Gov. Tom Wolf is not willing to give up on efforts to reach a final compromise and close out the months-long impasse over the state’s current budget.
In fact, in his budget address today, the second-year governor did not talk at all about his 2016-17 spending plan, a plan that calls for $32.7 billion in spending.
Instead, he spent his time urging Republican lawmakers to pick up on a $30.6 billion budget deal that almost got done before Christmas.
“This is about math,” Wolf said. “Pennsylvania now faces a $2 billion budget deficit. That’s not a Democratic fact or a Republican fact. It’s just a fact.”
Wolf ended up using a line-item veto on the 2015-16 budget ahead of the New Year. The partial veto allowed Wolf to release about $23.4 billion in funding on an emergency basis to help school districts, human service agencies and counties that have been waiting on state aid.
That $30.6 billion plan is built into the blueprint for 2016-17. If the current budget is finalized, it would mean $893 million in tax increases for the fiscal year that expires this June.
Next year’s budget calls for $2.7 billion in new revenue in 2016-17, including $1.3 billion from an increase in the personal income tax.
“If the General Assembly does not approve a responsible plan to solve this crisis, every Pennsylvanian will suffer the consequences,” Wolf said. “Those consequences will be real. They will be immediate. They will be severe.”
Human service programs will be cut, local property taxes will be increased and debt costs will continue to grow because of future credit downgrades, Wolf said.
“You see, because our credit has been downgraded so much, we are forced to pay a higher rate of interest on our $17 billion in debt,” he said. “That will eventually cost us an extra $139 million a year.”
The tax package for 2016-17 is driven by an increased personal income tax rate — a move to 3.4 percent from 3.07 percent — as well as an expanded base for sales taxes, higher cigarette taxes and a 40 percent tax on other tobacco products.
The sales tax would be expanded to items such as movie theater tickets, digital downloads and basic cable television services, according to Budget Secretary Randy Albright.
Wolf wants a bank share tax increase to 0.99 percent from 0.89 percent, an increase of 0.5 percent on the insurance premiums tax surcharge for property and casualty and fire, and a new 8 percent tax on promotional play at state casinos.
The insurance premiums tax would rise to 2.5 percent. In discussing the casino tax, Albright said that about 27 percent of all betting at casinos is now promotional play.
The tax plan also includes a 6.5 percent severance tax on natural-gas drilling. That tax would not go into effect until July 1, so it wouldn’t impact the current budget.
The severance tax would pump $217.8 million into the 2016-17 budget, according to the administration.
Minimum wage, pensions
Wolf wants to increase the state minimum wage to $10.15 per hour from $7.25. That increase would benefit more than 1.2 million workers in the commonwealth.
The administration expects that move would boost revenue by about $60 million annually after the added costs to employers.
On state pension costs, 2016-17 will be the last year of significant increases, Albright said. General fund costs will increase about $500 million in this budget before beginning to level off in future years.
The combined unfunded liability of the Public School Employees’ Retirement System and the State Employees’ Retirement System is expected to rise to more than $58 billion this year, according to the administration.