Pennsylvania Gov. Tom Wolf unveiled his $36 billion proposed budget for fiscal year 2020-21 on Tuesday, drawing criticism from some Republicans and business groups for overspending and not encouraging the state’s economic growth, though workforce development initiatives attracted widespread support.
The Democratic governor’s proposed budget for the fiscal year beginning July 1 reflects an approximately $2 billion increase over the current budget. It does not call for broad-based sales or income tax increases but includes a controversial additional tax on energy production and various fee increases.
“This budget contains more than a half-a-billion dollars in tax increases on employers and other things that play to his base of supporters,” said Senate Majority Leader Jake Corman (R-34). “We will start from the beginning and continue to unshackle employers from the unnecessary regulatory and tax burdens. As we go through this process, we will hold the governor to the policies that have led to record high wages and record low unemployment.”
Pennsylvania Manufacturers’ Association President and CEO David N. Taylor said the governor’s budget plan does not make the state’s business competitiveness a top priority.
“The Wolf plan does not prioritize competitiveness and doesn’t do anything to make businesses want to locate, hire, or expand here in Pennsylvania rather than in one of our competitor states,” Taylor said.
“From new and additional taxes on Pennsylvania energy production, to increased corporate tax complexity, to artificial inflation in government-mandated wages, these stale plans have finally turned rancid,” Taylor added.
Wolf is continuing to pursue $4.5 billion in funding for infrastructure projects through his Restore Pennsylvania initiative, a plan that calls for a severance tax on natural gas.
Marcellus Shale Coalition President David Spigelmyer said additional energy taxes would jeopardize job-creating investments in a critical industry within Pennsylvania during an already sharp market downturn.
“[It] will be a gut-punch to the hard-working employees, building trades union members and families who want to pay less for the energy they need, not more,” Spigelmyer said. “Pennsylvania’s existing tax on natural gas is on track to generate nearly $2 billion since 2012 – revenue that’s dedicated for communities to strengthen roads and bridges, improve parks and trails, flood mitigation, and emergency services, to name a few.”
Rep. Mike Puskaric (R-Allegheny/Washington) also said that a severance tax would be detrimental for the area he represents.
“The governor is once again seeking to impose a natural gas extraction tax on our region’s job-creating energy producers. This is critical to those who live in Allegheny and Washington counties and those who would relocate to western Pennsylvania because natural gas is creating tens of thousands of good-paying jobs. A tax on this industry would be a very tough pill for this area to swallow.”
Wolf said that his proposed budget is focused on an ambitious agenda that will strengthen the Commonwealth through investments in school funding, education reform, the environment, and increased workforce development.
House Democrats commended the governor’s efforts, stating that the proposed budget closely tracks their own policy agenda.
House Democratic Leader Frank Dermody said, “Wolf’s budget proposal includes heavy investment in public schools and early childhood education, as well a new workforce initiative to prepare more workers for in-demand jobs. Wolf proposed a new scholarship program to help students in the State System of Higher Education avoid crushing student debt.”
Pennsylvania Chamber of Business and Industry President and CEO Gene Barr praised the workforce development initiatives included in the governor’s plan.
“We applaud and support the governor’s continued focus on addressing Pennsylvania’s workforce issues and closing an existing jobs skills gap,” Barr said. “This is an issue that impacts businesses of all sizes across all industry sectors. And it’s one that’s preventing the Commonwealth from moving forward.”
Wolf’s budget would provide $12 million in grant funding to implement recommendations from the Keystone Economic Development and Workforce Command Center to assist workers in overcoming barriers such as transportation, child care, training, licensure and community re-entry. It also would invest nearly $15 million in federal dollars into the Department of Human Services redesign of its employment and training programs, among other initiatives.
Critics of the budget proposal, however, say that it is fiscally irresponsible.
“For the past few months, the General Fund has had a negative balance, forcing the Commonwealth to borrow from itself to cover expenditures. The governor has continued to mismanage his agencies and his budget proposal shows that he is planning to overspend by $900 million. We had hoped the governor would not only acknowledge this problem but would also work with us to fix it,” said a joint statement from Reps. Seth Grove (R-Dover), Kate Klunk (R-Hanover), Dawn Keefer (R-Dillsburg), Mike Jones (R-York Township), and House Appropriations Chairman Stan Saylor (R-Red Lion). “Instead, we heard plans to increase spending in nearly every area of government, including a plan to borrow nearly $5 billion in a single year, leaving our children to pay off the debt. Naturally, when expenses go up, taxes would have to increase as well. Overtaxing Pennsylvanians is not the right way forward,” the York County Republican House Delegation said.
The 2020-21 budget proposes increasing the state minimum wage to $12 per hour effective July 1, with annual increases of $0.50 until the minimum wage reaches $15 per hour in 2026. The proposal has been criticized by some Republicans and business advocacy groups who say it will lead to higher labor costs and job losses.
A recent report from the nonpartisan Congressional Budget Office found that a $15 minimum wage could lead to as many as 3.7 million lost jobs.
Wolf’s budget proposal also calls for reducing the corporate net income (CNI) tax from 9.99 to 8.99 percent on Jan. 1, 2021 and then incrementally to 5.99 percent by 2025.
“We encourage lawmakers to move forward with substantial state tax reform – starting with a reduction to the CNI rate – that is based on the principles of competitiveness, fairness, predictability and simplicity,” the PA Chamber’s Barr said, adding that the state’s current corporate net income tax rate is the second highest effective rate in the nation.
The Pennsylvania House Appropriations Committee will begin holding hearings to examine the details of the governor’s plan on Feb. 18.