Proposed state budget is big, bold...and flawed
03/10/2015 12:41PM ● Published by Steven Hoffman
There are a lot of big ideas in Gov. Tom Wolf’s proposed $29.88 billion budget for 2015-2016.
The spending plan proposes an additional $1 billion in education funding, an investment of $1.6 billion for economic initiatives aimed at job growth, and more money for higher education. The governor wants a phased in increase of the minimum wage to $10.10 per hour. He also wants to invest in economic development initiatives for communities, increase health care options for senior citizens, and he called on the 14 state-owned universities to hold the line on tuition rates.
There’s a lot to like about the proposed state budget, starting with the bold attempts to address some of the biggest issues facing the state.
For more than a decade, Pennsylvania lawmakers have failed to address the growing pension crisis, and now the state’s two pension plans are under-funded by approximately $50 billion. Wolf’s budget proposes to begin the process of fully funding these pension plans.
Wolf’s push for more education funding is part of an overall plan to increase the state’s share of education funding to 50 percent. It’s been four decades since the state’s share has reached that level. The state’s current share of the overall education funding stands at approximately 35 percent, which ranks among the lowest levels in the country. One of the centerpieces of Wolf’s proposed budget calls for $3.8 billion in property tax relief. Increasing the state’s share of education funding will ease the burden on local property owners, including senior citizens and residents on a fixed income. This editorial page has long advocated reducing the reliance on property taxes to fund schools.
Gov. Wolf wants to enact a severance tax on natural gas production starting on Jan. 1, 2016. Pennsylvania is currently the second-largest natural gas producer without such a tax, and statewide polls show that citizens support imposing it on natural gas producers. Gov. Wolf is proposing a tax equal to 5 percent of the selling price of natural gas plus a charge of 4.7 cents per thousand cubic feet. Considering the financial challenges that the state is facing, a severance tax in line with what other states charge would be prudent.
One element of the proposed budget that Republican lawmakers are expected to support is a gradual reduction in the corporate net income tax from 9.99 percent to 4.99 percent, an initiative that aims to improve the business climate. Pennsylvania ranks 50th among states in job growth and 46th in revenue growth.
None of the aforementioned ideas can become a reality without funding, of course. Wolf’s budget proposal calls for an increase of the personal income tax from 3.07 percent to 3.7 percent and a hike of the state sales tax from 6 percent to 6.6 percent. In all, the proposed budget includes $4.7 billion in proposed taxes.
While we support the idea of transitioning away from property taxes in favor of a higher sales tax or personal income tax, Gov. Wolf’s proposal does not include a dollar-for-dollar swap of one tax for the other. We agree with our State Rep. John Lawrence, who wants to see a dollar-for-dollar requirement to be a part of the proposal. When Pennsylvania lawmakers approved the expansion of casinos in the state a decade ago, it was supposed to provide much more property tax relief than it did, so a dollar-for-dollar swap provides a level of protection for taxpayers.
With approximately $4.7 billion in proposed taxes, it’s unlikely that the governor’s proposed budget gains the necessary support from the Republican-controlled General Assembly. There are also plenty of reasons to be concerned about the $3.7 billion in borrowing that the budget calls for. Including that amount in the budget’s bottom line brings the real amount of spending to approximately $33.7 billion, which is a 16 percent jump.
We give the new governor credit for providing a big, bold proposal, and hope that Republicans and Democrats can work together to move some of the big ideas forward while limiting the tax increases for 2015-2016. In a $29 billion budget, there are savings and efficiencies to be found before residents are asked to shoulder more of a burden.