Republicans offer more of the same, so here’s quick reference to Gov. Tom Wolf’s alternative revenue proposals
Republican legislative leaders have finally responded to Pennsylvania Gov. Tom Wolf’s complicated budget proposal with a plan of their own, and it’s a plan of stunning simplicity: let’s keep doing what we’ve been doing.
Under their party’s failed governor, Tom Corbett, the Republicans happily brought state government to a grinding standstill while they ran up $2 billion in public debt.
Under Corbett, the Republicans sponsored big giveaways to gas and oil companies, caused kids to do without schoolbooks, while simultaneously threatening pre-schools and kindergartens, school bands and athletics.
As if those good times weren’t good enough, the GOP leadership in the Pennsylvania legislature now say they want more of the same.
So they’ve countered Gov. Tom Wolf’s plan with what they’re calling an “austerity” budget of their own.
Republicans say their plan, like former Gov. Corbett’s plan, raises no taxes, cuts deeply into education, while giving deep tax breaks to their wealthy chums and political donors, the gas drillers.
And why not?
The Republicans’ politics are bankrupt, and their policies are bankrupt of ideas, so ‘why not drag the rest of us and our kids into bankruptcy with them?’ the reasoning goes.
Unfortunately, in case the Republicans haven’t been keeping up on current events, the state’s voters resoundingly disagree with them.
Corbett lost big in the last election and was thrown out of office in no small part because of these same losing budget policies.
What’s at stake?
To understand this year’s impending legislative stalemate, it helps to recall the specifics of Gov. Wolf’s proposed budget.
Gov. Wolf’s proposal is complicated, in part because that’s the nature of a $78 billion budget in one of the nation’s largest states.
Wolf’s plan is also complicated because it shifts increased revenue from some categories, like sales and income taxes, to offset other budget items, like education, property tax abatement, and pension solvency.
The state’s Independent Fiscal Office summarized Wolf’s proposals from testimony of administration officials at recent legislative budget hearings:
(All but the last item represents new revenue, or taxes, in 2015-16.)
$2.41 billion: raise personal income tax rate from 3.07% to 3.70%.
$1.55 billion: increase sales tax from 6 to 6.6%, and eliminate 45 sales tax exemptions.
$358 million increase: raise cigarette tax by $1 per pack, to total state tax of $2.60 per pack of smokes.
$84 million increase: more taxes on smokeless tobacco, cigars, loose tobacco and e-cigarettes.
$339 million: increase in Bank Shares Tax from 0.89% to 1.25%.
$166 million increase: Marcellus gas severance tax: 5% tax at the wellhead plus $0.047 per million cubic foot for fiscal year 2015-16 (note how this number keeps going down as the domestic fracking industry collapses; this number was once close to $1 billion).
$249 million: reduced corporate taxes
All told, these and other changes will bring an additional $4.7 billion to state coffers in 2015-16, and $8 billion more in 2016-17, the Fiscal Office reports.
But that’s not really the full story.
For example, of the $2.41 billion in proposed increased personal income taxes, $2.14 billion would be shifted to a Property Tax Relief Fund, to offset reduced local property taxes.
And $1.75 billion in revenue from sales tax would be transferred to cover pension obligations of the state Public School Employees’ Retirement System, or PSERS.
By 2019-20, the Fiscal Office estimates, $9.8 billion in tax increases, offset by $4.6 billion in property tax and rent relief, would bring an additional $5.2 billion of state and local tax revenue from this year’s baseline.
With this much money on the line and potentially up for grabs, there’s bound to be disagreements.
So how bad’s the disagreement between Gov. Wolf and the Republican-controlled legislature?
When you’re in a hole, the first thing is to stop digging. But these guys can’t even agree on the size of the hole they’re in.
For starters, the Fiscal Office disputes Gov. Wolf’s estimate that the state’s structural deficit this year stands at $2.3 billion; the deficit instead is only $1.5 billion, the office’s director, Matthew Knittel, says.
But few in Harrisburg, except apparently Knittel and Republican partisans, expect the red ink to stay at $1.5 billion.
Republicans disingenuously use the smaller deficit number to argue for the need for less revenues and taxes.
Even so, if revenues exceed the expected deficit, surpluses can always be added to a rainy day fund. (In fact, by law, at least fifteen percent of all unexpected surpluses must go to the rainy day fund.)
When Ed Rendell came into office, the state’s Rainy Day Fund held $1.2 billion. After twelve years of Rendell and Tom Corbett’s follies, that emergency fund was down to about $240,000, Wolf reported.
Battle lines drawn
In the last weeks of May, the Republican state senate leadership attacked Wolf’s plan to raise taxes, and instead focused in on two pet issues: state worker and teacher pension liabilities, and that perennial whipping boy, the state store liquor system.
“The state’s pension obligations are staggering,” GOP senate President Pro Tempore Joe Scarnati blogged on his webpage this May 19. “This year alone, we face a $1 billion increase in our pension contributions (in addition to $3.5 billion spent in 2014-15). As the pension crisis has continued to devour state resources and drive up property taxes, viable solutions have been difficult to come by.”
But addressing the pension liability problem alone isn’t going to fix our schools, or the state budget.
Former Gov. Corbett, like other governors before him, ignored the revenue side of the equation, to his own peril.
Old-time political hands in Harrisburg suspect that Scarnati’s focus on the pension system creates an opening for Gov. Wolf to cut a broader budget deal with the Republicans by compromising on pension reform. There really isn’t much more with which to horse trade.
What to expect
The problem for Republican legislators is that, sooner or later, they’ll have to pass a budget.
So expect a deal, however long it takes, to include pension reform, and some compromise on Wolf’s proposed tax increases.
But increased revenue — read taxes — certainly must happen after four years of Corbett’s fiscal irresponsibility.
Sorry guys, governments need revenue to keep running, just like cars need gas, and Republican fat cats need contributions from gas drillers.
Sacrificing our kids’ education isn’t an option. Pennsylvania schools must get better, not worse.
All this will certainly be interesting, and will test not only the state’s fiscal health, but also Tom Wolf’s political skills.
