Wolf Offers Budget Compromise Plan with Severance Tax, Calls for Immediate Vote
Harrisburg, PA – Today, after the repeated failure of the legislature to finalize the budget deal, Governor Wolf called on Republican leaders to replace their most recent tax proposals with a commonsense severance tax and vote. Republican leaders could not deliver votes for a commercial storage tax or a hotel tax despite their offering of both as counters to a severance tax.
“I’ve had enough of the games,” Governor Wolf said. “House Republicans again failed to deliver on a budget agreement. Over the past several months, I have been flexible and patient as they have repeatedly failed to agree amongst themselves on how to approach the budget.
“They have made it clear that they would rather see me fail than Pennsylvania succeed. In the absence of a compromise revenue plan getting to my desk, I am going to take action to manage our state’s finances.”
The commercial storage tax would have raised approximately $100 million in year one and approximately $170 million in year two. The severance tax passed by the Senate will raise the same amount and is widely supported throughout the commonwealth and among bipartisan legislators. Pennsylvania is the only major gas producing state without a severance tax.
Without a finalized budget, Governor Wolf will securitize profits from our state’s liquor system. It will raise $1.25 billion to pay off nearly all of our prior year deficit and significantly reduce the need for additional temporary borrowing to pay our bills. The Liquor Control Board transferred $210 million to the General Fund last year, far in excess of the annual amount necessary to make payments on this loan.
Additionally, the governor will take steps to manage complement and continue to find ways to streamline government services.
Unlike the Republicans’ similar proposal involving tobacco settlement funds, this plan will put the commonwealth in the best position possible to protect funding for schools, senior programs, and hospitals – along with investments in our roads and bridges.
The legislature also has not taken action to fund institutions of higher education including Penn State, Pitt, Temple, Lincoln, and the PennVet School.
The full text of Governor Wolf’s remarks is below:
Today, House Republicans again failed to deliver on a budget agreement. Over the last several months, I have been flexible and patient as they have repeatedly failed to agree amongst themselves on how to approach the budget. House Republicans continue to prolong and delay the debate over the means to pay for the programs they themselves voted to pass – overwhelmingly – in June. They have worked tirelessly to block a severance tax, at the expense of finishing this budget process months ago. In February, I proposed a budget that balanced by implementing more than $2 billion in cuts, savings, and efficiencies and relying on a severance tax and closing loopholes.
I proposed this budget to begin a conversation on common ground. I was optimistic. Despite a historically divided government – big and very conservative Republican majorities and a Democratic governor, we were making real progress. We had made strides on many issues – working together: Medical Marijuana. Liquor Reform. Investing in Education at all levels. A fair funding formula. Substantive measures to combat heroin and opioids. Pension reform had been at the top of the Republicans leaders’ to-do list for decades, yet I, as a Democratic governor with Republican majorities in both the House and Senate, brought it across the finish line.
But despite these efforts, one thing has become abundantly clear: Too many Republicans in the legislature are more focused on the 2018 elections than on helping Pennsylvania succeed. They would rather see me fail than Pennsylvania succeed. They would rather protect special interests, lobbyists and campaign donors than do the right thing. I’m not going to play their games anymore. I’m drawing a line in the sand.
Yesterday, they said they could not pass their own proposal to lift the exemption on commercial storage. Now, their proposal to tax hotels has failed. The fairest and simplest solution to this challenge would have been, and still is, to replace these taxes with a severance tax. It’s the same amount. And it’s widely supported throughout the commonwealth and among bipartisan legislators, as was evidenced by the responsible action taken by the Senate just a few months ago. It’s commonsense. We’re the only major gas producing state in the nation without one. The House could still put that in, and have a vote this week to get this done. Doing so would bring together a budget with ideas from all caucuses and the administration.
The House Republicans had every opportunity to put a balanced budget on my desk. And they have continuously failed. So, in the absence of a compromise revenue plan getting to my desk, I am taking action to manage our state’s finances. I will take immediate steps to address the deficit.
First, I will initiate plans to securitize profits from our state’s liquor system. This will raise $1.25 billion to pay off nearly all of our prior year deficit and significantly reduce the need for additional temporary borrowing to pay our bills. The Liquor Control Board sent $210 million to the General Fund last year, far in excess of the annual amount necessary to make payments on this loan. This would be structured similarly to the Republicans’ plan using tobacco settlement funds.
Additionally, I will take steps to the best of my ability to manage complement, and continue to find ways to streamline government services that do not harm Pennsylvanians. I will also look for other state assets to monetize, if appropriate. Doing so will put the commonwealth in the best position possible to protect funding for schools, senior programs, and hospitals – along with investments in our roads and bridges. This is not the outcome I wanted.
Let’s be clear: The House Republican foot-dragging has led to one credit downgrade already and warnings of more. That means the Republicans in the House, by virtue of their inaction, have handed every single Pennsylvania taxpayer a tax increase – all so special interests don’t have to pay their fair share. It means that every entity with the commonwealth’s backing will have to pay higher interest rates. This affects school districts. It affects townships. It affects cities. It affects boroughs. It affects counties. Now, we’ll all have to pay more. Just to get the same.
This is not just irresponsible – it’s hypocritical. The very folks who have proclaimed themselves the protectors of the taxpayers hard-earned money have blithely reached into the pockets of those same taxpayers. I’ve had enough of the games.
In February, I presented a balanced budget with no broad-based tax increases and more than $2 billion in cuts, savings, and efficiencies. It funded schools, senior programs, hospitals. It upheld our commitment to create jobs and improve our roads and bridges. But in the time since my budget speech, House Republicans have again proven themselves incapable of completing their constitutional duty.
And so, I will manage the finances of the commonwealth until the House sees fit to do what it’s supposed to do. I will make sure we protect education I will make sure we protect our seniors I will continue to do what we need to do to combat the opioid epidemic. I will continue to do everything I can to create good-paying jobs and attract businesses to the commonwealth.
Again, this is not the way our government is supposed to work. But I must ensure that Pennsylvanians are not hurt. And so I will act to protect the investments we all made earlier this year.