Wolf calls for an 'honest budget,' tax increase


HARRISBURG — Eleven weary months later, Gov. Tom Wolf is about to deliver a second budget proposal that he says will narrowly focus on boosting school funding while raising taxes to pay for automatic cost increases.

“There are no other issues,” Mr. Wolf said last week during an interview with the Post-Gazette. “We need to have an honest budget, that is funded with recurring revenue, and we need to have investment in education.”

Mr. Wolf said his spending proposal for the year beginning July 1 will total about $32 billion, including automatic increases in pension payments and other areas, and that balancing the budget will require raising the sales or personal income taxes or some combination of the two. The state’s Independent Fiscal Office projects a structural deficit of approximately $1.9 billion for the upcoming fiscal year.

“In the ’15-’16 budget compromise, I agreed to a sales tax increase,” Mr. Wolf said, referring to a framework agreement that ultimately failed to become law. “I would agree to a personal income tax. So I’m indifferent. Either one.”

When he strides into the House chamber on Tuesday, Mr. Wolf will be in the unusual position of proposing a budget for next year while the budget for the current year -— already seven months done -— remains incomplete.

After Mr. Wolf’s first budget address last March, differences between his objectives and those of the Republican legislative majorities were clear. On the June 30 due-date for an on-time budget, Mr. Wolf vetoed a Republican-crafted plan. Negotiations continued and late in the year, the Democratic governor and Republican leaders seemed on the cusp of a deal that would increase education funding while enacting GOP-sought changes to the state pension and liquor systems. A $30.78 billion spending plan supported by Mr. Wolf passed the Senate. But the bills never made it to his desk, and the state is operating under a partial budget that Mr. Wolf signed in late December after making billions of dollars of line-item reductions.

Mr. Wolf said he was surprised during his first year in office by what he called “the willful ignoring of the mathematical realities of the budget.” Without increases in recurring revenues, he said, Pennsylvania will be forced to close a shortfall of $1.7 billion to $2 billion, which he said could necessitate cuts in education funding, lead to teacher layoffs and local tax hikes.

Legislative Democrats have backed Mr. Wolf’s calls for increases in recurring revenues.

“I think he's got to argue that we need a budget this year and next year, but we need a real one,” said House Minority Leader Frank Dermody, D-Oakmont. “It has to be a real one, it has to have sufficient revenues to balance.”

But Republican legislative leaders say it is Mr. Wolf who is ignoring realities — for one, that the budget compromise negotiated last year is not going to become law. Of the so-called framework, Senate Majority Leader Jake Corman, R-Centre, said: “That’s dead.”

“He can pine away all he wants for that to come back,” Mr. Corman said said in a phone interview. ”It’s not going to come back. He needs to negotiate a new deal, something that can get the votes in the House and Senate.”

Senate Republicans, he said, continue to believe that changes must be made to the pension systems for state and public school workers before the state moves to generate additional revenue.

“He’s got to understand some basic realities of the situation,” said House Majority Leader Dave Reed, R-Indiana, speaking to reporters in the state Capitol last week. “I don’t think anybody blames him for being aggressive in his first budget address, but to think that you are going to accomplish everything in your first three months, it was really a four-year sort of agenda that he set forth. He’s just got to be realistic on where he wants to go. He’s got to work with us, and stop the campaigning from a broad public perspective of attacking the very folks he’s expecting to agree with him around the negotiating table.”

Mr. Wolf’s first budget address was particularly broad in its ambitions. In addition to significantly raising education funding, he proposed raising the rates of the sales and personal income taxes while lowering the corporate net income tax rate and providing relief from local property taxes. He said he still wants to reduce the corporate income tax and help homeowners with property taxes, but that neither will be part of his budget proposal Tuesday.

In recent days, the governor has revealed two of his proposals for education funding. At an elementary school in Reading last week, he said that his budget proposal will assume an increase of $377 million in the main K-12 funding line this year and then add $200 million more in the new fiscal year, beginning July 1. In Philadelphia, he announced that he will call for an increase of $60 million for early childhood education next year on top of increases he is still seeking in the current year. On Friday at the Capitol, he said he will renew his call to merge the Department of Corrections with the Board of Probation and Parole.

On Tuesday, Mr. Wolf will address the legislators and the state, unveiling his plan in full. Weeks of House and Senate appropriations hearings will follow. With a budget in place now that funded the main K-12 education line through onlyDecember 2015, pressure is likely to build at the Capitol well before the final weeks of June.

”It’s embarrassing for all of us to be in this situation,” Mr. Corman said. “But we are, so we’ll see what he presents.”