Pennsylvania’s Budget Funding Quandary

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Posted by Shane Otten on Wednesday, July 12th, 2017, 9:12 AM PERMALINK

On Monday, Pennsylvania Governor Tom Wolf (D) announced he will let the $32 billion budget, approved by both legislative chambers on June 30th, pass into law without his signature. Before Gov. Wolf’s decision, Pennsylvania was one of seven states without a budget for the new fiscal year. However, the Pennsylvania legislature is not finished with their new budget, as no measure to fund it has been approved, marking the second consecutive year Gov. Wolf has allowed a budget to become law without a way to pay for it.

Pennsylvania legislators are split on how to address the Keystone State’s $2.2 billion deficit, also known as a $2.2 billion overspending problem. Back in February, Gov. Wolf introduced a $1 billion tax package, including an expanded sales tax and a tax on natural gas production. House Republicans have rejected these tax hikes and instead have proposed various measures to grow state revenue without raising taxes.

Proposals to raise revenue without raising taxes include allowing 40,000 slots-style video game terminals (VGT) in bars, bowling alleys, and other establishments across the state, which could raise over $500 million once fully implemented. Other proposals call for selling more liquor licenses and permitting online gambling as well as allowing online sales of state lottery tickets. However, Senate Republicans have expressed opposition to VGTs. As Pennsylvania is second only to Nevada in total gambling revenue, some in the legislature are worried that VGTs could take revenue away from the state’s casinos. 

House Majority Leader Dave Reed (R-Indiana) recently expressed his disagreement with Gov. Wolf and others who are calling for higher taxes to balance the budget. "Look, there's two sides to credit problems. One is not just more taxes, one is less spending," Reed said.

Both sides do agree on borrowing $1.5 billion from master tobacco settlement funds to close the shortfall. Settlement funds bring in approximately $350 million per year. Until the revenue portion of the budget is balanced, lawmakers plan to withhold $563 million of funding from four state universities. Gov. Wolf’s failure to offer sustainable budget solutions is creating a ripple effect that hurts the whole state.

ATR is urging Pennsylvania lawmakers to reject balancing the budget with tax increases, such as the tax hike on online travel agents now being demanded by Gov. Wolf. Pennsylvania already has the nation’s 11th highest state and local tax burden. If that weren’t bad enough, Keystone State taxpayers have been hit with more than 20 federal Obamacare tax increases over the last eight years. As the Commonwealth Foundation has documented, it is clear that Pennsylvania’s budgetary problems are found on the spending side of the ledger. If Pennsylvania lawmakers had kept spending in line with population growth and inflation over the last three years, the state would have increased spending by $1 billion and the budget would be balanced.

IRS data shows that citizens are voting with their feet and leaving Pennsylvania. From 2014-15, the most recent year for which data is available, Pennsylvania experienced a net loss of over 16,000 residents, who took $1 billion in income with them. Tax hikes like what Gov. Wolf has called for will only exacerbate this exodus and make it even more difficult to compete with the likes of North Carolina, Texas, Florida, and Tennessee, states that are enacting tax relief and keeping spending in check. Rather than balance the budget with job-killing tax increases, Pennsylvania should put spending in line with revenues, pass a budget that does not include tax increases, and go on summer vacation. 

 

Photo Credit: Gov. Tom Wolf

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