this session – including licensure of appraisal management companies and a repeal of the sprinkler mandate.

The Department of Public Welfare and Agriculture as well as the PA Gaming Control Board answered questions of the Appropriations Committee. Our gaming industry continues to make progress, even in a down economy. I was recently contacted by a constituent who stated that if Governor Corbett believes imposing a tax on the Marcellus shale industry will result in the loss of jobs or a slower economy that he should look to the gaming industry. One of the highest taxes in the country is imposed upon the industry, yet it continues to make gains. Perhaps Governor Corbett should take a note from that constituent.

Hearings concluded on Thursday morning with appearances by the Department of State, the PA Emergency Management Agency and Homeland Security.

On Friday, the conversations turned back to the district and its issues as I attended meetings with Mayor Ravenstahl to hear what the City’s legislative priorities are and one with the Wilkinsburg Penn Water Authority to discuss water quality in Western PA. The weekend and Monday also included several meetings with constituents and groups with budget and legislative concerns, including a meeting with the American Federation of Teachers in PA, before I headed back to Harrisburg this morning for session.