Since new Pennsylvania Gov. Tom Wolf unveiled his proposed state budget on Tuesday, everyone’s been talking about the winners and losers, whether it’s taxpayers, corporations or students. Come June, those winners and losers will look completely different as the deadline to actually pass something looms (and, let’s be honest, probably expires — as it’s done nearly every year for the past decade.)
Budget day in Harrisburg is an act of theater. Now, the real work gets done as legislative leaders spend the next few months making back-room deals.
For now, every side in Harrisburg says they’re not willing to compromise on pension reform, liquor privatization, education, taxes, minimum wage, what have you. But they are, because they have to. That’s how Harrisburg works.
“[Wolf] is going to have to give it a major effort,” said Terry Madonna, director of the Center for Politics and Public Affairs at Franklin and Marshall College. “Maybe he gets a couple of things… I would say shale tax and education spending. Once you go beyond that, I don’t know where it goes. It’s just anybody’s guess.”
Now it’s up to Wolf to sell his plan to the people, but more importantly, the lawmakers. While it’s hard for Republicans to vote against something like injecting a billion dollars in the state’s education system, that tone will change when they think of what it will sound like during election season when challengers start saying they raised taxes.
Senate Majority Leader Jake Corman, R-Centre, reportedly joked in Harrisburg on Tuesday that “every budget is dead on arrival,” and later said that Republicans are “not starting from $33 billion and … negotiating from there. It’s not reality.”
But lawmakers will have to come to some sort of consensus unless they want to be stuck in Harrisburg all summer past the June 30 budget deadline, which, in Pennsylvania, is kinda arbitrary and meaningless. (Ed Rendell didn’t get one budget done on time.) To get a budget through, a plan will have to garner 102 House votes, 26 Senate votes and a signature from Wolf.
Here’s a breakdown of the major points from Wolf’s proposal and how they might change in the coming months:
Increase in education spending
Odds: Will probably pass in some shape or form
Wolf, like he promised throughout his campaign for office, proposed a massive bump in education funding to the tune of $1 billion statewide that isn’t easy to argue with. Under the plan, basic education funding would increase by $400 million and special education by $100 million. Higher education would also see a large increase in funding in exchange for the promise of a tuition freeze. For Philadelphia? The school district would see a 14 percent increase in funding, AKA an additional $160 million that’d make a huge difference for the city’s estimated $80 million budget deficit.
From Madonna’s perspective, some bump in education funding is likely to pass through because Republicans can get behind it — polls have showed overwhelming public support for increases in education funding after Gov. Tom Corbett cut nearly $1 billion from education funding during his four years in office.
Philadelphia Sen. Vincent Hughes, the Democratic chair of the Senate Appropriations Committee, said he’s not trying to compromise on the education funding, because “I’ve had to live with less for the last four years with Governor Corbett.”
5 percent severance tax for natural gas drilling
Odds: Will probably pass
Making good on another campaign promise, Wolf proposed levying a five percent severance tax against Pennsylvania’s natural gas drilling companies, a move that would have an especially large impact on the Marcellus Shale-rich western part of the state. Democrats have called for the tax for years, but Corbett failed to levy the tax, citing concerns that it would send business and jobs away from the state. Wolf’s plan would tie the tax to education funding, which some critics have already called unsustainable.
Point is, this is something (at least some) Republicans can get behind and won’t mind compromising on. Madonna said some Republicans themselves have even proposed taxing the companies 3.5 percent. As the state stares down a $2 billion budget deficit, the Republican-controlled General Assembly is probably going to send this part through as is.
Increase in personal income tax
Odds: Probably won’t pass as is
The changes in the tax system is where things get a little dicey. Madonna said Wolf was smart to lure in Republicans to his taxation plan by promising a large reduction in corporate taxes as well as a reduction in property taxes. In Philadelphia, property tax relief will be felt more in high-poverty districts. Residents in the city would also see about a half-a-percent reduction in wage tax (3.92 percent to 3.48 percent), but would still be subject to the statewide hike in personal income tax.
The problem, Madonna said, is how the legislature changed after the last election. Yes, it’s largely Republican-controlled, but the Republicans who are there are more conservative than ever before and ran on platforms of not raising taxes. Wolf’s proposals to increase the personal income tax and increase the sales tax by 10 percent (while also expanding it to new goods and services) will be shot down in the legislature.
The problem is, those same Republicans want to promise cuts in property and corporate taxes. How they work to compromise on that is anyone’s guess.
Changes to the liquor system
Odds: Liquor modernization has a chance
Republicans have been trying for years to figure out a viable plan for privatizing the state-controlled liquor system which, when sold, would immediately send $1 billion to the state’s budget and would allow for a more convenient experience for consumers (read: let’s buy booze in the grocery store). But Democrats argue the state can’t afford to give up on the revenue incurred from the sale of liquor in the state and are instead for “modernization,” which would change amenities about the system but would keep it under the state’s purview.
In Wolf’s budget plan, he proposes the modernization model, which wouldn’t sell the system but would expand state store hours and allow for delivery of alcohol into the state from outside. AKA, if you like California wines, you’re in luck. This plan also allows for legislators to pass through small bills instead of making a deal on a large liquor package. It could happen — Madonna said Senate Republicans are behind making it work. House Republicans? That’ll take some convincing.
Odds: May pass after some sort of compromise
Most in government believe the minimum wage could stand to be increased in some way, but the majority of the debate will center around by how much. The current federally mandated minimum wage sits at $7.25, but proposals have beeb circulated in Harrisburg that would raise that to anywhere from $8.50 to $15. Wolf’s plan would increase the minimum wage statewide to $10.10, while Philadelphia City Council has heard proposals to raise it to $15.
The chambers of commerce in both Pennsylvania and Philadelphia have come out strong against minimum wage hikes, saying it could lead to a loss in revenue for companies and, thus, a loss in jobs. Republicans favoring the views of the small businesses and corporations oppose a significant minimum wage hike, but some might be able to get behind a small one to somewhere in the eight-dollar range. Time will tell how this one will play out.
Odds: Probably won’t pass as is
I know, I know, pension reform is a suuuper unsexy topic. But it’s what’s seriously cutting into the state’s budget, and Wolf is going to have to figure out how to grapple with $50 million in underfunded pension liability. It’s so important, that Corman has said that Republicans aren’t willing to budge until the pension crisis is addressed.
But Corbett was in office for four years with Republicans controlling both Houses, and he couldn’t get pension reform passed then. But this is now, and Wolf’s plan to tie an influx of liquor-related cash to save the state’s ailing pension system *could* perk up some Republicans. They just need to figure out which version of pension reform they want to pass, whether it’s a 401(k)-style plan or whether it’s financed through bonds.