House Republicans spent the week again airing budget proposals privately and behind closed doors, but there is no consensus on an overall revenue plan to respond to the Senate-passed revenue package supported by both Caucuses in the Senate, House Democrats and Gov. Wolf.
The most conservative members of the Caucus led by Rep. Dan Moul (R-Adams) were again advocating for a plan to raid a series of special funds and transfer the money to the General Fund to help fill the $2.2 billion budget deficit.
They really don’t like the idea of borrowing $1.3 billion like the Senate package does to pay for operating and administrative costs.
This same group has also been advocating for reopening negotiations on the spending plan passed with bipartisan agreement in the Senate, House and with Gov. Wolf in late June to bring it more in-line with the $31.52 billion budget passed in April by the House.
Tuesday the group of 17 conservative legislators led by Rep. Moul have scheduled a press conference to unveil their alternative budget plan.
Of course that April budget still had an $800 million to $1.2 billion hole in it (depending who was looking at it) that House Republicans said could be filled with $247.5 million from liquor expansion (which the Senate hasn’t supported), $376 million from gaming expansion, including iGaming, airport slots, tablet gaming and fantasy sports (which the Senate is only interested in in part), $160 million in transfers from special funds (which the Senate has so far opposed, mostly) and $25 million in potential tax credit reductions.
"I think today [Wednesday] is kind of the last segment of hearing the different members' reaction to it [the fund transfer plan]," House Majority Leader Dave Reed (R-Indiana County) said. "After we get through today, we'll do a vote count, and if we have 102 votes we'll run it."
House Republicans have 121 members in their Caucus.
The one item that seems to be gaining strength is a severance tax on natural gas production.
The House Environmental Resources and Energy Committee has schedule a meeting for September 11 to consider a severance tax bill-- House Bill 113 (Harper-R-Montgomery)-- that would enact a 3.5 percent natural gas severance tax and leave the existing drilling impact fee in place.
Proceeds from the proposed severance tax would help fund school employee pension obligations and provide State Police protection to rural areas (sponsor summary).
House Democrats - Freeze Spending
A work-up discussed by House Democrats this week warned if there is no agreement on a revenue plan soon, most of the state’s discretionary spending lines would have to be cut by 12 percent. And that would be on top of cuts agencies already got in the spending plan adopted in June.
Democrats also said the $650 million in appropriations to Penn State, Pitt, Temple and Lincoln universities as well as increased funding for public schools would also have to be cut.
They are echoing concerns raised by Gov. Wolf last week when he said come September 15 when large payments are due to pay the state’s bills, he may have to institute a freeze on state spending.
He said he didn’t want to “alarm anybody” with announcing the amount he would freeze.
Wolf Shuffles Money Between Accounts
On Tuesday Gov. Wolf announced he had to take out a short-term loan from the state’s Motor License Fund to cover a payment due to public schools and to pay other bills coming due.
Wolf warned in a letter to House Republican leaders that failing to fund the state budget will put the state in “a much more dire financial situation,” risking a credit rating downgrade and increasing borrowing costs.
FY 2017-18 Revenues Ahead Of 2016 Pace
The Department of Revenue Friday reported Pennsylvania collected $2.1 billion in General Fund revenue in August bringing the fiscal year-to-date General Fund collections total to $4.2 billion.
In August of 2016 the state collected $2.02 billion bringing that fiscal year’s collections to $3.99 billion.
IFO - Continued Revenue Weakness
The Independent Fiscal Office told the House State Government Committee Wednesday that while overall revenue projections seem to be holding at $31.19 billion (taking out tax refunds)-- that’s without considering any new revenue package-- there has been slower than anticipated growth in Sales Tax revenue based largely on national trends.
Sales Tax revenues so far are $22 million below expectations.
Based on the Sales Tax weakness and across-the-board revenue weakness over the last year, the IFO said it is already forecasting a deficit of $750 million for FY 2017-18; again without taking into account any new revenues adopted by the General Assembly.
What’s Next?
The House still will not be back in session until September 11, just a few days before the September 15 fiscal cliff Gov. Wolf has talked about.
House Republican leadership told members Friday “to be prepared to stay until budget-related bills are done.”
The Senate is scheduled to come back September 18.
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