Pennsylvania State Budget
This week, Pittsburgh Mayor Bill Peduto criticized Gov. Wolf’s plan to sell $3 billion in pension obligation bonds. In a meeting with editors and reporters from the Pittsburgh Tribune-Review, the city’s Democratic mayor explained that this same plan nearly led Pittsburgh into bankruptcy and that:
“One out of every $5 we spend every year just goes back to paying those old bonds. Not only that, but our debt ratio is higher than New York City's when they went bankrupt.”
With Pittsburgh facing a $1.2 billion pension obligation, Peduto said “[t]here has to be a new mechanism from the state in how pensions are paid.”
Luckily, there is.
Peduto, along with a number of mayors and local government officials, supports state legislation that would reform the municipal pension plans. Specifically, these bills would put new employees into a 401k-style plan, and move pensions out of the collective bargaining process. There is a growing bipartisan support for municipal pension reform across the commonwealth.
And Peduto is far from alone in criticizing Gov. Wolf's ill-conceived pension obligation bond plan. Financial experts and rating agencies across the country have warned against using pension bonds to try to repay debt with more debt. Many cities, like Pittsburgh, and several states have tried to use pension bonds to get out of a bad financial situation—it hasn't worked yet.
Previously, we blogged on how Gov. Wolf’s tax proposal raises more revenue than the tax proposals in the 49 other states combined.
To put this another way, Wolf’s $4.6 billion tax increase is nearly $4 billion more than any other state. Only two other states—Connecticut and Alabama—had tax proposals even one-tenth as large as Tom Wolf’s proposal.
It is no wonder the House overwhelmingly rejected the governor’s proposal, which failed to garner a single vote as it was defeated 0-193.
The liberal Pennsylvania Budget and Policy Center—an arm of the union-funded Keystone Research Center—has a new claim that Gov. Wolf's "property tax relief" is similiar to that in a bill passed by the House of Representatives earlier this year.
Unfotunately, PBPC's analysis offers virtually no discussion of the tax increases in these plans.
For starters, PBPC never mentions that Gov. Wolf’s tax plan, overall, is a net increase of $3.8 billion in 2016-17, according to the IFO. This jumps to a net increase of $5.2 billion in 2019-20. The same IFO report finds that households in every income bracket would pay more in net taxes under Gov. Wolf’s plan.
Yet, PBPC's news release claims Wolf’s plan has "similar sales tax increases as in the House plan" and says the plans raise "revenues from the sales tax by similar amounts."
In reality, Wolf’s tax plan calls for almost $4 billion in higher sales tax revenues in 2016-17, compared to $1.7 billion in HB 504.
Those totals are nowhere close to similar. That’s the equivalent of saying a 6-foot tall man and a 2-foot, 6-inch child are similar in height.
|Tax Increases, Reductions Full Year Effects (2016-17/2017-18)
|Wolf Plan||HB 504|
|Income Tax Increase||$2,396||$2,710|
|Sales Tax Increases||$991||$1,655|
|Total Sales + Income||$6,366||$4,365|
|Other Tax Increases||$1,009||$0|
|Total Tax Increase||$7,375||$4,365|
|Property Tax Reductions||$2,732||$4,160|
|Net Tax Increases||$3,822||$80|
PBPC notes that Wolf’s plan calls for much more in additional spending than the dollar for dollar shift in the House bill, but claims this is "substantially paid for by a proposed severance tax on gas drillers."
I guess that depends on what your definition of "substantially" is—but about $3 billion of the $3.8 billion net increase in 2016-17 is paid for by taxes other than the severance tax (primarily the excess sales and income tax increases).
Meanwhile, neither plan addresses the inherent flaws in tax shifting. By relying only on a shift, taxpayers will still be hurt—even if in state taxes rather than in property taxes—by the cost drivers in education, including pension costs, mandated costs, and unaffordable union contracts.
Tax shifting creates winners and losers—families that would pay more under the shift and districts that would pay more under the shift. The PBPC analysis fails to consider this at all.
The House Appropriations analysis shows that 80% of school districts would pay more in income and sales taxes under Wolf’s plan.
Finally, PBPC's assertions about how we fund schools are misleading. Our state funding per student is similar to the national average, and overall, Pennsylvania schools spend about $3,000 more per student.
Claims of "similarity" aside, the truth is that Wolf's tax plan would cost Pennsylvanians dearly.
My letter to the editor in the Times Leader today takes Gov. Wolf to task for claiming to compromise, while still insisting on his sales and income tax increases—the largest tax increase in the nation—that received zero votes in the state house.
Bill O'Boyle's July 16 column, "Did we elect a dysfunctional government," concludes, "it appears the governor is the only participant who has made significant concessions." Yet he fails to identify any actual concessions – only that the governor’s spokesperson claims he would make them.
In fact, that same spokesman told the Patriot-News in Harrisburg, "Wolf hasn’t moved off his initial positions." At a separate July 14 press conference, he told reporters, "The governor is sticking to the property tax relief plan articulated in his March budget address."
The truth is, less than 4 percent of the revenue for that property tax proposal comes from the severance tax, though that is the only tax the Wolf administration wants to talk about. Wolf’s cradle-to-the-grave tax increases – taxing everything from diapers and day care, college textbooks and meal plans, to nursing homes and funerals – would harm poor and middle-class families.
Moreover, that plan calls for twice as much in state tax increases as in property tax relief – a net increase of $1,400 per family of four – while providing no property tax reductions until October 2016.
The state House of Representatives even held a vote on Gov. Tom Wolf’s tax proposal. It received zero votes, even from Democrats. So why is Gov. Wolf continuing to insist on his original budget proposal?
