The 2015-16 fiscal year is underway and with no state spending plan in place, it seems as if we are reverting back to the old days of budget impasses and standoffs. Despite the General Assembly meeting its constitutional obligation of getting a budget to the governor’s desk by the June 30 deadline — a $30.2 billion plan that included a $1 billion increase in state spending, invested more in education and didn’t raise taxes — Gov. Tom Wolf chose to veto the measure and is sticking to his proposal that includes broad-based tax increases and nearly $5 billion in new spending. This massive tax increase plan failed to garner a single vote when it was brought up for consideration by the House of Representatives.
The legislature-approved budget would have made historic state investments in education funding — including a $100 million increase to the basic education funding line. It’s important to note that Pennsylvania already invests more than $27 billion in education (in total local, state and federal funds). According to the most recent Census Bureau data, the commonwealth ranks among the top 10 states in the nation in per-pupil spending. Clearly, when viewed in a national context, Pennsylvania doesn’t suffer from a lack of dedicated education funding. What we do suffer from is the ability to ensure those education dollars are being invested in student achievement and the classroom. That’s why pension reform is so critically important.
With an unfunded liability of $53 billion, the pension crisis represents the greatest threat to the commonwealth’s fiscal stability. Each year, more and more tax dollars are dedicated to pension obligation payments — impacting both the state’s general fund and local school districts. If left unchecked, the increasing pension debt will continue to divert funding away from students and burden Pennsylvanians with increased taxes at the state and local level. Unfortunately, the governor vetoed SB 1, a common-sense reform measure that would have addressed the pension crisis by making comprehensive and structural reforms to the pension systems going forward.
The governor also vetoed legislation that would have finally ended the government monopoly on the sale of wine and spirits. Besides the fact that selling the state-owned stores would generate upfront revenue for the commonwealth, this legislation would have given consumers the convenience and choice they overwhelmingly want. Even though a majority of Pennsylvanians have long supported ending the antiquated state-store system, the governor chose instead to maintain the status quo.
So how does the governor’s budget proposal compare to the spending plan passed by the General Assembly — which addressed the state’s structural deficit without raising taxes on Pennsylvania’s job creators and taxpayers?
The Wolf administration’s budget proposal would be among the priciest in the nation (at eighth among the states) and the governor’s tax plan is the largest proposed tax increase in the country when compared to other states, according to a study by the National Association of State Budget Officers. Additionally, a report by the Independent Fiscal Office found that the governor’s efforts to raise the personal income tax by 20 percent, raise the sales tax by 10 percent and eliminate most sales tax exemptions would result in higher taxes across all income classes.
This isn’t even accounting for the administration’s proposed additional tax on the natural gas industry, which the IFO has determined that, at more than 17 percent, would be the highest effective rate in the nation. Yet, despite the fact that this industry has created more than 200,000 direct and indirect jobs — including union jobs, engineers, blue-collar workers and truck drivers — the administration continues to call for this punitive tax. At a time when the price of natural gas is at an all-time low, this tax (along with Pennsylvania’s already burdensome corporate tax climate) would drive companies to other states or shale plays — taking good paying, family-sustaining jobs and economic opportunity with them.
You may have seen the commercials from out-of-state interests lobbying for huge tax increases on Pennsylvanians. Despite what they would have you believe, the bulk of the revenue from the Wolf administration’s proposed severance tax would not go to education. The language in the governor’s plan actually calls for a substantial portion to go toward payments for alternative energy subsidies with not one dollar guaranteed to go toward education.
These massive tax increases are not in the best interest of Pennsylvania’s residents and will not move the state forward. If the Wolf administration really wants “jobs that pay,” as they have often said, then we need to work together to make Pennsylvania’s business climate one in which job creators can afford to do business. As budget negotiations resume, the PA Chamber will continue to advocate for a fair and responsible budget that improves the state’s economic climate and promotes job growth.