Op-Ed – Budget Impasse

There remains a great deal of concern with Governor Wolf’s vetoes of first a balanced budget, and then of necessary cost-saving reforms for the state: a pension reform measure and a measure to divest the state stores.

Rightly there needs to be public conversation about the governor’s proposed budget, and his arbitrary actions to veto each of the bills supporting the legislatively crafted budget for 2015-16.  The legislative budget is balanced and has no new taxes.  The governor’s proposed budget included $4.7 billion in new taxes on every Pennsylvanian resident and business.

The legislative budget addresses very necessary public pension reforms. The governor says pensions aren’t a problem, but his budget actually increases debt for pension payments rather than reform the systems.  He believes debt on top of debt is wise, but that only compounds the problem without attempting to provide any solution.

The governor will not recognize that pension obligations are the largest and ever-increasing cost drivers in school district budgets and the state budget.  School districts will see 31 percent of their budgets go directly to pension obligations.  The state will have more than 20 percent of the total budget go to pensions.  For every property tax dollar collected, 31 cents will go to pensions, leaving 69 cents for school districts.  And of that 69 cents, 75 percent (state average) goes to wages and benefits, leaving about 17 cents of every property tax dollar collected to be used in the classroom.  Pension reform is essential for effective budget controls for school districts, and yet the governor says pensions are not an issue.

The legislative budget would expand state revenues through the sale of the current liquor store system and with expansion of convenience outlets for wine sales. The governor wants to protect the current, dated system and keep Pennsylvania as one of only two states where the state subsidizes with tax dollars a retail store system that in 48 states is controlled by private investment.

The legislative budget includes a $100 million increase in basic education funding and includes the much-needed new funding distribution formula. The legislative budget also includes $30 million more for early childhood programs (a 300 percent increase over the $10 million increase last year), $20 million more for special education and $10 million more for education tax credits.  And very importantly, it includes $306 million to aid school districts in retiring costly debt they have accrued for recent construction projects.  The governor sees no merit in helping schools retire this construction debt, which is being borne by property tax payers.

The legislature has proposed Senate Bill 76 and House Bill 76, identical bills designed to permanently eliminate property taxes. To permanently eliminate property taxes will require an increase in sales tax and earned income tax — after all, property taxes raise almost $12 billion for K-12 education funding in Pennsylvania.  The governor has mimicked that idea, sort of.  His proposal is a temporary 50 percent reduction in property taxes, with a permanent increase in sales and earned income taxes.  Administration data suggest that under the governor’s proposal residents in 401 of the 500 school districts in Pennsylvania will end up paying about 150 percent of the taxes they now pay.  By the way, the governor’s proposal is also to provide renters with property tax relief – even though they don’t pay property taxes.

The governor’s budget makes some good talking points: more money for schools and property tax reduction.  But the truth to these claims is much different.  I will continue to work with my colleagues to find a compromise with the governor, however, I will remain steadfast in representing the views of my constituents and continue doing what is best for all Pennsylvanians.

CONTACT: Sarah Rasmussen srasmussen@pasen.gov (215) 541-2388