With lots of cash on hand, Pennsylvania wraps up budget deal

Pennsylvania State Capitol building

Pennsylvania State Capitol building in Harrisburg, Pa. (Matt Rourke/AP Photo)

Gov. Tom Wolf and lawmakers wrapped up a budget package this week — nearly two weeks late — approving billions of dollars in new spending, tax breaks for businesses and substantial new sums for public schools to cap the eighth and final budget for the Democratic governor.

Closed-door talks dragged on for weeks between Wolf’s office and leaders of the Republican-controlled Legislature, sometimes getting rocky, before a whirlwind two days last week in which lawmakers approved dozens of bills.

Some lawmakers complained the budget took so long because the state had so much money to spend.

Indeed, Pennsylvania is in its best fiscal position in years, with the state treasury benefiting from federal coronavirus subsidies propping up the economy, tax collections and state spending.

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Wolf secured big new subsidies for public schools, perhaps his top priority as governor after taking office with a public school funding system riven by huge funding disparities between Pennsylvania’s wealthiest and poorest school districts.

But he also made concessions. Here are some key takeaways:

Spending

The $42.8 billion budget plan authorizes a spending increase of 13%, or $4.9 billion, including more than $700 million that is being added to last year’s previously authorized total of $38.6 billion.

The plan also spends $2.2 billion in leftover federal coronavirus aid.

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Most of the new money goes to education and human services, including hundreds of millions of dollars in increases for mental health programs, anti-violence programs and subsidies for workers who care for children, disabled people and the elderly.

The plan leaves more than $8 billion in reserve for the future — perhaps necessary as demographic projections show a fast-growing retirement age population that will need costly services and a shrinking working age population that must pay for them.

Schools

The budget includes about $1 billion more for public schools, or 11% more for instruction, special education and operations. That brings the total annual increase over Wolf’s eight years in office to almost $3 billion, or 41% more.

Hundreds of millions more went for pre-kindergarten programs, rising pension costs, the rising cost of gas for school buses, school security and programs that benefit private schools.

Funding for higher education rose by about $165 million, or 9%, including $75 million for the 14-campus Pennsylvania State System of Higher Education. The system’s chancellor, Daniel Greenstein, called it “unprecedented.”

Taxes

Pennsylvanians won’t see a cut in income or sales taxes, the two major sources of money for the state’s operating fund.

But Wolf and lawmakers are cutting the corporate net income tax rate, one of the nation’s highest.

It will drop from its current 9.99% rate next year by a full percentage point, then a half-percentage point annually until 2031 when it hits 4.99%. That is projected to cost the state hundreds of millions of dollars in the next couple of years at least.

Lots of other business interests got bigger tax breaks, too.

Elections

Democrats and Republicans remain mired in a stalemate on most aspects of updating state law on election administration and voting, but they did agree on one item: banning outside funding of elections in exchange for approving $45 million in grants to counties to run elections.

Republicans had pressed to restrict third-party funding for elections — a throwback to GOP complaints that nearly $25 million from the nonprofit Center for Tech and Civic Life was heavily tilted to Pennsylvania’s left-leaning counties in 2020′s presidential election.

The money came from Facebook founder Mark Zuckerberg — drawing the nickname “Zuckerbucks” from Republicans. But some county officials accused the state of underfunding elections.

Housing

Housing programs will get one-fourth of the leftover federal coronavirus money, or $540 million.

The aid will boost affordable housing construction, home repair and heating assistance and property tax and rental subsidies.

Environmental programs

The package includes nearly $700 million for environmental improvement programs, nearly all of it from the federal coronavirus aid. Much of it is designed to help protect water quality in streams and rivers and improve outdoor recreation, including state parks.

Wolf’s concessions

Wolf agreed to requests from Republican lawmakers to drop his push to toll as many as nine major bridges on interstates in Pennsylvania and to abandon regulations to subject charter schools to stronger ethics, accounting and admissions standards.

Efforts to update Pennsylvania’s charter school law have been stuck in a political deadlock for more than a decade.

Meanwhile, Wolf — who has called for the phaseout of the gasoline tax — said figuring out a better way to fund roads and bridges “has to be done soon.”

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Contributing to this report was Brooke Schultz, a corps member for the Associated Press/Report for America Statehouse News Initiative. Report for America is a nonprofit national service program that places journalists in local newsrooms to report on undercovered issues.

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