Close but no cigar

That’s the state budget right now, at least according to Senate Minority Leader Jay Costa, D-Allegheny. 

“Over the course of the past several months, we’ve had a series of meetings, often times they were not very productive, but what I can tell you is there have been a series of meetings that, I think, would lead us to be more encouraged that the outcome … is a lot closer than I think folks recognize,” Costa told the Pennsylvania Press Club luncheon Monday afternoon at the Harrisburg Hilton. “I think that’s a positive sign.” 

He qualified those comments a bit when asked about them after the luncheon, saying, “I’m an optimist, and good conversations have been taking place, and I think we’re probably honing in on some things that will help us get to a resolution sooner than later.” 

One of the things that might help produce a resolution, at least from the perspective of legislative Republicans, is that broad-based taxes won’t be part of a final state budget plan.

Said Costa: “It’s my belief. I believe what my colleagues in the Senate Republican Caucus have told us. I think that they’re sincere in their position that they believe they’re not able to get that through their caucus. So I think now we are looking at other ways that we can get to the same end, or close to the same end.”

House GOP spokesman Steve Miskin echoed what Costa said his GOP colleagues in the Senate have been telling him.

“We are not into raising revenues just to raise revenues,” said Miskin Monday afternoon. “We need to know how much we’re spending.”

Costa offered a similar comment when asked during the luncheon if any of his Democratic Senate colleagues were ready to put up a vote for a personal income tax increase or a sales tax hike and/or expansion.

Costa: “It’s a tough question to answer in isolation. Our members are ready to address and support a comprehensive approach that addresses a whole bunch of things,” he said. “Trust me, we need about $2 billion-plus dollars to deal with the structural deficit in 2016-17, how much of that we get will determine how many members participate – I think that’s what’s important. 

“It depends on what the package looks like – what are the investments in education, is Marcellus part of the solution, what are the investments in human services – what are those types of things going to look like. Those are all going to be factors that are part of the conversation we’re going to have with our [Democratic] members about how many members support a proposal.”

When later asked if lawmakers could come up with $2 billion without broad-based tax hikes, he said, “You can certainly get to just about any number – you can get to it, but whether you can get the votes for it remains to be seen.

“And that’s what we’re trying to get our arms around.”

Costa said recent meetings involving the four legislative caucuses and Budget Secretary Randy Albright have been useful in “narrowing the issues,” including “conversations about revenues … spend numbers, all that kind of stuff – we’re trying to get our arms around what options will be available, to what degree we want to look at property tax relief, in addition to pensions and wine and spirit privatization.

“A number of other things are sort of percolating at this time.”

He said it was unlikely his caucus – and legislative Democrats, in general, along with Gov. Tom Wolf – would back off of the need for $400 million in additional funding for basic education. He also indicated one item that remains close to resolution is pension reform, although discussions continue regarding how to construct a new retirement plan for future state and public school employees.

Costa did express concerns about the recent interest in turning to an expansion of gambling to generate more revenues for Pennsylvania, calling it “fool’s gold” and invoking the recent small games of chance effort that failed to generate promised revenues.

And he said while there’s no specific revenue amount in mind for a natural gas severance tax, imposing a tax that’s greater than the current impact fee is necessary to ensure the Marcellus community is contributing what the public expects them to contribute.

Costa explained: “Right now they’re [natural gas industry] not deemed to be part of the solution … it’s not necessarily the amount of money, but more importantly, I think, it’s how the public perceives the work that we did here: if we do a budget that includes enhanced revenues without doing Marcellus, I believe the people of this commonwealth won’t be very happy with the members who supported that … because that was the charge we had – make investments in education, make investments in human service programs, look to the Marcellus shale community, look for property tax relief, look for job creation.”

Reacting to the need for more money to balance both this year’s budget and the 2016-17 budget, Miskin said the goal is to have a balanced budget for 2015-16. And while Gov. Tom Wolf vetoed several GOP-constructed budgets because they included one-time revenues to balance the budget, Miskin argued they were still balanced.

“We need to look at all the revenues that are available in the Commonwealth’s accounts before we look to raising taxes on Pennsylvanians and employers,” said Miskin.

And despite the ongoing public sniping between the various players in the current budget drama, Miskin did agree with Costa’s characterization of the budget situation being better now than it has been. 

“The goal has always been to have a bi-partisan budget that gets the governor’s signature,” said Miskin. 

“We finally have partners, that’s the difference,” Miskin added, referencing legislative Democrats.

Miskin said there are no meetings between legislative leaders and Wolf currently planned, but all the parties involved are hopeful the next week or two will produce progress toward a break in the impasse.

