Pennsylvania Governor's New Budget Provides Generous Stimulus Package

Pennsylvania Governor Edward Rendell recently unveiled an economic stimulus program that will invest nearly $2 billion in bonds and loan guarantees. The stimulus program is intended to leverage at least $5 billion in private investment in economic development projects, creating jobs in Pennsylvania's small and mid-size cities and towns.

Key provisions of Plan for a New Pennsylvania include:

• $500 million for the Pennsylvania Opportunity Fund, a program to provide high demand financing to the state's young companies.
• Keystone Innovation Zones (KIZs) to improve and encourage Pennsylvania’s research and development (R&D) efforts and technology commercialization apparatus. KIZs would be geographically designated zones of opportunity and innovation designed to harness resources made available through partnerships among institutions of higher education, private businesses, business support organizations, commercial lending institutions, venture capital networks including angel investors, and foundations. There would be no limit on the number of KIZs created, but the zones must be established within three years from the commencement of the program.
• Expansion of the Research and Development Tax Program. The governor's plan would increase program funding from $15 million to $60 million, including a set-aside increase of $9 million, or $12 million total, for small businesses. Companies that increase their investment in R&D activities could reduce their taxes by up to 75 percent.
• Large property tax cuts. Plan for a New Pennsylvania would return $1.5 billion in property taxes, giving homeowners tax relief at averaging 30 percent, but no less than 15 percent. And,
• Investment in education to close the resource gap between school districts. The plan would invest up to $1.25 billion annually within three years to fund proven programs that boost student achievement.

Governor Rendell, navigating a budget deficit, said his plan requires new revenue sources such as slot machines at racetracks, increased fines on reckless drivers and a higher tax on malt beverages, which was last raised in 1947. To help fund the property tax relief and school programs, the governor proposes a personal income tax increase of 0.65 percent. Combined with a separate 0.3 percent income tax increase, Pennsylvania's personal income tax rate would rise to 3.75 percent — the first increase since 1992, according to press reports.

For more information on Plan for a New Pennsylvania, visit http://www.planforanewpa.com.