Skip to content

Impasse Collapses Budget Framework

As the state budget impasse passed a record 200 days, explaining how we got here gets more difficult with every passing social media commentary.  Perhaps the best route is to use an analogy – building the state’s financial house…

An architect (Governor Wolf) wants to build a house in a new development, but is told two contractors (the House and Senate) must be hired to complete the job.  The architect designs a five-bedroom contemporary, all-electric with solar panels, carpet throughout, and wants enough money left over to buy the lot next door for future expansion.  All three agree on the size and composition of the foundation (let’s call it a budget framework), and manage to get that laid.

But the contractors and architect keep changing the plans, one working on a ranch house, another a bi-level, the third still working on that contemporary.  The contractors order hardwood floors and gas heat.  They start trenches for a pipeline through the back field, debate over using union labor, try to level the yard, and park their trucks in the driveway, unintentionally preventing supply deliveries.  Meanwhile, the contractors’ employees are arguing that they shouldn’t have to listen to the contractors. Sound familiar?

Way back in November, legislative leaders and the Governor announced they had reached a “framework budget agreement.” That deal included $30.8 billion in state spending, increased funding for education, and state pension and liquor system reforms.  But no deal was reached for how to raise the revenues.  By mid-December, it was clear that few if any of the many pieces of that framework had the necessary votes to pass the state House of Representatives.  Democrats were not willing to add their votes, and the Republican caucus had undergone a mini-revolt, refusing to put up votes for tax increases (Democrats withheld their votes on tax hikes as well) and disagreeing with the Senate’s pension reform plan.  The Senate on its part passed pension reform, but refused to act on liquor or taxes until that issue was resolved.

Raising the funds to support that budget and reforms became a virtual impossibility.  PIT increases?  Expansion or increases in sales taxes? Neither of those is palatable in an election year, and each could have a crippling effect on small businesses.  On line gambling, sales of the liquor system? Each has its own problems – and none has a majority of support.

After failing to pass pension reform and the Governor’s tax proposals, the House refused to consider the budget passed by the Senate and instead passed a scaled down version of $30.3 billion.  Governor Wolf vetoed about $7 billion of that budget, allowing $23.3 billion to be funded, including release of some money to school districts, counties and human service agencies.  But using terms like “stupid,” and “garbage,” to describe the bill, the Governor both attacked the General Assembly and slashed funding for Medicaid, Corrections, schools, and hundreds of millions for what he called “legislative initiatives,” saying the revenues were insufficient for the budget they passed while insisting the General Assembly get back to work.  

By early January, the House leadership has said that they can live with most of the Governor’s cuts as a budget in and of itself.  The two (five?) sides in the budget process have focused as much on public campaign-style rhetoric as they have on finalizing a 2015-2016 budget.  Governor Wolf began distributing basic education funding using the old formula, and is traveling the state on his “Jobs that Pay” tour, the Senate has been waiting for bills from the House, and the House has been unable to pass funding bills for state related institutions over partisan bickering. 

The House passed a fiscal code bill (which directs the spending approved in the budget) on a mostly party line vote, changing school funding formulas and   The Governor has already promised at least a partial veto of the fiscal code bill over provisions put in it, and the Senate has not yet suggested it will pass that bill.

House Majority Leader Dave Reed has declared that the budget framework “died a very slow death over two months, as first property tax reform was gone, then liquor privatization was gone, and then pension reform was gone,” He said that by Christmas, the only part of the framework left was higher taxes for higher spending, which his caucus could not support.

The Governor and Democratic leaders continue to argue that without a full budget (i.e., $30.8 billion) anything else is wishful thinking.  Unfortunately, the pieces are all tied together, and leaders are making no headway on resolving their differences.

And just think: the Governor’s 2016-2017 budget address will take place February 9. Calling for additional taxes in a year when 203 House seats and half of the Senate are running for re-election is not a recipe for success.   Maybe it IS time for a two-year budget cycle – but unfortunately, the best hope for such an action would be in a year without general elections.