Legislature update

 As a school superintendent and constituent, I urge you to Vote No on reauthorization of the Scholarships for Opportunity and Results (SOAR) Act (H.R. 10), which funds the Washington D.C. private school voucher program. Since the programs authorization in 2004, over $190 million in taxpayer dollars have been diverted to private schools in D.C.  

·         I oppose this and all other private school voucher programs because public funds should be spent on public schools, not private schools. But the D.C. program, in particular, has proven ineffective and unaccountable to American taxpayers. Not only have multiple Department of Education (USED) studies concluded that the program has failed to improve educational outcomes for participating students, but two U.S. Government Accountability Office (GAO) reports have also identified its repeated management and accountability failures.    

·         Vouchers do not offer a meaningful choice to parents or students. Voucher schools can reject students based on prior academic achievement, economic background, English language ability, or disciplinary history. These schools are not held to the same public accountability standards all public schools must meet, and deprive students of important rights and protections. 

·         At a time of limited funding for existing education programs, such as IDEA and Title I, and a looming sequester, it is unthinkable to divert millions of taxpayer funds to paying for the private school tuition of less than 7,000 D.C. students

·         Again, I urge you to Vote No on H.R. 10. Thank you for your consideration.

Wolf update

Here's the highlights of the tax package Gov. Tom Wolf has introduced for possible consideration on the state House floor as early as Wednesday.

Note that this is not necessarily the full revenue package the governor would be seeking to conclude a budget deal.

Administration officials said Tuesday they can't make that promise in the absence of a final agreement.

But it is evident that, by the administration's own math, that when the proposed property tax relief piece is factored into Wolf's proposal, there is not enough income to close what he has defined as the state's structural deficit and increase education spending to the level that Wolf wants.

So, even if this measure passes, expect continued discussion about increases in cigarette taxes, the bank shares tax, etc.

Wednesday's bill is, however, intended to represent the size and scope of any broad-based tax that would be needed, and the new severance tax on natural gas production that Wolf has long championed.

PERSONAL INCOME TAX

The rate for all wage-earners would rise from 3.07 percent to 3.57 percent, effective Oct. 1, 2015. On an annual basis, that 16.3 percent increase would take the tax for a person making $50,000 from $1,535, to $1,785.

Some low-income households would be shielded from the increase by an expansion of the state's special exemptions for the working poor.

At present, a family of four with two children does not pay any income tax if their income is less than $32,000. Wolf's proposal would raise that total tax forgiveness ceiling to $36,400.

It is projected to raise a net $1.316 billion in 2015-16, and just under $2 billion in 2016-17.

SEVERANCE TAX

Wolf would set a severance tax on natural gas produced through hydraulic fracturing in the state's Marcellus Shale region at 3.5 percent of the value of the gas extracted, plus 4.7 cents per thousand cubic feet of gas produced.

This tax, to take effect January 2016, would be on top of and leave untouched the current impact fee structure established during the Corbett Administration.

At present, Pennsylvania is the only gas-producing state in the Marcellus Shale region without a severance tax.

It is projected to raise $67 million in 2015-16, and $389 million in 2016-17. All of the revenues are to be used for education.

PROPERTY TAX RELIEF FOR SENIORS, DISABLED

More than $400 million of the income tax money would be steered into Pennsylvania's existing property tax rebate programs for senior citizen and disabled homeowners.

The Wolf Administration says this will allow the state to expand the program to deliver bigger rebates to more households, starting in the 2017-18 fiscal year.

Administration officials said that increasing the maximum rebates permitted to $2,000 in some cases would provide for the effective elimination of school property taxes for 331,000 households. At present, the rebate program zeroes out taxes for about 84,000 households each year.

The tax rebate program's expansion would also permit more households to apply for larger rebates by expanding the household income ceiling from $35,000 at present to $55,000.

Summaries provided by the administration Tuesday suggested that the more liberal income eligibility limits for the program means nearly 570,000 households could be eligible for the rebates, up from 360,000 served last year.

Running out of money

Officials with the Northern Potter School District in Ulysses are poised to borrow $5 million to fund school district operations as the state budget impasse drags on.

On Tuesday, that school district appeared on a list released by Auditor General Eugene DePasquale of school districts that already borrowed funding — but Superintendent Scott  Graham told The Era the school board is slated to approve a resolution to take out a loan during  a meeting set for Oct. 12.

On that same day, Gov. Tom Wolf vetoed a spending measure and accompanying bills approved by state lawmakers that called for $11 in funding to schools and social service organizations across the state.

At this point, Northern Potter’s solicitor is discussing options with the First Citizen Community Bank of Ulysses for a loan, Graham said. The $5 million would ideally carry the district through the year, if needed, he said.

“We’re getting everything ready to go,” said Graham who is not surprised with having to take out a loan.

