JULY 1 UPDATE: As expected, Governor Wolf vetoed the bill. There remains a limited amount of time to avert a partial government shutdown, however.
With a veto threat looming over their heads, Pennsylvania legislators adopted a $30.2 billion budget that eschews taxA tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities. increases. A $1.2 billion increase in spending over last year’s budget—largely to cover rising pension obligations—relies heavily on the use of a present surplus and other one-time revenue transfers, along with $220 million in projected receipts from privatizing the state’s wine and liquor store system.
The budget includes $370 million in additional general fund allocations for PreK-12 education (including a $100 million increase for basic education funding), decried by some as inadequate in part because it relies substantially on greater contributions from localities, and a $332 million increase in health and human services programming. The budget also transfers Oil and Gas Fund moneys to state conservation efforts. The major funding areas under HB 1192 are as follows:
|
Program Area |
Amount |
Percent |
|
Human Services |
$11.6 billion |
39% |
|
PreK-12 Education |
$10.6 billion |
35% |
|
Corrections |
$2.2 billion |
7% |
|
Higher Education |
$1.7 billion |
6% |
|
Debt Service |
$1.3 billion |
3% |
|
All Other |
$2.6 billion |
9% |
Governor Tom Wolf’s introduced budget envisioned as much as $4.7 billion in net tax increases, with a higher individual income taxAn individual income tax (or personal income tax) is levied on the wages, salaries, investments, or other forms of income an individual or household earns. The U.S. imposes a progressive income tax where rates increase with income. The Federal Income Tax was established in 1913 with the ratification of the 16th Amendment. Though barely 100 years old, individual income taxes are the largest source of tax revenue in the U.S. , a higher and broader sales tax, and a new severance tax, partially offset by reductions to the corporate income taxA corporate income tax (CIT) is levied by federal and state governments on business profits. Many companies are not subject to the CIT because they are taxed as pass-through businesses, with income reportable under the individual income tax. and local aid intended to reduce property tax burdens. Although Republicans floated competing plans that also shifted the tax burden more toward property taxes and sought to reduce local reliance on property taxes, the budget which just cleared the Pennsylvania General Assembly jettisons these in favor of a simpler budget that avoids raising taxes.
Concurrently with the budget bill, the legislature also passed legislation on pension reform and liquor privatization. Gains associated with the latter are included in the General Assembly’s budget; savings associated with the former are not, in part because they would take time to realize. As of this writing, Governor Wolf has not taken a formal position on either proposal.
With only a few hours before the end of the fiscal year, all eyes are now on the Governor. Anything is possible, though a veto seems likely, with the possibility of furloughs or delayed payments in coming weeks. But then, it wouldn’t be the first time Pennsylvania has experienced a partial government shutdown.
Tax Foundation testimony on Pennsylvania’s budget situation here. More on Pennsylvania here.
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