Analysis: Wolf Will Cut His Way To A Balanced Budget Proposal For Next Year

Gov. Tom Wolf told the Associated Press Wednesday he will propose a FY 2017-18 budget that is balanced using funding cuts and steps to make government more efficient, rather than ask Senate and House Republicans for an income or sales tax increase to cope with an estimated deficit of over $2.2 billion.

But, Wolf said he would still press lawmakers to raise taxes on the Marcellus Shale natural gas industry.

Gov. Wolf took the first step on this path on December 16 with the unprecedented action of eliminating thousands of vacant state employee positions across state government to save an estimated $100 million.

This strategy is in marked contrast to the approach he took for his first two budgets in 2015 and 2016 when he proposed significant sales and income tax increases and a bucket full of other revenue enhancements.

The Rendell Approach Redux

It is, however, the same approach Gov. Rendell used for his first budget in 2003.  Rendell used only budget cuts to close an estimated $2 billion budget deficit in his FY 2003-04 budget proposal in what was then a $20.8 billion General Fund budget.

The FY 2016-17 state budget was $31.5 billion by comparison.

Facing a Republican House and Senate during his budget address, Gov. Rendell said very plainly-- "I hate this budget.  I hate it with every fiber of my body."

Then Senate Majority Leader David Brightbill (R-Lebanon) reacted to the budget by saying-- “This guy has done a good job of proposing reasonable cuts, and we need to lock that in."

Gov. Rendell did go on to propose a separate package that included increased school and economic development funding ending up in an epic budget battle that was not finished until December of 2003, the previous record before the FY 2015-16 budget debacle.

True to Sen. Brightbill’s words, the Republican House and Senate passed Rendell’s budget and he signed it in March 2003, but vetoed all school funding to keep the Senate and House working on a bigger budget solution.

The final resolution in 2003 involved a 10 percent income tax boost and a $258 million increase in education spending.

Perhaps Gov. Wolf is thinking-- hoping-- for a similar outcome by adopting Rendell’s strategy.

Environmental Losses Approaching $3 Billion, One-Third Of DEP Staff

A significant casualty of the Rendell Administration’s approach to budgeting was the beginning of 8 straight years of cuts to environment funding that resulted in a total of $1.3 billion in funding losses or diversions from environmental programs during his tenure to help balance the state budget or fund programs that could not get funding on their own.

DEP’s General Fund line-item is still below 1994-95 funding levels and the total loss of environmental funding is approaching $3 billion over the last 14 budgets.  

As a result of these cuts, DEP’s staff has been cut 22 percent and Gov. Wolf’s action on December 16 removed another 290 positions or so from its rolls.

This brings the total reduction over the last 14 budgets very close to one-third of its staff; without a decrease in responsibilities of course.

The FY 2016-17 budget diverted or cut $39 million alone from special funds previously earmarked for environmental programs to again balance the budget.  That’s in addition to the cuts baked into DEP’s budget from earlier budgets.

Last March, DEP said its budget came from these sources: 22 percent from General Fund, 28 percent federal funds and now 50 percent from permit review and annual permit administration fees, plus a very small percentage from penalties.

If General Fund support is cut further and now with federal support possibly in doubt, the only logical place the state has to go to fund its environmental programs is putting even more burden on the businesses, local governments and individuals regulated by state laws administered by DEP.

And fees are going up at DEP.  This year alone, 8 different programs have proposed fee increases, including--

-- NPDES Water Quality Permit Review and Renewals: Nearly $9 million increase;

-- Drinking Water Permit Review and Administrative Fees (fee report): $7.5 million increase;

-- Laboratory Accreditation Fees: $170,000 increase (fee report);

-- Radiological Health, Radon Fees: $1.69 million  (fee report);

-- Coal Mining Permit Fees: fee proposal discussed by Mining and Reclamation Advisory Board.

-- Non-Coal Mining Permit Fees: fee proposal discussed by Aggregate Advisory Board

Proposed fee increases are also under consideration for the - Air Quality and Oil and Gas Programs.

DEP has been working to make its programs more efficient and just as effective and it was forced to reduce the most significant cost-- staff-- by budget cuts, with again, no corresponding reduction in responsibilities.  
In fact those responsibilities have only increased with the passage of new environmental laws by the General Assembly.

The federal government has also been critical of DEP’s lack of resources.

DEP’s Drinking Water Protection, PennVEST, Chesapeake Bay, Stormwater Pollution Control, Air Quality and Surface Mining programs have ALL been criticized as inadequate by the U.S. Environmental Protection Agency and the federal Office of Surface Mining in the last year.

Restructuring Government

Gov. Wolf’s talk of improving government efficiency fits right in with what House Majority Leader David Reed (R-Indiana) told the media December 14.  He said given the  massive budget deficit the state faces there needs to be consideration of a broad restructuring of state agencies to save money.  

He said restructuring could affect schools, human services, prisons, what he called corporate welfare, and operations of the General Assembly itself.

Early Thursday morning, Rep. Reed took to Twitter to say Gov. Wolf’s approach “is good news for the taxpayers.  We need to challenge the status quo and truly reinvent how government operates in Pennsylvania.”
House Speaker Mike Turzai (R-Allegheny) late Thursday also commented, saying, “I agree with Gov. Wolf’s decision to put forward a fiscally responsible budget that does not raise personal income or sales taxes. The House of Representatives looks forward to working with the governor to construct a responsible budget that respects hard-working taxpayers, reduces debt and reinvents government to make it more efficient.”

Eliminating Cost Drivers

Senate Majority Leader Jake Corman (R-Centre) said in an op-ed released Friday his priorities in the next budget will be to address the same three cost drivers they have tried to deal with before-- pension reform and increasing costs in the departments of Corrections and Human Services.

“Unless we want to see our budgets continue to grow significantly faster than our revenues, we must have the courage to deal with difficult issues that will affect very delicate constituencies,” said Sen. Corman.  “The easiest thing to do in order to address budget deficits is to increase taxes.

“The hardest thing to do is to put in the work to reform these areas and slow growth,” Sen. Corman added. “One reason it is so hard is because the benefits of these reforms may not be seen for years. But until you put in the hard work and begin to make reforms, you are looking at a future of repeated and significant tax increases.”

Sen. Corman also credits Senate Republicans with opposing a “new Governor determined to impose an agenda out of touch with ordinary Pennsylvanians, including massive government growth and the largest tax increase in Commonwealth history.”

Expanding Gaming

The Associated Press reported Friday, Sen. Kim Ward (R-Westmoreland), Majority Chair of the Senate Committee with jurisdiction over gaming, called a meeting of the state’s 12 casino operators for January 3-- swearing in day at the Capitol-- to jumpstart talks about gaming issues.

At the top of the list is how to reenact the $141 million a year local casino assessment share program declared unconstitutional in September.  

Also on the agenda is expanded gaming, left on the table when the Senate and House adjourned.  The failure to act on gaming expansion left a hole in the budget, since they were counting on at least $100 million in revenue to come from more gaming.

Unexpected Opportunities

Looks like when it’s all said and done, we may be looking at a repeat of 2003-- and the last 2 years-- severe budget cuts, restructuring and more budget drama.

We’ll have to see how it comes out for environmental funding, especially given the backdrop of changes likely coming at the federal level from a new Trump Administration.

We hope the future brings unexpected opportunities to show Pennsylvania’s environmental leadership is still alive and kicking.

NewsClips:

AP: Wolf Says He Won’t Seek Major Tax Increase To Balance Budget

Reed: Amid Another Budget Gap Talk Of Redesigning Government

Analysis: 2017 PA Environmental Policy Initiatives In 140 Characters Or Less