Proposes $32.7 Billion Budget, $2.7 Billion in New Taxes.
Governor Tom Wolf delivered his much anticipated 2016-2017 fiscal year budget address to a joint session of the General Assembly this morning, and within minutes warned that it would not be an ordinary budget address. After dispensing with the traditional formalities, he began by saying that he could not lay out his agenda for the upcoming year, as would be customary, because the Commonwealth is in crisis.
True to his word, after nearly an hour he made no mention of his priorities, but did say that he wouldn’t talk about the need for “protections for the LGBT community in housing and the workplace, the legalization of medical marijuana, a raise in the minimum wage, and criminal justice reform.”
But he did talk about history and math. “Pennsylvania now faces a $2 billion budget deficit. It’s just a fact.” He described why the state fiscal situation is dire, the need for immediate action and the potential consequences if the Legislature does not respond accordingly and “do their jobs”.
Directly laying the blame for the crisis at the feet of the House and Senate Republicans, he devoted the second half of the speech to recollecting his version of the events of the last 7 months, and the reasons why portions of the 2015-2016 budget remain unfinished.
The fiscal crisis, the Governor contends, is a $2 billion structural deficit and that has been accumulating over the last five years as a result of the General Assembly’s electing to use one-time revenue fixes and tax shifting strategies to “balance” budgets. He warned that unless it is addressed with new revenue this year, Pennsylvania will fail to meet its basic obligations, cuts to schools and public services.
Clearly speaking past House and Senate members in attendance to the media and public, he accused Republican leadership in the House of walking out on a deal, passing a budget full of “dime store magic” that “your banker would laugh at,” using tricks and gimmicks, and choosing to ignore a ticking time bomb.
Stating that he would not accept another irresponsible budget from the General Assembly, he said, “if you won’t face up to the reality of the situation we’re in. . . if you ignore that time bomb ticking. . . if you won’t take seriously your responsibility to the people of Pennsylvania – then find another job.”
He didn’t say how much he was requesting in new spending, revenue forecasts, ways the structural deficit could be addressed or any of the detail contained in his budget proposal.
Beyond the rhetoric – and the Republican response was fast and furious – the Governor’s actual 2016-2017 budget proposal which was released separately without fanfare, calls for a $32.7 billion budget chock full of additional spending and revenue. On the spending side, Wolf is proposing (above and beyond the $30.8 billion he’s still seeking for 2015-2016 fiscal year) an additional $500 million in school funding, an increase of $188 million in human services initiatives, more than $500 milion transferred for public pension debt and the balance of the budget roughly similar to his 2015-2016 proposal.
Eliminating the structural deficit and the new proposed spending would be funded by more than a dozen new tax increases, most of which would be retroactive, providing an additional $3 billion annually to the state treasury. Some of the most notable are below:
- INCOME: Increases rate 11 percent, to 3.4 percent from the current 3.07 percent, to raise $1.4 billion. Effective Jan. 1, 2016.
- SALES: Keeps rate at 6 percent, but eliminates exemptions on basic cable TV, movie theater tickets and digital downloads to raise $415 million. Effective April 1, 2016.
- CIGARETTES: Raises per-pack tax to $2.60, from $1.60, to raise $468 million. Effective April 1, 2016. Extends a 40 percent wholesale tax to sales of cigars, loose tobacco, smokeless tobacco and electronic cigarettes to generate $136 million. Effective May 1, 2016; for loose tobacco, effective July 1, 2016.
- NATURAL GAS: Imposes a new tax on natural-gas production — 6.5 percent of value — to generate $218 million. Effective Jan. 1, 2016.
- INSURANCE PREMIUMS: Imposes a surcharge of 0.5 percent of premiums to fire, property and casualty insurance to generate $101 million. Effective Jan. 1, 2016.
- CASINO GAMBLING: Imposes new 8 percent tax on promotional plays at casinos to generate $51 million. Effective Jan. 1, 2016.
- BANKS: Raises rate of shares tax on bank and trust companies to 0.99 percent, from 0.89 percent, to generate $39 million. Effective Jan. 1, 2016.
The current proposal does not include any offset in the property tax, nor does it contain any of the business tax changes that has been included in recommended last year. There is no proposed reduction in the Corporate Net Income Tax, no reduction in the Net Operating Loss carry-forward limit and combined reporting which would have meant $250 million less revenue is not part of his 2016-2017 plan. It also includes an increase in the minimum wage to $10.15.
Senate Majority Leader Jacob Corman summed up the response of GOP legislative leaders. “By damn, you have to strike a balance here. This is the eighteenth budget address I’ve heard…the “most absurd politically motivated speech I’ve ever heard by a governor in the hall of the House. Giving a speech like he did today drives people apart, not brings people together. My guess is that today we’re further away than we were last June.”
House Majority Leader Dave Reed said, “It’s absolutely absurd. He forgets to tell people that the only piece he’s talking about is taxes, not pension, accountability, restrictions on property tax increases, liquor system reform. I was hoping he’d talk about working together. I was hoping he’d come back from Fantasyland, but instead he went to Neverland. Generational change doesn’t come by simply passing higher taxes.”
After tomorrow, the both the House and Senate will recess until March 14 to allow for budget hearings, and hopefully a cooling off period.