February 9, 2016

Budget Edition

Gov. Tom Wolf delivered his second annual budget address to a joint session of the General Assembly this morning, and it was full of bad news on top of more bad news.

Instead of laying forth his ideas for moving Pennsylvania forward, such as “protections for the LGBT community in housing and the workplace, the legalization of medical marijuana, a raise in the minimum wage and criminal justice reforms,” Wolf painted a bleak picture for the future of Commonwealth, stating that the $2 billion deficit the state is facing will result in “fiscal catastrophe.” Failure to act to close the deficit will result in a massive property tax increase, teacher layoffs, cuts to services to seniors and those living with mental illness and intellectual disabilities, as well as cuts in funding for child care and domestic violence shelters and rape crisis centers.

Wolf went on to describe the circumstances leading up to the current deficit and the details of the 2015-2016 compromise budget deal that fell through on more than one occasion, stating more than once that “House Republican leaders just walked away.”

Looking forward, Wolf encouraged the legislature to continue its work on the compromise budget deal, which included a historic investment in schools and historic changes to the pension and liquor systems. Standing by his priorities from his last budget address, Wolf stated that the people of Pennsylvania still deserve “schools that teach, jobs that pay and government that works.”

The speech, in and of itself, was light on details on how the Governor proposes to deliver those three things. According to the administration, the total spend for the 2016-2017 state budget is $32.7 billion (though it moves over $560 million in pension spending from the General Fund to a restricted account to fund the state’s payment to PSERS). Gov. Wolf is asking for an additional $200 million for basic education funding and an additional $60 million for early child hood education to enroll about 14,000 additional children in Pre-K Counts and the Head Start Supplemental Assistance Program. He is also proposing an increase in human services spending in the amount of about $800 million and an increase of $300 million for the Department of Corrections.

To foot the bill for the increases, the Governor is proposing several new tax-based sources of recurring revenue, as follows:

  • An increase in the Personal Income Tax from 3.07 to 3.4 percent;
  • A expansion of the Sales Tax base;
  • An increase in the Bank Shares Tax from .89 to .99 percent;
  • An increase in the Insurance Premiums Tax;
  • An $1.00 per pack increase in the cigarette tax;
  • A tax on “other tobacco products” at 40 percent;
  • A 6.5 percent severance tax; and
  • Taxing gaming promotional pay at 8 percent.

Wolf is also banking savings as part of the budget. Last week, he unveiled his new GO-TIME initiatives; the most drastic of those initiatives will save the Commonwealth $11 million immediately. Wolf proposes to:

  • Merge the Department of Corrections and Probation and Parole into one new “Department of Corrections and Rehabilitation,” which would streamline correctional services while ensuring the safe and successful transition of offenders back into the community. This merger books $10 million in savings; and
  • Move the eHealth Partnership Authority to the Department of Human Services, maximizing federal dollars and realizing administrative savings. This move would save the Commonwealth $1 million.

This year’s budget is likely to be as complicated as last year’s, though we’re of the hope that it will be more timely. Stay tuned to this blog for updates, and in the meantime, more information is available as provided below: