How Big, Bad is Wolf’s Budget?

The first point of contention on Gov. Tom Wolf’s budget isn’t about his tax increases, or any specific policy item, but rather over the true size of his proposals. Andrew Staub of PA Independent runs down the “shell game”:

Gov. Tom Wolf claims his budget proposal spends $29.9 billion. Republican lawmakers — and the math within his plan — say it’s actually $33.8 billion.

What’s the deal?

Here’s what’s happening: Wolf isn’t counting three transfers in his spending number. He’s putting $1.75 billion for school employee pension costs into a restricted account and $2.14 billion to an account for property tax relief and rent rebates. He’s also transferring $10 million in severance tax revenue from the general fund budget, making his total appropriation figure about $29.9 billion.

Readers may notice that the Commonwealth Foundation refers to a $31.6 billion General Fund budget—an almost 9 percent increase over last year. This falls between Gov Wolf’s $29.9 billion claim and Republicans’ $33.8 biillion estimate. Why the discrepancy? 

Our analysis makes an apples to apples comparison of spending next year vs. this year. We include school pension payments ($1.75 billion) but do not include the property tax transfer ($2.14 billion). 

This year, the state is spending $1.1 billion for school employee’s pensions. Next year, the state would contribute $1.75 billion—a $675 million increase. Moving it “offline” doesn’t make it a spending cut, as Wolf’s budget secretary implies.

Not counting school pension payments as part of the General Fund budget is a parlor trick to disguise the true spending increase. These costs will be incurred next year, and they should count as General Fund spending. 

But what about the $2.1 billion transfer for property tax relief? Republican legislators counted that as part of his General Fund budget, while we did not. Our rationale: That money won’t be spent next year, but hoarded in a special account.

To be clear, taxpayers would certainly pay $2.1 billion in higher taxes for “property tax relief” as part of the $4.5 billion in state tax increase (see chart below) next year. But that money isn’t leaving Harrisburg for another 12 months.

To reiterate: There will be no property tax relief next year. Property tax rebates begin in 2016-17—when the net state tax increase reaches $8 billion.

In total, Wolf’s budget takes in $33.9 billion in state taxes—a 17 percent increase, which includes $4.5 billion ($1,419 per family of four) in net tax increases—and spends $31.6 billion (a 9 percent increase), while hoarding $2.1 billion for another year for future property tax rebates.

For a more detailed look at Governor Wolf’s budget proposal, read our latest policy memo.

Editor’s Note: This chart and post have been updated. A previous version counted tax refunds as a result of proposed changes twice and did not include the proposed expansion of the Tax Forgiveness Program.