Pennsylvania State Budget Update from Rep. John Lawrence
3/29/2016
March 29, 2016

The state budget standoff came to a close last week when Governor Wolf announced he would not veto the fourth budget passed by the General Assembly this session. After nearly nine months of seemingly endless finger-pointing and bickering, the impasse finally came to a conclusion. So how did the budget standoff happen? Why did it drag on so long? Was the problem that the legislature wouldn’t compromise, or was it something else?

Last March, Governor Wolf proposed a $33 billion budget for fiscal year 2015-16, followed by a $38 billion budget in FY 2016-17. To pay for this increase in spending, Governor Wolf proposed a variety of tax increases totaling a staggering $8 billion. I outlined my opposition to this proposal in previous op-eds. (These previous op-eds are available at RepLawrence.com.)

On June 1, 2015, the state House voted Governor Wolf’s tax increase proposal, and it was unanimously defeated. Not even the Governor’s strongest supporters in the legislature were willing to vote for the tax hikes required to fund the Governor’s budget proposal. Since it was clear that there was no appetite for tax increases, the Republican-led General Assembly set to work developing a balanced, fiscally responsible budget without tax increases. This budget went to the Governor before the deadline, increased funding to basic education, and contained many of the other initiatives he had requested. In addition, the Governor received two other vitally important bills – one to put new state workers into a defined-contribution retirement system, and another to privatize the state liquor store system and get Pennsylvania out of the business of selling alcohol. Governor Wolf vetoed all three of these bills.

To be clear, this was an unprecedented and reckless action by Governor Wolf. No Governor in decades, Republican or Democrat, has vetoed the entire state budget. Importantly, two-thirds of the line items in the budget plan vetoed by the Governor were at the spending level he requested or higher! Rather than take the opportunity to agree on what we all agree on, the Governor chose to veto the entire budget.

On August 25, the House attempted to override parts of Governor Wolf’s vetoes. These attempts failed on party-line votes. On September 28, the General Assembly sent Governor Wolf a stopgap budget which the Governor, again, immediately vetoed. I was a “yes” vote on both of these initiatives.

By early October, the state had been without a budget for three months. The Governor was very clear that he wanted a tax increase to fund the increased spending envisioned in his preferred budget plan. In an attempt to move the process forward, the state House considered a second tax increase proposal developed by Governor Wolf. The centerpiece of this $2.4 billion tax increase proposal was a $2.3 billion increase in the state income tax. When it came for a vote, this proposal failed by a bipartisan vote of 73-127, with many Democrats joining all Republicans in voting down this tax hike.

On December 6, the state House voted on a third budget plan. This balanced, fiscally responsible budget reprioritized funding to deliver a substantial increase in basic education funding. On December 23, the Senate sent this third budget plan to Governor Wolf. On December 29, the Governor signed House Bill 1460 into law, but used his line-item veto authority to cut $6.3 billion out of the $30.26 billion budget plan. The Governor cut $3.1 billion from K-12 education, $1 billion from Corrections, about $2 billion from Medicaid, and eliminated all line items that fund state-level agriculture programs such as the Penn State extension service. The Governor later asked the state Treasurer to ignore his line-item veto of Corrections funding when dollars ran short to keep prisons operating in Pennsylvania.

On March 16, 2016, the state House and Senate voted on a fourth budget proposal, again a balanced, fiscally responsible budget without tax increases. For the first time, the vote was truly bipartisan. Senator Andy Dinniman was among those who voted “yes” on the budget in the Senate, and 13 Democrats in the House joined all the Republicans in voting “yes” to pass this budget proposal. Governor Wolf again threatened to veto this proposal, but after passing the General Assembly with bipartisan support, the Governor changed his mind and allowed the budget to become law without his signature on March 28, 2016.

The budget that finally passed is one that meets the needs of the Commonwealth without being fiscally irresponsible. There is an increase in basic education funding to the highest level ever in state history. Also, the budget provides for the $1.7 billion required contribution to PSERS, the state retirement fund for school teachers. Additional details on the budget are available at PaBudget.com.

Throughout this process, I received many phone calls, letters, and emails from folks across our area with strong opinions on the situation. Friends and strangers alike chatted me up in the grocery store, in church, and stopped by the office. I held seven town hall meetings across the district a few weeks ago, with strong participation and a good deal of feedback to “hold the line” on taxes. All of this communication is greatly appreciated.

So what is the path forward? The budget for fiscal year 2016-17 is due in three short months. I anticipate Governor Wolf will continue to advocate for his 2016-17 budget proposal made public back in February. According to his website, the Governor’s budget proposal comes in at more than $33 billion, and would require a cornucopia of tax increases, including an increase in both the sales and the income tax, along with new taxes on insurance premiums, cigarettes, and banks doing business in Pennsylvania. I cannot support this dramatic tax increase proposal.

In the coming days, listen for the Governor’s allies to talk about the structural budget deficit facing Pennsylvania. There is no doubt that we are indeed facing a structural deficit. To address this, the Governor has proposed…increased spending! In my view, that is exactly the wrong approach. If your household budget faced a shortfall, would you solve that problem by buying a more expensive car? No, you would look for ways to live within your means. That is what we should do on the state level as well.

The Pennsylvania taxpayer is already shouldering one of the highest sales taxes in the nation, a substantial income tax, property taxes that are too high, and the highest gasoline tax in the nation, not to mention an endless variety of nickel and dime state and local fees. Our corporate income tax is also the highest in the nation.

Before asking for even more from the forgotten taxpayer, the state must redouble efforts to cut costs and budgets. Before asking for higher taxes, we should look at the hundreds of millions of dollars of increased revenue on the table through common-sense liquor privatization – the same type of system in place in 48 other states. Before levying higher fees, we must reform the state pension system for new employees, saving the taxpayer billions of dollars for decades to come. And while the Governor’s latest budget proposal drops his earlier talk on property tax reform, I will continue to advocate for badly needed action to keep homeowners from being evicted by a tax that does not take into account one’s ability to pay. These issues are central and too important to ignore as we move forward.

By way of process, the House Appropriations committee held hearings throughout the month of March with a wide variety of state agencies to review needs and wants for the upcoming fiscal year. I will be working with my colleagues to develop a sustainable and fiscally responsible budget that meets our needs without being reckless. I welcome your input over the coming weeks as to areas in the state budget where you believe the state should spend more or less, as well as state programs you believe should be broadened or cut. Your opinion is very important to me, and I look forward to hearing from you. In the meantime, thank you for the opportunity to serve in the Pennsylvania House of Representatives.

Representative John Lawrence serves the 13th Legislative District in Chester and Lancaster Counties.
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