Friday, July 21, 2017

Still No Finished State Budget, Everything Is On The Table, Environmental Funds At Risk

Now entering the fourth week without a revenue package to pay for the General Fund budget they passed June 30, Republicans are locked in negotiations over how to fashion a compromise that will get 26 votes in the Senate and 102 in the House.
The Republicans called the House back into session on Saturday and maybe Sunday primarily for a series of caucus meetings on proposed budget plans. They may move some budget-related Code bills, if there is agreement in the House on those.
House Republican leaders have put together a no general tax increase budget plan based on borrowing, expanded gaming, expanded liquor sales and fund transfers they hope to vet more thoroughly with House Republicans.
For the last week House and Senate Democrats have been trading increasingly hostile Tweets with House Republicans over not being in session to deal with the budget, although budget meetings have obviously been going on between Republican leaders.
The Twitter battle and pressure from Senate Republicans, who were in voting session this week for two days, no doubt prompted House Speaker Turzai to call a weekend session even after House Majority Leader David Reed (R-Indiana) said they would not be back to Harrisburg unless there was a deal on the revenue package.
Gov. Wolf, with Senate and House Democrats supporting, have been pushing Republicans for more recurring revenue-- $700 to $800 million in taxes-- to address the state’s structural deficit going forward.
Same Revenue Options
All the same revenue options are still on the table from Republicans to fill the $2.2 billion deficit hole they face.  Let’s refresh--
-- Fund Transfers: Special Fund transfers to the General Fund, especially those fed by the Realty Transfer Tax (Keystone Recreation, Park & Conservation Fund) and Cigarette Tax (Agricultural Preservation), monies going into the Environmental Stewardship (Growing Greener) Fund, the Domestic Fire Gross Premiums Tax on property insurance policies and from the Joint Underwriting Authority Medical Malpractice Insurance Fund and Horse Racing Development Fund are all being considered;
-- Tax Credit Cuts: House Republicans have also suggested shaving or eliminating many tax credit programs as corporate welfare, among the tax credits important to environmental programs are the Resource Enhancement and Protection Farm Conservation Tax Credit, which had $11.2 million in applications for $10 million in funding this year,  and the Coal Refuse Energy and Reclamation Tax Credit; and
-- Utilities: Expanding the Gross Receipts Tax on electricity and natural gas use and adding a new tax on buying and selling space on energy transmission lines;
-- Borrow: Borrowing $1.5 billion against tobacco settlement revenue, or securitizing some other revenue stream, to fill the biggest part of the revenue hole;
-- Gaming: Adjusting tax rates and expanding gaming with satellite casinos, online gaming, airport gaming, fantasy sports betting, online sales of state lottery tickets, maybe 40,000 video gaming terminals for everyone with a liquor license and redirecting the local share of the present casino tax revenues to the state General Fund;
-- Sales Tax: Extending the state Sales Tax to warehousing and storage and to homeowner cable bills;
-- Liquor: Authorizing beer, wine and spirits sales in more private outlets and shifting the Sales Tax on bottles of alcohol from the bottle bought by liquor license holders to the individual drink bought by consumers;
-- State Assets: Selling or leasing out state assets like the Farm Show Building (although Republicans didn’t like that one because it was Gov. Wolf’s idea) or some other asset;
-- Odds And Ends From Others: Legalizing marijuana and a severance tax on natural gas are very, very long shots.
Holding Up Pitt, Penn State
To help ends meet until a revenue package is passed, nonpreferred funding bills for state-related universities like the University of Pittsburgh, Penn State Temple and Lincoln universities are being held up so that $600 million more in spending does not enter the balance sheet quite yet.
Or as some Democrats said this week, “being held hostage.”
State Treasurer/Auditor General
State Treasurer Joseph Torsella and Auditor General Eugene DePasquale again wrote to members of the General Assembly warning that without new state revenues FY 2017-18 would see negative balances for eight continuous months causing the Treasurer to go to commercial sources of lending.
Tax Amnesty
In one little bit of good budget news, the 2017 PA Tax Amnesty Program generated $114.5 million for the 2016-17 fiscal year budget, exceeding the $100 million net revenue estimate, according to the Department of Revenue.  The Senate and House used revenue projections of between $130 and $150 million.
What’s Next?
With vacation reservations staring House members in the face, many schools set to start the third week in August, and Speaker Turzai off to Atlanta Monday and Tuesday for a meeting of the Republican Legislative Campaign Committee he chairs, there is a short window of opportunity to finish a revenue package in the near future.
The Senate is still officially on a 6-hour call, but depending on what the House does this weekend they could return Monday.
Or, it might be “see you in September!”
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