Six key issues to watch as Pennsylvania lawmakers debate a budget

Written by Ed Mahon, York Daily Record | Jun 9, 2015 11:59 AM

Earlier this month, state Rep. Seth Grove, R-Dover Township, introduced an amendment that he planned to vote against: Tax proposals from Gov. Tom Wolf's budget.

Democratic lawmakers and the governor called the move a political stunt, and the amendment got unanimously voted down.

"There seems to be a fair amount of gamesmanship on both sides," said G. Terry Madonna, a pollster and political science professor at Franklin & Marshall College. "But this is typical."

Welcome to June, as lawmakers face the end of the fiscal year and a June 30 deadline to pass the budget. The impact of missing the deadline would increase the longer any stalemate goes on, and as funding for school districts and other services dries up.

In March, the director of the state Independent Fiscal Office estimated the state's structural deficit at about $1.5 billion or $1.6 billion, while the Wolf administration has put the deficit above $2 billion.

For Wolf, many of the key issues he campaigned for or against will be tested in budget negotiations. Here are six issues that appear key to the negotiations, based on statements and actions of House leaders, Senate leaders and Wolf.

1. PROPERTY TAXES >> With a bipartisan vote on May 13, the state House approved a plan to reduce school property taxes by raising the personal income tax rate from 3.07 percent to 3.7 percent and the state sales and use tax rate from 6 percent to 7 percent.

The plan differs from Wolf's property tax reduction plan in several ways. Wolf's plan would: raise the state sales and use tax to 6.6 percent and expand what it covers; raise money for things other than property tax reduction; and direct more money to districts with high tax and high poverty rates, such as York City School District.

Still, Wolf and his administration have praised the House action, saying it continues the conversation.

How lawmakers voted on the House property tax plan

Dark red = Republican yes vote

Dark blue = Democratic yes vote

Light red = Republican no vote

Light blue = Democratic no vote

Gray = Lawmaker didn't vote on final bill or the seat was vacant.

Viewing this on a mobile device? Click here to check out a map of how state lawmakers voted on the House property tax plan.

2. PENSIONS >> On May 13, the state Senate approved legislation that would reduce future benefits by, among other things, requiring new state and public school employees be enrolled in a defined contribution plan. Although lawmakers say current employees would keep benefits they have already earned, for future benefits, many would have to pay more to keep the higher retirement benefits approved in a 2001 law.

Wolf has opposed reducing benefits. In his 2015-16 budget, Wolf proposed using revenue from an increased and expanded sales tax to make employer contributions for the Public School Employees' Retirement System. He has also proposed using increased profits from the state's wine and liquor system to help with pension costs, along with borrowing $3 billion and using proceeds from investing those pension obligation bonds to pay money due for pensions. Wolf also wants to reduce management fees.

3. LIQUOR PRIVATIZATION >> On Feb. 26, the House passed a plan to privatize the wholesale and retail state liquor system.

House Bill 466 would allow beer distributors and others to purchase licenses to sell liquor and wine, allow grocery stores to buy licenses to sell wine, and create a path to eventually close the state stores.

Wolf has opposed privatization and said he supports efforts to modernize the system to make it more consumer-friendly, such as expanding Sunday hours and identifying the most convenient locations for customers.

4. TAXING NATURAL GAS DRILLING>> Wolf has proposed a 5 percent extraction tax on natural gas drilling, plus 4.7 cents charged per thousand feet of volume extracted. He has said education funding would be the key priority for new revenue.

Wolf's plan sets a floor of $2.97 per thousand cubic feet for tax purposes, regardless of the price that it is selling for. His plan would not allow for post-production cost deductions, which other states allow, according to the state's Independent Fiscal Office.

The office has projected that Wolf's proposal would cause Pennsylvania to have the highest effective severance tax rate compared to other major natural gas producing states. That IFO breaks that down into four parts: the 5 percent extraction tax on the value of natural gas; the 4.7-cent tax on volume; the lack of post-production cost deductions; and the price floor.

The Wolf administration has disputed how the IFO does its calculations -- specifically, how the IFO counts the lack of post-production cost deductions as part of the overall effective tax rate.

5. INCREASING EDUCATION FUNDING>> Wolf has proposed a $400 million, or 7 percent, increase to the basic education subsidy, along with a $100 million increase for special education funding and more than $160 million in funding for school districts through cuts to cyber charter schools.

Republican legislative leaders have criticized the tax increases that are included as part of Wolf's budget and which would help him pay for the increases to education and other areas.

6. CUTTING BUSINESS TAXES, CLOSING LOOPHOLES >> Wolf has proposed cutting certain business taxes, including the corporate net income tax rate from 9.99 percent to 5.99 percent effective Jan. 1, 2016 and to 4.99 percent by 2018. His plan would also add reporting requirements, which he says are aimed at closing tax loopholes.

In a May 18 letter to several business and natural gas groups, Wolf criticized them for not supporting his plan.

"You have repeatedly called for major reductions in our Corporate Net Income Tax rate. My budget cuts the CNI in half," Wolf wrote. "Why aren't you supporting me on this?"

Gene Barr, president and CEO of the Pennsylvania Chamber of Business and Industry, responded by saying in a letter that the corporate net income tax cut and other cuts are linked to tax increases and changes that would hurt many businesses.

Contact Ed Mahon at 717-771-2089.

Check out Wolf Tracker

The YDR is tracking how successful Gov. Tom Wolf is at keeping his big promises and accomplishing key goals. Visit to see how he's doing so far.

On the minimum wage

Gov. Tom Wolf wants to raise the minimum wage from $7.25 per hour to $10.10 per hour, and he wants to index the wage to inflation.

Lawmakers have introduced legislation to do that, and the Senate Labor and Industry Committee held a May 5 hearing on the issue. But the measure hasn't passed out of a committee in either chamber.

The measure doesn't have a direct impact on the budget, although it would affect businesses and workers.

How senators voted on pensions

On May 13, the state Senate voted 28-19 to pass Senate Bill 1, which would make big changes to Pennsylvania's public pensions systems. All of the Democrats in the Senate and one Republican voted against it.

Here is how lawmakers voted, broken down by the districts they represent.

Dark red = Republican yes vote.

Light red = Republican no vote.

Light blue = Democratic no vote.

Gray = Lawmaker didn't vote or seat was vacant.

Viewing this on a mobile device? Click here to see how state senators voted on Senate Bill 1.

This article comes to us through a partnership between York Daily Record and WITF.

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