November 21, 2013 / 11:36 PM / in 4 years

Pennsylvania governor scores rare win with transportation bill

Nov 21 (Reuters) - Pennsylvania Governor Tom Corbett, considered among the most vulnerable U.S. governors seeking re-election next year, scored a much-needed political win on Thursday when the state legislature approved a $2.3 billion transportation package he had championed.

Corbett’s voter approval rating is low, especially for an incumbent, and he struggled earlier this year to get his biggest policy initiatives, including the transportation bill, past a state legislature controlled by his own Republican party.

Only one in five Pennsylvania voters think Corbett deserves to be reelected - and just 37 percent of Republican voters believe so, according to an Oct. 31 poll from Franklin & Marshall College. The same poll found that 61 percent believed the state is “on the wrong track.”

Approval of the transportation package is a shot in the arm for Corbett, according to G. Terry Madonna, director of the Franklin & Marshall poll.

“This demonstrates executive leadership by this governor, and that’s essential,” Madonna said. “This is one of the ways he can turn the narrative around.”

Since taking office in January 2011, Corbett hasn’t made much progress on some of his biggest agenda items.

He wants to privatize the state-owned and operated liquor system - a move voters support - but the measure has stalled.

Corbett is also trying to privatize the state’s lottery, but the effort has suffered setbacks.

Another key Corbett legislative initiative, to reform the state’s public pension system, has failed to gain traction.

The state’s retirement system is unhealthy, even compared with other U.S. states wrestling with large pension funding gaps and growing costs.

Its pension system was only 63.9 percent funded in 2012, well below the 68.4 percent median level for U.S. states, according to a report by Morningstar on Wednesday.

When asked what passage of the transportation package meant for Corbett politically, his press secretary Jay Pagni said that the governor “continues to work strongly and vehemently for the people of Pennsylvania” and “appreciates the bipartisan efforts in both chambers.”

Pagni said that Corbett would continue pushing for his policy and legislative initiatives but would not specify which one he would focus on next. “There is work to be done on all fronts,” Pagni said.

The transportation legislation, which Corbett said he will sign, will provide funds to replace bridges, rebuild and widen roads and fix transit systems.

Unlike many other states that use borrowing to finance such long-term capital projects, Pennsylvania pays for much of its infrastructure as it goes.

The road and bridge projects will be financed primarily by the people using them, with higher wholesale gas taxes and increased fees for vehicle violations, licenses and registrations. Some changes will start Jan. 1, with others to be phased in over the next five years, ultimately generating at least $2.3 billion annually beginning in fiscal 2018.

A unusual coalition of supporters rallied behind the bill to improve Pennsylvania’s transportation systems, including business, organized labor, and politicians from both sides of the aisle, analysts said.

The package is “critical for the state’s economy... creating jobs in the short term and improving economic performance down the road,” said Sharon Ward, executive director of the left-leaning Pennsylvania Budget and Policy Center.

Some lawmakers agreed to support the bill after a prevailing wage clause was changed so that smaller projects, those under $100,000, would not have to comply with prevailing wage rules.

Overall, the transportation bill is a “long-term positive for the state,” said Dan Heckman, senior fixed income strategist at U.S. Bank Wealth Management. “But we’re not overly eager about buying Pennsylvania bonds.”

The state’s more than $47 billion long-term pension liability and the financial crisis in Philadelphia’s school district, among other issues, have caused the firm to shy away from Pennsylvania debt.

“The credit still has the potential to decline over time,” he said. “We’d rather buy credits we think are on the upswing.”

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