After a scare Tuesday, leaders in the Pennsylvania Capitol said that the framework of a state budget agreement is still intact.
The tentative agreement includes a $400 million increase to K-12 public education this year.
On Monday, Wolf administration officials claimed that a two-year agreement would boost preK-12 public education by $750 million. Republican leaders insisted that nothing had been set in stone beyond the current fiscal year.
For a few hours Tuesday, the Senate Republican leadership stirred up doubts about the structural integrity of the deal – saying everything was again “up in the air.”
Gov. Tom Wolf and Republican leaders allayed anxiety by hosting an impromptu press gaggle late Tuesday committing to the framework of a one-year pact.
Pressure has mounted to reach an agreement more than four months after the June 30 budget deadline. School districts across the state have had to borrow money just to keep their doors open. Social services agencies have been hurt, and lawmakers have expressed fatigue as the budget battle has superseded all other agendas.
Wolf and the leaders of the Republican-held House and Senate believe they can shake hands on a budget before Thanksgiving, but the deal is far from finalized and many of the details are yet to be worked out: namely, the source of the education funding boost.
There’s talk about raising the state tobacco tax, hiking the bank shares tax and possibly shifting gambling revenue into an account that would help school districts pay down pension debt – which has become a major cost driver in recent years.
But Wolf and GOP leaders have reached consensus on an agreement to fund a $2 billion statewide property tax reduction by hiking the state sales tax by 1.25 percent.
Everywhere but Philadelphia and Allegheny County, the sales tax would rise from 6 percent to 7.25 percent.
In Philadelphia, because the sales tax is already inflated locally, it would jump to 9.25 percent. In Allegheny County, for similar reasons, it would move to 8.25 percent.
Philadelphia Mayor Michael Nutter and City Council President Darrell Clarke both said it would be premature to comment on this proposal.
State Rep. John Taylor, R-Philadelphia, agreed, but said he’d seek “some sort of exemption” to spare the city from increases “that will put us at uncompetitive levels.”
Sources close to the Wolf administration say that there could be a way to keep the sales tax rate down in Philadelphia by lessening the property tax reduction.
As is, advocates for the poor are upset with this deal for its regressive nature. With property taxes potentially going down, while sales and cigarette taxes go up, this aspect of the pact would disproportionately hurt disadvantaged Pennsylvanians.
“As much as we desperately need income for Philadelphia schools, we need to start looking away from taking money from low income people,” said Kate Goodman, an organizer for 15 Now Philly, which advocates for a higher minimum wage. “Sales tax impacts poor people who are buying basic goods more than wealthy people who have other assets.”
Lawmakers in Wolf’s own party have pushed back on this point as well.
“We want this done by Thanksgiving. We know there are people who do not agree with everything, and the governor is more than willing to have conversations with them,” said Wolf spokesman Jeff Sheridan.
Pushback on ‘taxpayer protection’
Despite this debate, the deal seems at first glance to be a huge win for public schools, but the comprehensive picture is more complicated.
There would be a big, new state influx of education spending. Basic education would get $350 million in new money. Special ed would get an added $50 million and pre-K will likely see a boost but leaders haven’t yet reached consensus there.
Republican leaders, though, have a key additional demand.
“One of the things we require is some sort of taxpayer protection,” said Jenn Kocher, spokeswoman for Senate Majority Leader Jake Corman.
Now, there’s nothing definitive on this yet, but an idea gaining traction would require a local referendum for any property tax increase – no matter inflation or rising fixed costs.
Under this proposal, anytime a school board wanted to raise taxes, it would have to win favor by popular vote – a prospect that has education advocates very worried.
A coalition of 50 ideologically diverse groups sent a letter to stakeholders this week denouncing the idea as “poor, reckless policy.”
The fear here is that in getting a win in short-term statewide education funding, Wolf could bless a plan that would potentially handcuff school districts locally in a way that could be damaging over the long term.
“People in communities don’t always appreciate what is taking place and what is required to properly educate the students in their community,” said Jim Buckheit, executive director of The Pennsylvania Association of School Administrators, one of the groups to sign the letter.
“It’s a challenge in Pennsylvania because less than 20 percent of households have school-aged children. So you’re going to have a lot of people who don’t have an interest in what occurs in a local school district, even though it’s a vital function of government.”
The Pennsylvania Business Council also laments the idea.
“Often at the spur of the moment, quick solutions, easy solutions seem appealing. In the long run they often don’t pay off,” said David Patti, president and CEO of the PBC. “There are unintended consequences, and regret is big, but undoing bad decisions is difficult. I think this is one of those bad decisions that people will regret later on.”
As part of the framework agreement, the Wolf administration said that one of the governor’s campaign-trail priorities – a tax on natural gas drilling – is now off of the table for this year.
Other Republican priorities, though, are in the mix. Some sort of change that reduces pension benefits for future state employees seems imminent, but details aren’t being released publicly.
The same can be said for some sort of shift to the current composition of the state liquor store system.
Both sides also tentatively agree on a 5 percent increase to higher-education spending.