HARRISBURG -- After two years of stringent budget proposals, Gov. Tom Corbett on Tuesday asserted that Pennsylvania has turned a fiscal corner as he put forth a plan that increases state spending -- so long as legislators act to limit employer pension contributions next year.
In his third annual budget address, Mr. Corbett, a Republican, laid out a $28.4 billion spending plan, an increase of $679 million from the current fiscal year, that would boost funding for public schools and welfare and maintain appropriations for higher education.
He also unveiled major and long-awaited proposals to avert imminent spikes in state contributions to public employee pensions and to provide for repairs to the state's system of transportation infrastructure.
"Now is not the time to be timid in our approach," Mr. Corbett told a joint session of the General Assembly. "Now is not the time to cling to old ideas and the status quo. Now is not the time to make small changes and expect big results."
The funding levels hinge on the willingness of legislators to pass at least part of a pension overhaul package that promises controversy.
In addition to diverting new hires from the traditional pension system into a 401(k)-style defined contribution plan -- a move supported by Republican leaders in the Senate -- the governor would change how benefits are calculated for current employees starting in 2015. Union leaders say they are confident such changes are unacceptable under Pennsylvania case law and have promised to file suit if the proposal becomes law.
While those changes would not take effect in the next fiscal year, the plan would reduce state expenses immediately by lowering a cap on the annual increase in employer contribution rates starting in July before allowing it to rise gradually. This change would save $175 million for the state and $138 million for school districts and other local education agencies next year, according to the administration.
Response to the budget plan came most swiftly from Democrats, the minority in both chambers, who said Mr. Corbett's proposed increases fall far short of the needs of the state. Rep. Dan Frankel, D-Squirrel Hill, said the proposal continues a pattern of corporate tax cuts while raising inadequate money for public education.
"He's filling small amounts of money in different things to try and say that he's increasing funding," Mr. Frankel said. "A sound bite to say that he's reversing the trend and now being able to make investments. It still doesn't add up to what we still need."
Republicans were more circumspect, praising the governor for putting forth a plan but stopping short of full-throated endorsement. Sen. Mike Brubaker, R-Lancaster, said legislators will have their work cut out overhauling pensions and carrying out Mr. Corbett's plan, announced last week, to privatize the state system of wine and liquor stores.
"There's a lot of heavy lifting for the General Assembly in order to pay for this budget," he said. "We need all of these reforms in order to make that budget work."
Leaders in Mr. Corbett's party commended the governor for his plans to boost funding for education and for programs for people with disabilities. Rep. Bill Adolph, R-Delaware and chairman of the House Appropriations Committee, noted the change from Mr. Corbett's earlier budgets.
"I certainly was pleased compared to the last two years," he said. "We don't have the decrease in higher education. We're starting at a much better place this year."
The governor's proposal for boosting overall spending by more than 2 percent comes after a pair of dramatic budget proposals during the first half of his term. He called for decreasing state spending by $900 million in his first year, and after seeking nearly level funding last year, lawmakers approved a final budget with about $500 million in additional spending.
As Mr. Corbett had announced previously, institutions of higher learning -- from the University of Pittsburgh to state universities to community colleges -- would see their state funding remain level next year. University leaders had agreed in exchange to keep tuition increases as low as possible.
Public education would see an increase of $90 million in basic subsidies and $224 million for increasing retirement costs. Schools also would be eligible for a share of $200 million in grants, so long as legislators pass Mr. Corbett's plan to sell off the state liquor system.
But the administration has connected its ability to maintain education funding to the success of legislation lowering state pension contributions. With total state pension payments scheduled to increase more than $500 million next year, and the retirement system for public school employees claiming the bulk of those payments, administration officials have suggested that -- should pension overhaul fail -- it would make more sense to recover the costs from within education funding than to dock another area of state spending.
Along with his budget and pension proposals, Mr. Corbett unveiled a plan to pay for improvements to the state's transportation infrastructure. His long-awaited plan would raise $510 million in the first year and $5.4 billion over five years, primarily by lifting a cap on a levy on wholesale fuel prices.
Democrats criticized the scale of the funding proposal, which falls short of the amount recommended in 2011 by the governor's Transportation Funding Advisory Commission. House Minority Leader Frank Dermody, D-Oakmont, said the governor had offered a "gimmick" in transportation funding that would raise far less than needed.
Republicans, too, indicated they could be open to additional funding. Sen. John Rafferty, R-Montgomery and chairman of the Senate Transportation Committee, said legislators are looking at all funding options.
"We're going to do transportation," he said. "We're not going to do transportation light."
After facing two years of criticism on deep cuts to the Department of Public Welfare, Mr. Corbett is proposing more spending by the agency, targeting new dollars toward services for older or disabled Pennsylvanians. Elderly residents will see an additional $50 million resulting from an agreement to hire a private manager for the state Lottery, and new funding will reduce a waiting list for those with intellectual disabilities.
A block grant for county services created last year will be expanded beyond its pilot program, and another $8.5 million will add more than 9,300 enrollees to the Children's Health Insurance Program.
Despite the funding boosts, continued reductions in administrative spending would mean eliminating 900 positions, including about 400 layoffs across state government.
The proposal contains welcome news as well for business owners, who would see a tax on business assets fully eliminated by 2014, and a higher cap on how much of its past losses a company can apply toward future tax liabilities.
Sen. Matt Smith, D-Mt. Lebanon, praised the governor for including $200,000 for support to communities like Moon that are fighting to keep military bases open. He called it "a very positive step," saying that those dollars could be used to pay for economic-development studies illustrating the impact that such bases have on a community.