State Budget Alert!
State Budget Alert
Please contact your representative and senator and urge them
- to support closing corporate tax loopholes
- to oppose the corporate tax rate cut
- to support licensing three resort style casinos
- to oppose increasing health insurance premiums for state employees (faculty and staff at public higher education institutions.)
The state is facing a budget gap of approximately $1.3 billion. The state must find $1.3 billion of new revenues over expected revenues to provide the same level of services in FY09 as the state provided in FY08.
Governor's FY09 Budget Proposal
The governor in House 2 – his FY09 budget proposal – increases revenue in three ways to help meet the budget deficit. These include: enhanced tax collections; closing corporate tax loopholes and licensing three resort style casinos.
- Enhanced tax collections increase revenue by $166 million.
- In separate legislation that accompanied House 2, the governor proposes several changes to the corporate tax code including combined reporting (preventing companies from shifting income to out of state subsidiaries to reduce their state taxes) and “check the box” (requiring companies to be file under the same classification for both state and federal taxes) and a phased in lowering of the corporate tax rate from 9.5 percent to 8.3 percent over three years. These changes are expected to raise $297 million in FY09. It takes effect half way through the year and there is no rate cut in the first year. When it is phased in, it will generate $300 million a year.
- The governor proposes using some of the licensing fees - $124 million - from casinos to provide local aid to cities and towns.
- In addition to increasing revenue, the governor plans to use monies from the “rainy day” fund and to make cuts. He has called for increasing state employees (higher education faculty and staff) health insurance premiums by as much as 66 percent in order to save $51 million in FY09.
Speaker Sal DiMasi's Plan
While no legislation has been filed, House Speaker Sal DiMasi announced his proposal for closing the budget gap.
- Enhanced tax collection to increase revenue by $166 million.
- Increase cigarette taxes, which provide $152 million, to help pay for increases in health care costs.
- Supports changes to the corporate tax code. Recommends adopting combined reporting and "check the box." However, DiMasi supports reducing the corporate tax rate from 9.5 percent to 7 percent by 2011. At that time, the proposal would generate only $44 million. For FY09, it is expected to bring in more than $184 million.
- In addition to increasing revenue, the speaker plans to use monies from the "rainy day" fund and to make cuts. He, like the governor, has called for increasing state employees (higher education faculty and staff) health insurance premiums by as much as 66 percent in order to save $51 million in FY09.
- Cancelling scheduled increase in unemployment insurance rates saves $150 million.
If the corporate tax rate were left at 9.5 percent, it would generate close to $500 million a year in new revenue.
While the House has not fyet iled legislation to address the speaker's proposals, most will be considered before the House takes up its FY09 budget in late April.