The Pennsylvania Budget for Fiscal 2017-2018 is still not finished. Pennsylvanians deserve to know why and who is responsible. The answer is the House Republican Caucus led by Speaker of the House Mike Turzai, who refuses to accept any plan for funding the budget already passed by the General Assembly that includes new, recurring revenue — that is revenue that is generated year after year.
Cynics and cranks will be tempted to blame all our politicians, but that would be both untrue and unfair. Governor Wolf has reached an agreement with the leaders of the Republican Senate Caucus and the Democratic House and Senate Caucuses on the broad outline of a budget plan for the General Fund that is a genuine compromise. It includes some new, recurring revenue. Thus, it limits the reliance on one-time revenues, borrowing from other state funds, and the other gimmicks that, for the last seven years, have not only failed to stop budget deficits from recurring, but have made them deeper by essentially borrowing from the future.
The budget compromise is not, from our perspective, a perfect plan. It doesn’t generate enough recurring revenue and, thus, doesn’t set the stage for an effort to reduce our public investment deficit in education, higher education, environmental protection and roads, bridges and public transit.
It is not a perfect plan from the perspective of conservatives either. They would prefer to see more spending cuts (although they haven’t specified which spending to reduce.)
A plan that is the basis for a compromise will never make any side entirely happy. But it is part of the nature of compromise that all sides agree to put aside their narrow concerns in order to serve a broad, common good.
The common good of a compromise revenue plan is obvious. Pennsylvania needs a budget that is balanced with some recurring revenue. Without this, we are likely to see our bonds down-graded by ratings agencies, which will lead to higher borrowing costs not just for the state but for cities and towns and school districts. Without a budget balanced with new recurring revenue, we will face deeper deficits in the future.
It is irresponsible and foolhardy to keep borrowing from the future to solve our current problems.
But that is exactly the path Speaker Turzai wants to take. In response to the compromise being negotiated, he has retreated from his previous acceptance of some recurring revenues and has, again, insisted that the budget gap be closed with revenue gimmicks and spending cuts unacceptable to Governor Wolf and the other three caucuses in the General Assembly.
Turzai is demanding a broad expansion of video gaming terminals that, we are told, could even be found in old age homes. He has demanded new outlets for liquor sales even before we can evaluate the impact of expanded liquor sales enacted last year. Note that neither of these provisions generate new, recurring revenues. Our best estimates are that they simply shift gaming and liquor sales from one location to another. The financial benefit to the state comes only in the first year — from selling license for gaming and liquor sales.
(And even if some additional gambling and liquor sales take place, we need to ask whether the state should be trying to balance its budget by encouraging practices that can be dangerous, and especially in these new locations. Do we really want people to buy liquor and gamble on every corner in the Commonwealth?)
Speaker Turzai has also said that he is willing to block funding for Pennsylvania’s state-related colleges and universities — Penn State, Temple, Pitt, and Lincoln — in order to avoid raising recurring revenues.
And, finally Speaker Turzai is seeking new premiums and work requirements for Medicaid spending that have been rejected by Governor Wolf and Senate Republican and Democratic caucuses and that, as we have pointed out elsewhere, only save the state money by denying health care benefits to people with legitimate claims on them.
All of these positions are rejected by the Governor, the Senate Republican caucus and the Democratic caucuses in the Senate and House — and for good reason. The liquor and gaming proposals only give us one-time revenues. The cut to higher education is self-defeating in that it undercuts a key source of economic growth. And the cut to Medicaid is cruel.
Indeed, Turzai’s proposals are so problematic that we very much doubt that a majority his caucus supports them either. (We are sure a majority of the members of the House of Representatives would vote for recurring revenues in the form of a severance tax.) But Turzai’s ability to control the agenda for the House of Representatives gives him a great deal of power to block consideration of any proposal he opposes.
The funding compromise, on the other hand, makes sense for the state. As we have been pointing out for month, the budget deficits that recur every year are mainly a result of declining revenues due to deep cuts in corporate taxes. Spending as a percentage of state gross domestic product has been declining for the last six years and will drop again in the budget adopted for this year.
We don’t know what tax proposals are included in the deal — or if the four parties have fully agreed on them. We do know that they do not include any broad-based taxes — that is an increase in the personal income tax or the sales tax. We do know that a variety of taxes, mostly on businesses, are being considered, including a severance tax on natural gas drilling, sales taxes on business to business sales, and an increase in some gross receipts taxes on utilities.
Any of these proposals would be better than continued stalemate. And that’s why it is critical for Pennsylvanians to know why we have a stalemate and who is responsible.
His name is Speaker of the House Mike Turzai. And it’s time for all of us who want responsible government in Pennsylvania to let him know that it’s time for him to lead, follow, or get out of the way.