HARRISBURG, Pa. – The new fiscal year for Pennsylvania state government begins July 1 and Democratic Gov. Tom Wolf and leaders of the Republican-controlled Legislature are meeting regularly in an effort to reach agreement on granting the state another year of spending authority. The sides have had little, if any, progress to show. Other subjects are in the mix as well. Here is a rundown.
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Wolf has proposed a plan to increase overall spending through the state's main bank account by about 9 percent to $31.6 billion. That counts pension obligations that Wolf wants to move to a restricted account. The spending would account for a deficit Wolf's administration has estimated to be in excess of $2 billion. Under Wolf's plan, tax increases would be necessary to pay for it from a grab bag of sources including sales, personal income, Marcellus Shale natural gas production, bank share values and sales of cigarettes and other tobacco products. Neither Republicans in the House or Senate have introduced or passed a counterproposal, nor have they agreed to any sort of tax increase or overall spending figure.
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Wolf is proposing the biggest one-year increase in history of discretionary aid for public school instruction and operations, about $410 million, or about 7 percent. He also wants to cut an estimated $160 million in school district payments to cyber charter schools by capping the per-student subsidy, while adding an additional $380 million for early childhood education programs, special education programs and higher education. Republicans have not agreed to any specific element of Wolf's education plan. Top Republicans say they want to increase aid to public schools, but they have not said how much. The sides also have not agreed on how to distribute new aid to Pennsylvania's 500 school districts, a hot topic.
PROPERTY TAX REDUCTIONS
Wolf proposed a plan to cut school property taxes and Philadelphia's wage tax by $3.2 billion by raising the state's personal income tax rate from 3.07 percent to 3.7 percent, increasing the state sales tax rate from 6 percent in much of the state to 6.6 percent and expanding the categories of items that are subject to sales tax. He also would aid renters by expanding a state rebate program by $426 million to deliver $500 rebates to all renting households earning $50,000 or less. The House responded by passing a $4.3 billion plan to raise the personal income tax rate to 3.7 percent and the state sales tax to 7 percent in most of the state. The House bill would expand the existing rent rebate program for senior citizens, raising the income level for eligibility from $15,000 to $35,000, but it would not reduce Philadelphia's wage tax. Wolf's plan and the House bill disagreed on how to divide up the property tax cuts among schools districts and taxpayers. The Senate has yet to take up the House bill or a counterproposal.
WINE AND LIQUOR SALES
The House passed a bill that would license private wholesalers, instead of the state, to market wine and liquor products to retailers, and license around 2,500 new wine or liquor outlets to replace all but 100 of the approximately 600 state-controlled wine and liquor stores. The Senate has yet to take up the House bill or a counterproposal. Wolf has said he opposes the House bill. He favors keeping the current state-controlled wine and liquor store system and making changes to it to boost its profits.
Wolf says he can cut pension debt for state government and public school employees by an estimated $10 billion over 24 years. He wants to borrow $3 billion in bonds to refinance part of the pension debt and cut investment management fees by $200 million annually. Republicans have not agreed to Wolf's plan. Senate Republicans passed a counterproposal to reduce payments into the pension system by an estimated $18 billion over 30 years, largely through concessions from current employees, and postponing payments into the state employees' pension fund. The Senate bill also would end the traditional pension benefit by shifting future employees into a 401(k)-style plan. House Republicans have not signaled whether they will support the Senate bill or an alternative. Wolf has said he does not support the Senate bill.