But if the school district has a good October with local tax dollars coming in, then school officials would dip into the borrowed funds after Thanksgiving, he predicts. As the money is used, though, he wonders if the school district would be reimbursed for the loan’s interest.

“Our students have returned to their schools, but much-needed state funding is stalled by the budget impasse in Harrisburg. It’s causing financial insecurity in schools across Pennsylvania and already forcing some to borrow money,” DePasquale said in a prepared statement. “Instead of focusing on education, schools across the state are having meetings to try and figure out how to get by every month, and shopping banks for loans that will hopefully allow them to keep the lights on.”  

The Northern Potter School Board is expected to approve a resolution to borrow funding during a meeting that starts at 7:30 p.m. Oct. 12 in the children's school library.

Meanwhile, as the budget crisis continues, school officials have ordered bills according to importance, something Graham calls unfortunate. Not getting paid are Public School Employees' Retirement System and cyber school, he said.

By itself, cyber-school costs the school district around  $150,000 a year, he said. Ten or 11 students are enrolled in cyber school, Graham said.

If officials paid those two categories of bills, the district would already be out of money, he said.

No matter, as the budget impasse carries on, Graham said school officials will focus on the children and keeping the school district open.

“I certainly regret the impact this is having on our schools, which is why I supported a budget in June that increased funding for public education by $100 million,” said state Rep. Martin Causer, R-Turtlepoint. “It’s why I voted in support of overriding the governor’s veto of education funding in that budget, an effort that failed due to the lack of Democrat support. And it’s why I voted for the emergency funding bill last week. As budget negotiations continue, I will continue to support efforts to get needed funding to our schools and human service agencies, while also ensuring the final product is respectful of the taxpayers who foot the bill.”

And when the budget does get approved, Graham said he is hoping for a significant boost in state funding. As it is, the district doesn’t receive enough local taxes to even bring the district on solid footing, Graham said.

In fact, officials have had to bring salaries almost back to 2004 levels and reduce staff through attrition over the last decade, Graham said.

“I just hope they can come together,” said Graham.

So does DePasquale.

“Even if the Commonwealth repays the borrowing costs to the districts and IUs — and that is not guaranteed — the money has to come from somewhere, and that could eat into other parts of the education budget,” he said. “This is already a huge problem affecting districts in rural, suburban, and urban areas. And it is going to turn into a crisis if the budget doesn’t get passed now.”

Nathan Benefield, vice president of policy analysis for the Commonwealth Foundation, shared similar thoughts on the ongoing battle.

“It’s astonishing that Governor Wolf is blocking immediate funding for students, the disabled, and struggling citizens unless his tax demands, which amount to $1,400 per family of four, are met,” he said in a prepared statement. “The governor claims he’s holding out for increased education funding, but legislative leaders already offered the $400 million increase he requested in his original budget proposal. With these vetoes and rejection of increased education funding, Governor Wolf has demonstrated that he’s really just holding out for higher taxes on Pennsylvania families — families who already bear the 10th highest tax burden in the nation.”

But Wolf feels differently.  

“Instead of seriously negotiating a final budget that funds education with a commonsense severance tax, fixes our deficit without gimmicks and provides property tax relief for middle-class families and seniors, Republican leaders passed a stopgap budget that once again sells out the people of Pennsylvania to oil and gas companies and Harrisburg special interests,” he said in a prepared statement.

As is tradition, he says, Republican leaders are intent on Harrisburg politics and embracing what he calls “a failed status quo that is holding Pennsylvania back.”

“Throughout negotiations, I have tried hard to compromise, and recently, I offered historic reforms to the liquor and pension systems, two areas Republicans say are priorities, and in return, I have received nothing on education, a severance tax or fixing the deficit,” Wolf said. 
Yet, Causer said Wolf’s tax plan includes a 20-percent income tax increase and a 10-percent sales tax increase.

“It also broadens the sales tax to apply to hundreds of products and services not currently taxed,” he said in an email. “When this proposal was brought before the House in June, not ONE member voted for it, Republican or Democrat. No one in the Capitol believes Pennsylvania can afford such a huge tax increase … except for our millionaire governor.”

In a prepared statement, Pennsylvania GOP Communications director Megan Sweeney has called Wolf’s continued efforts to block emergency dollars for schools and social services has caused the state to plunge into an unnecessary crisis.

“Our school districts should not be forced to borrow money because Governor Wolf and Democrats in the State Senate and House view them as political pawns in their
efforts to raise taxes,” she said. “It’s time for Governor Tom Wolf and Democrats in the State Senate and House to join with Republicans in supporting emergency funding for our schools and social services during the ongoing budget negotiations.”