Wolf, lawmakers launch Pa. budget season with billions to spend

It is a particularly unusual spot for a state that has been largely mired in deficits since the Great Recession and is struggling with a shrinking workforce.

The Pennsylvania Capitol is shown in Harrisburg, Pa., Wednesday, Sept. 15, 2021.

The Pennsylvania Capitol is shown in Harrisburg, Pa., Wednesday, Sept. 15, 2021. (AP Photo/Matt Rourke)

Pennsylvania Gov. Tom Wolf and state lawmakers are launching into their busiest stretch: the horse-trading and budget-making weeks of June that are vastly different this year than any other in memory, with billions of extra dollars to spread around.

It is a particularly unusual spot for a state that has been largely mired in deficits since the Great Recession and is struggling with a shrinking workforce and fast-growing elderly population.

There is, of course, no shortage of demands on the money.

“To me this should be easy, but it comes down to — and I’ll be honest — when everybody has money, they want to spend every last dollar,” said House Appropriations Committee Chair Stan Saylor, R-York.

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Assembling a spending plan for the fiscal year starting July 1 will play out in the shadow of partisan fights over abortion rights, gun violence and proposed constitutional amendments that Republicans are wielding as a policy-making avenue around Wolf’s veto pen.

Wolf, a Democrat who is serving his last year in office, kicked off the budget season in February with a $43.7 billion proposal to the Republican-controlled Legislature. Its dominant feature is a request for about $1.8 billion, or about one-fifth, more for instruction, operations and special education in public schools. The aggressive request caps a hallmark of his tenure: a campaign to wipe out deep funding disparities between the poorest and wealthiest public school districts.

How much Republican lawmakers are willing to approve could determine how willing Wolf is to go along with GOP budget priorities.

Other major Wolf proposals include using federal coronavirus aid to send $2,000 checks to households earning under $80,000 a year — an idea that gained no traction with Republicans — and a $200 million scholarship program to bolster the state’s shrinking public university system.

Since he took office in 2015, Wolf has pushed to cut Pennsylvania’s corporate net income tax rate — one of the highest in the nation — but with structural changes to crack down on tax avoidance that were opposed by the Pennsylvania Chamber of Business and Industry.

This year, the chamber and Wolf are optimistic about a compromise.

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Wolf’s office says his plans comprise a “historic opportunity to make Pennsylvania a more desirable place to live and work.”

House and Senate Republican leaders were working toward a joint counterproposal over the weekend and are on board with sending more money to public schools. But not nearly at the level Wolf wants.

They preach restraint, worrying over projections that the economy is heading for a slowdown.

The state’s bank accounts are now flush with — by some estimates — $12 billion in reserves and surpluses, boosted by inflation and an economy juiced with federal pandemic subsidies.

That is a revenue “bubble,” said Rep. Jesse Topper, R-Bedford, vice chairman of the House Appropriations Committee.

“It’s unprecedented and it is not sustainable,” Topper said. “So how do we go about using this money in a way that really helps set a good course for the future when the inevitable rough seas approach?”

A couple billion in leftover federal coronavirus relief aid must be spent by the end of 2024 and lawmakers expect to commit all of it this month. Water and sewer projects, state lands and businesses hurt by the pandemic are likely to get some of it.

Meanwhile, several billion in state reserves will be necessary to prop up spending next year.

There are other big demands on the state.

Nursing homes are warning of further closures without an increase in the long-stagnant Medicaid reimbursement rate.

The No. 1 priority of counties is to win the restoration of decade-old cuts to state aid for mental health services — a growing need that has been spotlighted by the COVID-19 pandemic and mass shootings.

Meanwhile, difficulty in finding workers to care for children, the elderly and disabled has budget-makers eyeing more subsidies for those professions.

Saylor said his goal is to keep at least $5 billion in reserve, “or the next governor is going to have a very difficult time.”

In a lot of ways, the billions of dollars in extra cash is making lawmakers open to things they have rejected for years.

Wolf’s office and lawmakers are eyeing ways to tear off Band-Aids — such as borrowing and delayed payments — that they’ve applied to the state’s finances during lean times.

The National Federation of Independent Business, for years, has sought improvements in how their members remit sales tax receipts and relaxed limits on expensing purchases. This year, the organization’s state director in Pennsylvania, Greg Moreland, is more optimistic than ever.

“I’m going to be pretty disappointed to be quite honest if we don’t see something big in the budget this year for small business,” Moreland said. “The timing’s right. The revenues look good. They can’t use that as an excuse any longer.”

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