Questions about budget remain
Some legislators express concerns about ‘smoke and mirrors’ in budget
Pennsylvania broke its budget impasse record last year by going nine months without a state budget in place, but the bitter stalemate surrounding the 2015-16 budget will not be repeated this year, since Democratic Gov. Tom Wolf and the Republican-led General Assembly have agreed upon on a state budget for 2016-17 as well as a tax and revenue package to finance the budget.
At the end of June, the state House voted 132-68 and the state Senate voted 47-3 in favor of the budget bill, Senate Bill 1073; Wolf allowed SB 1073 to become law
without his signature July 12, completing the first half of the budget deal. On the following day, the state Senate voted 28-22 and the state House voted 116-75 to pass the tax and revenue package, House Bill 1198.
Wolf signed HB 1198 into law the evening it was passed by the General Assembly. Technically the new budget was still about a week-and-a-half late, after the deadline of July 1 when the new fiscal year began, but it’s a far cry from last year’s prolonged standoff.
Wolf made some concessions on the $31.5 billion budget, and as with last year’s budget, it still does not contain some of the major goals he had campaigned on in 2014. The new budget does include a $200 million increase for basic education funding, but it’s short of the $350 million increase Wolf had originally sought for the 2016-17 budget.
The budget also includes increases of: $40 million for higher education, $30 million for early-childhood education, and $20 million for special education. The budget allocates $15 million for fighting opioid addiction, which has become the leading cause of accidental death in the commonwealth.
The budget does not include reforms for property tax or income tax, nor does it implement an extraction tax on hydraulic fracturing, or “fracking,” for energy companies drilling for natural gas in the Marcellus Shale.
The revenue package will implement some new taxes to help fund the budget, including taxes on tobacco products, digital downloads, and lottery winnings. Cigarette taxes will increase by $1 per pack, effective Aug. 1. Taxes on smokeless tobacco and rolling tobacco will go up by 55 cents per ounce. A 40-percent wholesale tax will be applied to electronic cigarettes, as well as ‘e-liquid’ cartridges and other vaping devices.
The taxes on non-cigarette tobacco and e-cigarettes start Oct. 1. However, cigars of all varieties will remain tax-free.
Pennsylvania’s 6-percent sales tax will be applied to streaming services and downloads of digital products, such as Netflix, e-books, music, apps, and games, starting Aug. 1. Winnings from the Pennsylvania Lottery will now be subject to the state’s income tax of 3.07 percent.
The budget bill and the tax and revenue package passed the General Assembly with bipartisan support, but the latter was approved by a smaller margin in both chambers. Some legislators on both sides of the aisle voted in favor of both bills, some voted against both, and others chose to vote for one of the bills but against the other, due to various concerns with the legislation.
State Rep. William Adolph, R-165, of Springfield, lauded the compromise that went into reaching the budget deal in an op-ed he submitted to Digital First Media. Adolph is the chairman of the House Appropriations Committee. He voted for both SB 1073 and HB 1198.
“The passage of the general fund budget for the 2016-17 fiscal year represents something that is becoming all too rare in government, compromise,” Adolph said. “People throughout Pennsylvania and throughout our country are becoming frustrated by the increased polarization in Washington D.C. The people we represent sent us to Harrisburg to get things done and that is why I am proud that we came together, Republicans and Democrats, to create a budget that both sides can support.
“The budget impasse last fiscal year went far too long and caused pain for our school districts, nonprofits, county governments, universities, and our hospitals. We in the General Assembly and Governor Wolf realized that we could not go through that kind of impasse again.”
Adolph said compromise has sadly become a dirty word in politics. “Too often people associate compromise with ‘selling out,’ but the reality is compromise is an acknowledgement that we have a diverse set of values and priorities and a recognition that we need to come together for the greater good,” he said. Adolph said the budget is fiscally responsible, and it puts the people of Pennsylvania first.
State Rep. Madeleine Dean, D-153, of Abington, voted against the initial budget bill, but she voted in favor of the revenue bill. She said she supported the increased investment in education provided in the budget, but she thought it was irresponsible to vote for a budget without first figuring out how to pay for it. “The bottom line is we hadn’t funded it (the budget); we were doing it backwards,” she said.
Dean said she decided to vote for the revenue package after the Legislature had already passed the budget, because at that point the budget had already been improved, and it was incumbent upon the legislators to make sure they had a plan in place to pay for the budget.
“It was the best Harrisburg could do at the time, and the alternative was not acceptable to me,” Dean said. She said she did not want to risk a budget impasse like last year, which would leave human services and education hanging in the balance, without the funding they need.
Dean said she was concerned that failing to pass the revenue package could also lead to Pennsylvania’s credit rating being downgraded again, which would lead to higher interest rates for the state, and in turn more taxes that would be passed on to the public to pay for it.
She said she had proposed alternate ways for the state to generate revenue, such as an extraction tax on natural gas drilling and an increase in the personal income tax along with a decrease in the sales tax, which would be a more progressive tax overall.
State Rep. Steve Barrar, R-160, of Upper Chichester, voted in favor of both the budget bill and the revenue bill. He praised the spirit of cooperation among Republicans and Democrats in both chambers of the Legislature, along with Wolf, for settling on a fair budget.
He said nobody is happy to vote for taxes, but the state had to find a way to pay its bills. Most of the new spending in the budget is to cover mandates from the federal government, for things like education, welfare programs, and pensions, Barrar said.
However, the pensions are still not fully funded by the new budget, he said. Barrar said he and other legislators are looking for ways to control spending, and the hope is that the economy will continue to recover and help boost revenues, without the need to raise taxes in a big way.
State Sen. Andy Dinniman, D-19, of West Whiteland, voted for the budget bill, but against the revenue bill. He said he voted against the tax and revenue package because it does nothing to address the need for property tax reform in the state, and some of the revenue outlined in the bill is based on projections for which there are no guarantee. He described it as a “smoke-and-mirrors” approach to budgeting.
Dinniman said some of these projections are not feasible, such as borrowing $200 million from the state’s medical malpractice fund, which the state would need to begin repaying in July 2018.
The state is essentially borrowing against itself in order to make the budget balanced, he said. The budget also projects that recently passed legislation to allow expanded wine sales in restaurants and grocery stores, starting Aug. 8, will generate additional revenue.
Dinniman also took issue with the projection that the state will receive $100 million from online gambling because legislation has not yet been passed to legalize online gambling in the commonwealth, so there’s no guarantee the state will actually get that money.
The state House has supported pending legislation that would legalize online casino-style gambling and allow slot machines to be placed in off-track betting parlors and airports, but the state Senate is not expected to act on the bill, House Bill 2150, until the fall.
Critics of this plan have speculated that most of the money generated would be a one-time cash infusion from licensing fees, and online gambling would not be a sustainable source of revenue in subsequent years.