Pennsylvania: Pa. budget negotiations head into home stretch after another temporary disruption to budget framework
November 24, 2015
The “framework” is back on.
After a significant bump in the road that led to short-lived threats of a veto override attempt Tuesday afternoon, Republican legislative leaders emerged from a meeting with Gov. Tom Wolf with fresh commitments to strive toward a final, negotiated state budget agreement.
The broad parameters of the deal remain:
* A significant, well-above-inflation-rate increase in state aid to public schools.
* Some new, still-to-be-determined tax increases to help balance the approximately $30.7 billion spending plan.
* Significant changes to the current state-owned monopoly on liquor sales.
* Implementation of a new pension plan for future state and public school hires that adds a 401(k)-style defined contribution component.
An expanded school property tax relief program that was scrapped last weekend apparently remains off the table.
Details of the still somewhat fragile plan were scarce Tuesday night, in part because many of them have yet to be locked down. But there was initial relief that it didn’t collapse over a pension formula issue that could be the first of many speed bumps between here and the finish line.
“Things are on track. We have a framework in place,” said Senate Majority Leader Jake Corman, R-Centre County.
He said current plans are for staff work through the holiday weekend, after which the package will hopefully be ready for what could be a difficult, final sales job to the full House and Senate next week.
“We’re very comfortable and optimistic that we can have this done in short order next week, but we’ve got to do some work ahead of time,” Corman said. “But right now we’re on track with the framework that we agreed to and we’re going to keep moving.”
Wolf did not comment publicly after his 5 p.m. make-peace meeting with legislative leaders, but his Budget Secretary Randy Albright told reporters between meetings that “there are a whole lot of details that have to be worked out.”
The spending plan for 2015-16 and pension reform pieces appear to be the farthest toward completion.
Wolf has hailed a legislative commitment for $350 million in the main state aid line for public schools this year, plus an additional $50 million for special education services.
There would also be significant increases in funding for state aid to pre-kindergarten programs, and public colleges and universities.
On pensions, the so-called “side-by-side hybrid” would pair a smaller, traditional pension based on years’ service and salary for new hires with a new 401(k)-style plan.
It would also place new rules on current employees’ plans, though there are no changes envisioned to their basic pension formula.
The main task there, according to those familiar with the negotiations, now may be the mandatory independent reviews the plan will face from the Public Employees Retirement Commission to project future savings and where they come from.
That’s an important piece in closing this deal with rank-and-file lawmakers.
Liquor changes appear farther from completion. Here, for example, sources said House and Senate Republicans were said Tuesday to still be striving for common ground on their position.
But broad parameters were emerging, sources familiar with those talks said, that could see a push to expand wine sales to groceries, restaurants, direct-to-door shipments from wineries, and possibly even beer distributors.
Battles appeared to still loom over whether the state should relinquish its status as the lone wholesaler of wine and liquor to restaurants, bars and state stores, or whether that should be privatized, too.
Democrats and some Republicans will also likely insist that the current state-owned retail stores be freed of legislative restrictions to offer expanded hours, pricing flexibility and other steps that allow them to maximize profits.
Finally, there’s the thorny issue of new revenues.
The plan had already counted on a 75-cent per pack increase in the state’s cigarette tax, with a 50-cent bump taking effect Jan. 1, and an additional 25 cents next July.
But with the property tax shift on hold for another time, the budget builders are still struggling to patch a roughly $600 million hole that would have – had the original property tax plan survived – come from slots tax money.
One prime target for that revenue, sources confirmed to PennLive Tuesday, is broadening the base of the existing 6 percent state sales tax to capture some goods and services that are currently exempt.
“That’s a well of recurring revenues, and we need hundreds of millions of dollars to balance,” one legislative source familiar with the talks confirmed. But ending any of the sales tax exemptions will ensure fierce lobbying from whatever businesses or industries are targeted.
Legislative staffers are expected to spend the long holiday weekend start ironing out the many details of the plan.
If the deal holds together through that legislative birthing process, the equally complex task of rounding up votes will begin.
That will likely be another challenge because with many House and Senate Republicans unwilling to vote for higher taxes, Wolf and the GOP leaders will likely have to turn to the minority Democratic caucuses for significant votes to deliver parts of the deal.
And for many of the Democrats’, the measuring stick for the package will be some level of satisfaction that public-sector workers haven’t been asked to sacrifice too much on the pension or liquor reform fronts.
Corman said if all goes well the plan would be to try to take final votes by the middle of next week.
That fact that that was still a possibility Tuesday night felt like a victory in itself.
When a mid-afternoon meeting to try to lock down some of the last big pension details dissolved into disagreement, Republican Senate leaders started preparing for an evening debate on overriding Wolf’s Sept. 29 veto of a stopgap funding bill.
But a last-ditch effort to salvage the framework talks – apparently initiated by Senate Minority Leader Jay Costa, D-Allegheny County, who intercepted GOP leaders as they headed to the Capitol newsroom to announce their plan – called that firefight off, and by last night the negotiations were headed into what most hope will be the long-awaited stretch run.
Pennsylvania’s state government has been operating without a state budget since June 30, as Wolf, a first-year Democrat, has locked horns repeatedly with leaders of historically large Republican majorities in the state House and Senate.
Meanwhile, growing numbers of county governments, school districts and third-party service providers that rely on large chunks of state aid are being forced to trim programs, drain reserves or take out loans in order to maintain services.