HARRISBURG (AP) – The start of Pennsylvania state government’s 2016-17 fiscal year is just four days away and key budget legislation remains under negotiation behind closed doors. Democratic Gov. Tom Wolf and leaders of the Republican-controlled Legislature have reported no agreements on spending or how to pay for it, and have not unveiled a bipartisan budget package.
Negotiations continued through the weekend, and lawmakers were to return to the Capitol on Monday, virtually ensuring that a budget will not meet the fiscal-year deadline. Negotiators are tight-lipped, while rank-and-file lawmakers who must vote on it say they are being told little by caucus leaders.
A look at some key topics:
Spending
According to lawmakers, the debate is between a Republican position of roughly $31.5 billion, a 5 percent increase, and $31.9 billion being sought by Democrats, a 6 percent bump. Wolf is seeking enough money to balance a long-term deficit projected at $1.8 billion in the 2016-2017 fiscal year by the Legislature’s Independent Fiscal Office and to increase aid to public schools for instruction and operations by $250 million, or about 4 percent.
Funding for human services and public schools could be affected, depending on the spending level. The deficit is driven primarily by rising costs for pension obligations and health care. The use of one-time stopgaps has drawn five credit downgrades by the three major credit rating agencies since 2012, leaving Pennsylvania among the lowest-rated states and paying higher rates to borrow money. Failure to eliminate the deficit could prompt another downgrade. For public schools, Wolf wants more aid to help close a huge funding gap between Pennsylvania’s wealthiest and poorest school districts.
Taxes
There are discussions about a variety of tax increases to help fill the gap between spending and about $30.4 billion that the governor’s office projected in tax collections, after refunds. Discussion revolves around increasing excise taxes on cigarettes by up to $1 per pack, from $1.60 per pack currently, and a reviving a gross receipts tax on natural gas that utilities sell to consumers. It was a 5 percent tax – or an estimated $55 per household – when it was eliminated starting in 2000. Other potential tax increases on banks, electronic cigarettes and other tobacco products are in the mix, as is eliminating a sales tax exemption on basic cable service. Republicans otherwise have balked at a tax increase on income, sales or Marcellus Shale natural-gas production.
Gambling
The House has given preliminary approval to legislation that, in part, would make Pennsylvania just the fourth state to allow casino-style gambling online. Republicans say it would generate $270 million in the first year, mostly through initial license fees, while Democrats say they expect $200 million from it. Its prospects in the Senate are unclear. Under the bill, casinos could offer slot machine-style games and table games on their websites, and they could station slot machines in Pennsylvania’s six international airports and at 10 licensed off-track betting parlors. The casinos could also make the online games available on mobile applications for use in airports. The measure also would regulate daily fantasy sports betting.
Pensions
The Senate has rejected House-passed legislation designed to pare back the traditional pension benefit for future state government and public school employees. Wolf has pledged to sign the House bill, as well as a plan drafted by Senate Republicans that was defeated in the House in December. Neither plan has any effect on the budget under discussion. But it has ramifications for the budget if Senate Republicans block a tax increase before pension legislation, their top priority, becomes law.
Wine sales
Wolf signed legislation earlier this month to allow sales of wine to-go at private-sector establishments for the first time. It also allowed more flexible rules around state-owned liquor stores, such as longer Sunday hours. Supporters say it will generate more tax revenue for the state treasury; the Independent Fiscal Office projected it at approximately $100 million extra.
