State Budget 2018: Policy Victories & Missed Opportunities

With a signed state budget, it’s time to review the policy victories and missed opportunities that define the 2018-19 spending package.

Victories

Educational Improvement Tax Credit (EITC) expansion: Lawmakers approved legislation to increase the EITC by $25 million. This is one of the most significant expansions since the program’s inception. Additionally, all new money will be dedicated to k-12 student scholarships. The higher cap will serve an estimated 15,000 additional students. Still, demand will exceed supply. Two of the largest EITC scholarship organizations turned away 17,000 students last year—which is why lawmakers should implement automatic EITC funding increases so scholarships keep pace with demand.
No new taxes: The budget does not include tax hikes or fees on working families. This includes Gov. Wolf’s punitive severance tax proposal, which would have destroyed jobs and raised utility bills. This is great news for Pennsylvanians, who already shoulder one of the highest tax burdens in the country.
Giving Pennsylvanians a clean slate: On the criminal justice front, lawmakers passed House Bill 1419—a landmark reform known as “clean slate” legislation. The proposal, championed by Rep. Sheryl Delozier and Sen. Scott Wagner, limits access to criminal records after 10 years if the individual was convicted of certain minor crimes and is not convicted of a new crime during that 10 year period. The law will give thousands of Pennsylvanians new job, education, and even housing opportunities.

Missed Opportunities

Taxpayer Protection Act: The Senate’s inability to pass House Bill 110—the Taxpayer Protection Act (TPA)—is disappointing. House lawmakers approved the TPA in December, giving the Senate six full months to act. Unfortunately, the popular spending limit legislation stalled, even though it is a constitutional amendment and does not require a signature from Gov. Wolf. What’s more, the budget increases General Fund spending by nearly $300 million above the TPA index. This lack of spending restraint will make it more difficult to improve Pa.’s business climate and avoid future tax hikes.
Shadow budget spending: The General Fund spending growth does not provide a complete picture of Pennsylvania’s budget decisions. Lawmakers hid a sizable portion of spending growth in the shadow budget. It’s unclear how much spending has been moved, but the shifted funds—papered over with one-time revenue sources—will make next year’s budget more difficult to balance.
Welfare reform: Despite popular support, two welfare reform bills—House Bill 1659 and House Bill 2138—were reverted to a Senate committee hours before the budget was completed. HB 1659 strengthens work requirements for healthy adults using food stamps. HB 2138 begins the process of seeking work requirements for healthy adults on Medicaid (Michigan passed similar legislation just last week). Reforms to encourage work will help hundreds of thousands of unemployed adults raise their incomes and free up resources for Pennsylvania’s aging population.

Interestingly, the budget also contains an odd departure from the principal of fair education funding. Allentown will get $10 million of the $18 million increase in Accountability Block Grants, not because of any equitable funding formula, but through some side deal between Gov. Wolf and Sen. Pat Browne.

Fortunately, the General Assembly still has an opportunity in September to act on welfare reform, among other initiatives. These include additional corrections reforms outlined in a report for Justice Reinvestment Initiative II and budget transparency reforms that enjoy bipartisan support.