Bipartisan Senate and House Leadership and Gov. Wolf Wednesday said they have come up with a draft framework for a budget settlement that involves the state budget and some sort of pension reform and changes to Pennsylvania’s state-owned liquor system.
Some of the essentials reportedly include--
-- Sale Tax Increase Of 1.25 Percent to 7.25 Percent (2nd Highest In The Nation): Provides funding for $2 billion in school district property tax relief to homeowners [really $1.4 billion in new relief because gaming revenues previously used for tax relief would be diverted for other uses (see next)]. In Philadelphia the increase would drive the Sales Tax there to 9.25 percent and in Allegheny County to 8.25 percent. Senate Republicans are also looking for some sort of taxpayer protection plan that would require school districts to go to the voters every time districts wanted to raise taxes.
Sen. David Argall (R-Schuylkill) announced Tuesday the Senate would hold its first debate and vote next week on his Senate Bill 76 (Argall-R-Schuylkill) to increase both the Personal Income Tax and Sales Tax to replace local school district property taxes completely.
The House passed House Bill 504 (Gabler-R-Clearfield) in April that provides $5 billion in school property tax relief by increasing the Personal Income Tax and Sales Tax.
-- Education Funding Increase: An additional $350 million for K-12 education funding with $50 million for special education funding is included in the framework, but there has been no agreement on the second year of funding.
-- Pension Reform: The agreement calls for transferring $600 million a year in existing gaming proceeds now earmarked for property tax reductions, to pay down unfunded pension liability costs for school and state employees. Still being discussed are other pension reforms that would change the benefit levels for future employees in a hybrid system that uses a defined contribution program. There would be no changes to current retirees or employees.
-- Liquor Privatization: The framework earmarks $200 million for some kind of liquor privatization plan yet to be defined. House Speaker Mike Turzai (R-Allegheny) introduced another vehicle for liquor privatization-- House Bill 1690 (sponsor summary) on Thursday. The House Liquor Control Committee is scheduled to consider the bill on Monday, November 16.
-- No Natural Gas Severance Tax: Gov. Wolf and Democrats have given up on the idea saying it was a casualty of compromise. The severance tax was originally intended to fund a big increase in funding for basic education, a $675 million bond to invest in economic development initiatives, including $325 million for alternative energy, energy efficiency, last mile natural gas lines and combined heat and power projects and an extra $10 million for 50 new staff for DEP’s oil and gas regulatory program. Very little new revenue from the severance tax was devoted to actually protecting or restoring Pennsylvania’s environment directly. Gov. Wolf was quoted Thursday as saying he would continue to pursue a tax on Marcellus Shale production in the future. Perhaps to fund a Growing Greener III?
-- No Word Yet On: There was also a proposal in Gov. Wolf’s March budget for a new $500 million revenue bond to be issued through the PA Infrastructure Investment Authority, a $17.1 million increase in DCNR’s budget for State Park and Forestry Operations to start weaning the agency off oil and gas royalty income and $100,000 for a drilling related health registry, but no word yet on these Wolf initiatives. $2.2 million in Heritage Parks Program funding was also zeroed out in Gov. Wolf’s proposal, but it typically restored by House and Senate Republicans.
“An awful lot of details still need to be worked out and it will take a couple weeks for everything to be passed, but included in the framework are pension reform, liquor privatization, an increase of $350 million for basic education, property tax reform as well as tighter controls on future property tax increases,” said House Majority Leader David Reed (R-Indiana). “There will also likely be a vote on Senate Bill 76 (Argall-R-Schuylkill)/House Bill 76 [from last session] for complete elimination of property taxes to gauge support to go further than the reductions on the table, whether it be with the budget or not; I am supportive of this proposal as well.
“With divided government, compromise can sometimes be elusive and I have yet to see the perfect budget deal, but a lot of issues that have been talked about for decades are hopefully about to become reality.”
Given the scope of the potential deal, Rep. Reed said 30 to 40 separate bills would be needed to implement the entire budget deal, once it is all agreed to.
Senate Minority Leader Jay Costa (D-Allegheny) said, "While there is more work ahead, I am pleased that a budget framework is in place that may put us in position to consider a comprehensive budget agreement in the near future. What we announced with the governor today was an outline of a plan that leaders of both parties can take to their members once details are finalized.
"The hope is that the process can be concluded shortly and that a full general budget plus historic agreements on key issues will be before the General Assembly within the next couple weeks.
"Today's announcement was a positive development. Clearly, there is momentum and both Democrat and Republican leaders are working with the governor to reach consensus on the details of a spending plan that addresses key priorities."
If all this seems a little thin, it is. There are lots more details to work out that will take time.
Related Story:PennFuture: With No Natural Gas Severance Tax, Pennsylvanians Will Pay