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Mandates, Budgets and Compromises – What’s Next?

By John Nikoloff, Partner, ERG Partners, Harrisburg

The 2015-2016 session of the State General Assembly started with a new slate of leaders – in the House, Senate and a new Governor. Each thought the 2014 election had given them a mandate: Republicans increased their control of the House and Senate, and Democrat Tom Wolf was elected Governor in a near landslide win.

The combination resulted in the longest budget impasse in the state’s history as Governor Wolf proposed a unique budget, which attempted to balance all structural defcits, eliminate property taxes and increase education funding by $1 billion in one fell swoop, through a variety of tax proposals. These included significant increases in personal income and sales taxes, a severance tax on natural gas, and more.

The July 1 deadline passed without a budget, and the subsequent months saw more nasty political campaign rhetoric rather than negotiations over how to run state government. A possible “framework budget agreement” in November was scuttled by the House Republican members, despite its leadership agreeing to the deal. It took till late March this year before a budget fnally became law –without the Governor’s signature or agreement on how to fund it.

The Governor’s 2016 budget address took place almost two months BEFORE the 2015 budget became law, with the Governor castigating the General Assembly rather than explaining his proposals. The rhetoric on both sides had precluded action on many of the real issues that were on the table for the session.

But in the subsequent months, after the 2015 budget and revenue package was fnally done, the House, Senate and Governor’s staff found a way to pass a 2016-2017 budget almost on time, increasing school funding and reducing the defcit without signifcant tax hikes, both claiming victory.

In June and throughout the summer, the tone shifted – and almost ironically, the campaign style attack rhetoric of the last two years lightened as the 2016 election approached. The Governor and even conservative legislators found ways to compromise and get agreement on medical marijuana, several environmental bills, historic liquor reform, and a fair funding formula for schools.

This fall, Wolf and the General Assembly are working on legislation to combat the state’s opioid crisis, and to enact some form of pension reform for teachers and state employees. The differences remain great on taxation and the role of government, but the House, Senate and Wolf Administration are still moving forward together on a few issues.

The fall election will surely impact how the legislature and the Governor approach major issues in 2017. Assuming no major changes take place in the General Assembly, the agenda will continue to include education funding, pension reform, property tax reform, environmental regulation, workplace issues from gender issues to minimum wage, new calls for severance taxes and other revenue sources to resolve the state’s structural defcit and more.

And as 2018’s Gubernatorial election approaches, all parties will have one eye on the Governor’s Offce, which will further affect actions and reactions from all sides.