We agree with state Rep. Aaron Kaufer that it is time to come to the negotiating table. But that means Gov. Wolf must drop his demands for unpopular sales and income taxes. And Gov. Wolf must also consider the priorities of legislative Republicans – who were also elected by an overwhelming majority of voters – including liquor privatization and pension reform.
In a Patriot News story, Gov. Wolf’s spokesman Jeff Sheridan commented on need for immediate “property tax relief”—comments that don’t jibe with Gov. Wolf’s actual budget proposal.
"Pennsylvanians don't need property tax relief in the fall, they need it now," Sheridan said. Well, someone should tell his boss. The governor's plan doesn't provide immediate relief or much tax relief at all:
- Funds for property tax "relief" won’t be distributed until October 2016.
- Families pay higher state taxes starting now (income tax increases beginning July 1 and sales tax increase in January).
- Only 30 cents of new state taxes would go to property tax relief—with a net increase of $1,400 per family of four.
I’ll give Jeff Sheridan the benefit out of the doubt by assuming his inaccurate comments were the product of angry rage, and not a deliberate attempt to fool voters.
Notwithstanding Sheridan's comments, the reality is clear: Gov. Wolf’s proposal doesn’t deliver property tax relief now, and imposes significant new tax burdens on poor and working class families.
Nearly two weeks into the new fiscal year, and Pennsylvania is still without a budget after Gov. Wolf vetoed the Republicans' proposal last month.
The governor, whose own budget proposal didn't receive a single vote in the House, cited the lack of severance tax as one of the reasons for his veto. Keep in mind, this is a tax that would destroy jobs and raise energy costs for poorer families.
Elizabeth Stelle, CF’s director of policy analysis, was on WSBA’s The Gary Sutton Show to discuss the pitfalls of raising taxes on the natural gas industry.
Gov. Wolf’s camp claims the gas industry doesn’t pay its fair share of taxes. Not true. As Elizabeth points out, Pennsylvania already imposes an Impact Fee and “many other taxes, fees, and regulations that put a very heavy burden on the drilling industry."
The severance tax would drive away investment in the state and result in 4,138 fewer private sector jobs in 2017. It would also hit poor and working class families with $180 million more in higher utility taxes.
To listen to Elizabeth's conversation with Gary Sutton, check out the link below.
The Gary Sutton Show airs daily on WSBA 910AM in the York area.
Follow Commonwealth Foundation’s SoundCloud stream for more of our audio content.
Gov. Wolf promised to be a governor who would eliminate Pennsylvania’s destructive status quo. So how did he respond when state legislators put a budget without tax increases, a bill to privatize the liquor business and a bill to give more funding to schools on his desk?
Gov. Wolf promptly scribbled his veto pen across all of them, ensuring the status quo lives on.
Matt Brouillette spoke with WPHT’s Rich Zeoli about Gov. Wolf’s decision to veto all of these bills.
He explains Gov. Wolf executed his veto power to “take care” of public sector unions (his biggest campaign contributors) while ignoring the concerns of average Pennsylvanians.
Matt clarifies why Gov. Wolf’s own budget plan got zero votes in the House, saying it “presented spending and tax increases that exceed the other 49 states combined”. Gov. Wolf needs to lose the “my way or the highway” attitude and start chipping away at the status quo rather than allowing it to continue.
Click here or listen below to hear more.
Rich Zeoli appears on WPHT weekdays from 3 pm – 6 pm.
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There's a lot of misinformation being thrown around about the Pennsylvania state budget and education spending. While folk are entitled to their own opinions, they aren't entitled to their own facts.
The charts below illustrate some of the key trends and data points in Gov. Wolf's proposed budget and in state education spending.
Scroll down to advance the slideshow.
Today marks the 10th anniversary of the midnight pay raise. Although it was ultimately repealed, the pay raise was a dark hour in Pennsylvania political history. Over the past decade, though, state government has steadily moved toward increased openness, transparency, and accountability.
Here are a few reforms lawmakers have enacted to shed more light on state government:
- Open records law and creation of the Office of Open Records
- PennWatch, a searchable database of state expenditures
- Lobbying disclosure law
- Independent Fiscal Office (IFO), which releases independent revenue projections and selected analysis of legislative proposals
- Legislative rules preventing middle of the night votes
- Posting of roll call votes and fiscal notes online
Thanks to these measures, the public is better informed. Take Gov. Tom Wolf's budget proposal, for instance. Gov. Wolf may claim that his budget provides "property tax relief," but the IFO estimates it would amount to a $4.5 billion tax hike on Pennsylvanians in EVERY income level. That's just one example of how enhanced transparency helps taxpayers uncover the truth.
In that same spirit, the latest legislative push for transparency would shine light on negotiations for state worker contracts. Currently, taxpayers are kept in the dark about a process that adds millions of dollars each year to the cost of government.
Transparency alone will not return Pennsylvania to prosperity, but it serves as a powerful tool combating half-truths that are used to justify greater burdens on Pennsylvania families.
Throughout this state budget debate, Gov. Wolf has touted his natural gas severance tax to fund education. And some reporters refer to the severance tax as the "cornerstone" or "centerpiece" of his plan.
Except it isn't. The severance tax makes up a slim portion of Gov. Wolf’s proposed tax increases. In fact, his plan to tax health care and day care would raise more revenue than slapping an additional tax on the natural gas industry.
He never talks about his sales tax proposals—probably because they are so unpopular. His entire tax plan couldn't garner one single vote in the House. It failed 0-193. Yet, he hasn't said whether he is still demanding a $4.6 billion tax increase.
Even if Gov. Wolf has dropped the majority of his massive tax hikes, that’s no reason to accept a new severance tax. As Dawn pointed out yesterday, the severance tax is bad for all energy consumers, no matter your income level.
Total Records: 399
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