State Budget Update

On the last day of the state’s fiscal year, the General Assembly passed a $32 billion budget that boosts state spending by $500 million, but lawmakers didn’t say how they’d pay for it. This spending increase coupled with an existing budget shortfall put hardworking Pennsylvanians on notice that they may be asked to cough up even more to fund government’s spending addiction.

There was no “agreed to” plan to balance the budget, much less legislation passed by both the House and Senate to generate revenue whether via borrowing, expanded gambling, liquor privatization, or transfer of other funds. Passing a spending bill without a plan to pay for it violates the constitutional requirement for a balanced budget. Gov. Wolf then abdicated his legal responsibilities by letting an unbalanced budget become law.

Beyond questions of constitutionality, passing a spending plan without a plan to pay for it either results in pressure to make bad decisions, like job-killing tax hikes, or in another deficit. Or both, as was the case last year.

The spending plan exceeds the limit embodied in the Taxpayer Protection Act (TPA) by nearly $100 million. The TPA index represents the average growth of population and inflation (1.16%) applied to last year's enacted budget.

Based on this budget and the latest revenue forecast, the year will end with a $1.6 billion deficit, and lawmakers need approximately $500 million in new revenue to pay for next year's spending list.

A few weeks after the budget became law, the Senate came back to Harrisburg and approved a revenue plan that rejects tangible solutions to balance the budget without tax increases—such as redirecting lavish corporate welfare handouts and letting private stores sell liquor—and instead hits Pennsylvanians with broad-based tax increases. The legislation passed on a vote of 26-24 (14 Republicans—a minority of the caucus—joined with 12 Democrats).

This is the opposite of responsible governing.

Under the Senate’s $2.2 billion revenue plan, Pennsylvanians would pay a higher tax on cell phone service, home-heating bills, electricity, and some online purchases made through vendors such as Amazon and eBay.

The Senate’s $571.5 million tax hike would cost a family of four nearly $180 dollars in higher taxes.

A new natural gas gross receipts tax makes up the lion’s share of the increase. Half of Pennsylvania households will pay this tax on their home heating bills. Additionally, the Senate piled a natural gas severance tax on top of the impact tax drillers already pay.

Contrary to some policymakers’ claims that they have shielded Pennsylvanians from tax hikes for years, state government has raised taxes four times in the past eight years, totaling $4 billion. Indeed, last year’s $650 million tax increase—also sold as a way to balance an unconstitutional, unbalanced budget—crushed nearly 100 vape shops.

We can’t keep repeating the failed mistakes of the past. Multiple tax hikes have not addressed the real problem, which is frivolous overspending. You can’t claim government is “cut to the bone,” while politically connected special interests siphon $800 million in corporate welfare from taxpayers every year. While raising home heating bills for half of Pennsylvania households, the Senate left in place the horse-racing industry’s $250 million in public subsidies.

Now, this harmful bill moves to the House, and we’re urging lawmakers to stand up for Pennsylvania families and job creators, reject these broad-based tax hikes, and implement responsible solutions.