The winners and losers of Wolf's budget compromise
While there are still some deep wrinkles to be ironed out in the final days of the Pennsylvania budget impasse, Governor Tom Wolf’s final budget will no doubt contain some big changes from the original proposal.
At loggerheads with Harrisburg Republicans over the last several months, Wolf’s top priority right now is securing a major boost in public education funding. It looks like he will get most (not all) of his request. But doing so will likely require a higher sales tax, additional tobacco tax, changes to state-run liquor stores, changes to retirement benefits for future state employees, and some kind of deal involving gambling.
It’s going to be complicated. Pennsylvania may adopt one of the highest sales taxes in the nation, and may continue to be the only state not to levy natural gas drilling. For those reasons alone, there are already some clear winners and losers.
PA’s poor, especially Philly’s poor
Under the proposed budget agreement, Pennsylvania would become the state with the second highest sales tax in the U.S., rising from 6 percent to 7.25 percent according to the Associated Press. California's is the highest at 7.5 percent.
Poor people spend a larger percentage of their budget on essentials like food and clothing. For that reason, an across-the-board regressive sales tax hits them the hardest.
Moreover, individual counties already have higher sales levies than required by the state. In Philadelphia, where many of the state’s poorest are concentrated, the sales tax is already at 8 percent, meaning that it would rise to 9.25 percent under the proposed budget.
That’s higher than Boston and New York City’s sales taxes combined. Not to mention, Philly already has additional levies like the $2-a-pack cigarette tax that disproportionately targets the city’s poor. Both
The majority of Pennsylvanians who want to tax frackers
StateImpact Pennsylvania reports that a tax on natural gas will “likely” not be part of the budget compromise. From the outset, conservative lawmakers have been worried that a severance tax on drilling would stifle the Marcellus Shale energy boom in its infancy. Wolf’s original proposal was backed by the majority vote, even among those with no opinion on the dangers of fracking. If there’s no natural gas tax in the budget, this is a huge lose for the majority of Pennsylvanians who backed the severance tax — especially the environmental advocates who are looking to place more regulations on hydraulic fracking.
The natural gas industry
See above. For obvious reasons, nixing the gas tax is a boon for 66 natural gas drillers that currently have over 7,000 operations in the north and southwestern parts of the state. Wolf’s most recent proposal relied heavily on the 3.5 percent severance tax to fund education. Proposed to go in effect in January, it was expected to raise $67 million in 2015-16, and $389 million in 2016-17. All of the revenues were to be used for education. Collectively, those gas drillers are now spared $450 million over the next two years.
Human service organizations
No matter what the final budget looks like, many human service providers will rejoice with any sort of cash flow at this point. AL DÍA reported last month that human services providers in North Philadelphia community had tapped out their resources, including taking out high-interest loans so that they could continue to pay staff and serve their communities throughout the budget stalemate. Up to 85 percent of some service providers' budgets come directly from state and city funds. For over 130 days, their finances have been in limbo.
Wolf said Tuesday that Republicans have committed to boost public school funding by $350 million. It’s less than the $400 million boost he requested, but still represents a sizeable increase for a statewide school system that has been drained of over $1 billion in the four years prior to Wolf taking office. There’s still a long way to go to make up for the spending cuts, but $350 million is a promising start. Much like human service providers, there's a short-term benefit for Philadelphia's public schools in particular: they can stop taking out loans in order to keep the doors open.