Remarks by Governor Wolf at the Pennsylvania Press Club
November 23, 2015
Thank you for having me here today. I want to wish everyone a very happy Thanksgiving holiday. It’s a great time to be with family, to eat well and to count our blessings and give thanks for them.
Of course, one of the blessings we cannot yet count is a budget for the state. We have been without one this entire fiscal year. That fiscal year began on July 1, almost five months ago.
Since then many of the organizations that rely on the state for crucial funding have continued to wait for payment. Counties, schools and non-profits have done their best to make ends meet by dipping into reserves, cutting services, or both.
Many of our fellow citizens have had to do without services and things they desperately need. Clearly, we must end this nonsense. And that’s what I want to talk about today.
I want to encourage all of my colleagues here in Harrisburg to do the people’s business. Let’s get back to work, to finish the job, and reach agreement on a real budget based on the framework we announced a few weeks ago.
To a certain extent, our prolonged budget debate is a natural function of a divided government. No one can get everything she or he wants in such a government. Compromise is of the essence and many of us have tried to do just that – compromise.
I made my initial proposals in March where I called for a number of things I believed were necessary for moving Pennsylvania forward. I called for a truly balanced budget and an end to the smoke and mirrors of budgets of the past. An end to budgets that only pretended to balance, but really didn’t.
I called for a real increase in funding for our schools and our children basic education, early childhood education, and special education.
I called for a shale tax that would be used to provide funding our schools and our children.
I called for a massive drop in the Corporate Net Income Tax rate.
I called for real property tax relief that would help working citizens and seniors at risk of losing their homes because of the never-ending rise of school taxes at the local level and that would help municipalities whose citizens are stuck with local school tax bills that are far too high.
I called for an increase in recurring revenues to do all this honestly.
I thought it was a reasonable, practical budget proposal. I thought it would get a fair hearing. I was wrong.
The budget proposal I got in response from the Republicans on June 30 had none – none – of the things I believed Pennsylvania needed. For a start, it didn’t balance. The math didn’t add up. It had more of the same smoke and mirrors that had led the rating agencies to downgrade our debt five times in four years, three times last year alone.
There was no real investment in education. There was no mention of a shale tax. There was no property tax relief and no recognition that we had to move away from the bad budgeting habits of the past and actually try to pay for the public goods our fellow citizens want to consume with recurring revenue. Remember the legislature actually went through this exercise in 2013 with Act 89 and they did come up with recurring revenue of more than $2 billion.
So, I tried again and a few weeks ago I thought we had come to a meeting of the minds. Republican leaders Reed and Corman stood with me at that time to announce a framework for a budget deal that would address many of these issues.
That framework included a number of things both liked along with a number of things both sides disliked. It brought us much closer to a budget that was truly in balance. It proposed a historic increase in education funding including $350 million for basic education. It proposed historic property tax relief. It proposed real pension reform. It proposed real liquor reform. It proposed paying for this with an increase in the sales tax rather than an increase in the personal income tax or some combination of the two. Also, the framework did not include a shale tax.
Since then, we have been working with these same Republican leaders to work out the details of this framework. Unfortunately, that work looks like this project is in deep peril. The Republicans have been unable to muster the votes they need to transform this agreed-upon framework into a real budget. Instead they passed a liquor privatization bill that is identical to the one I vetoed in June.
The Senate Republicans made clear their intention to pass SB 76, a bill I oppose and that was not part of our agreement. All of these are distractions. All of these things are prolonging the process. None of them seem to be getting us any closer to the budget we need.
Then late last week Republican leaders told me that they didn’t have the votes to deliver on property tax relief. In other words, the framework was not going to become a budget. I deeply regret this. We had within our grasp a budget framework that would have been transformational.
It would have done much of what so many Pennsylvanians want their government to do. Show fiscal responsibility. Invest in our children and our schools. Produce real local property tax relief, put our public pension system on a firm financial foundation, and bring our liquor system into the 21st century.
I want to encourage my fellow public servants to do what we said we would do. We said we would deliver a budget by Thanksgiving. In three days we hit that deadline. It’s time to deliver.
The Republicans need to find their votes on the bi-partisan agreement we made. Please get this done and to my desk quickly.
This would still leave work to be done next year. This framework leaves gaps. We are still the only major gas producing state in the country without a tax on gas drillers. We need a severance tax. We need property tax relief. Both will be part of my next budget proposal.
I would have preferred that the recurring revenue come from the personal income tax than the sales tax and I would have wanted rent relief for families.
But if we can at least implement a budget based on the framework we announced a few weeks back, Pennsylvania will be a much better place on the balanced budget. Keep overall spending to $30.745 billion and reduce one-time fixes from $2 billion in the 2014-15 budget to $700 million with the goal of eliminating the one-time fixes in the 2016-17 budget.
On education – raise our investment in basic education by $350 million over 2014-15, increase special education by $50 million, increase early childhood education by $50 million, increase Head Start by $10 million, and increase funding for higher education for the first time in seven years. The funds for basic education would be distributed fairly according to a negotiated formula.
The public pension system would be changed for new employees moving forward. It would be a side-by-side plan, defined benefit, defined contribution (401-K). Both would start at dollar one of compensation. This plan would reduce the Commonwealth’s unfunded liability by $10 billion over the next thirty years.
The liquor system would be reformed by leasing out the system – with the appropriate safeguards for current employees and others with whom the system has contracts – to a qualified private manager. The private manager would be hired after an objective bidding process. The bidding process would be carried out with the assistance of a qualified consultant. The system would be freed of the business restrictions that reduce customer convenience, and profitability.
All I want is to restart the bi-partisan framework we agreed to. Let’s get that stalled process moving forward again. I urge Republican leaders to gather the votes they need to finish our budget work quickly.
As I see it, they have three logical choices. They can run a budget that adheres to our framework with the level of support we need to assure passage. They can block such a budget and continue this wasteful impasse. Or they can present me with any full year spending plan that can pass by next Friday.
Democracy requires compromise – I get that and I have compromised time and time again on liquor, on pensions, on property taxes, on rent relief, and on the shale tax.
But the same democracy that requires us to compromise also gives us the power to hold our elected leaders accountable. If Republicans continue to perpetuate the irresponsible – and unworkable – status quo then it will be the voters’ turn to hold them accountable.
The ball is now in the Republicans’ court. I am calling for a renewed effort because Pennsylvania needs a budget. I am encouraging Republican leaders to get back to work to get the votes for the various proposals we have agreed to.
We cannot allow ourselves to get stuck trying to work out the details of a framework we all agreed to. I believe there are enough decent members of the General Assembly – in both parties – who want to move beyond the budget impasse and who want a practical budget that does the things our fellow Pennsylvanians tell us they want in a budget.
That’s what I’m proposing we do. Let’s pass a budget that works and let’s do it soon.
I look forward to the Republican response
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