By: Allison Coccia
This year’s budget process was not without its share of fireworks, but for the second year in a row, the Pennsylvania legislature delivered a fully on-time budget, meeting the July 1 deadline.
The 2019-2020 State Budget is a $34 billion spending package, representing a 3.9% increase in spending growth from the Commonwealth’s current fiscal budget.
Pennsylvania lawmakers had the wind at their backs this year, enabling them to produce a budget with no tax increases, no banks shares tax increase, increased education spending and a significant boost to the state’s rainy-day fund. What was Pennsylvania’s saving grace? A strong economy.
Thanks to higher than expected returns in corporate and sales taxes, the state’s revenue was $910 million1 over budget projections. This surplus allowed for some creative spending and savings.
Here are some highlights:
The budget included a $160 million increase for public education funding. In his original budget proposal Governor Wolf had called for a $200 million in new funding. It included a $50 million increase to both early childhood and special education programs; a 2% increase in state funding for community colleges, all 14 state-owned universities, and state related universities like Pennsylvania State University, University of Pittsburgh, Lincoln University and Temple; and $15 million for school safety programs. The mandatory age for children to start school will lower from 8 to 6 and the minimum drop out age will increase from 17 to 18.
$25 MILLION INCREASE FOR THE EITC PROGRAM
The state’s Education Improvement Tax Credit (EITC) Program will get a $25 million boost from its already budgeted $110 million. The program provides tax credits to businesses who invest in scholarships for private and parochial schools and educational programs. Many PACB member banks utilize this program to enhance their community involvement efforts and support educational endeavors.
Depleted from previous budget shortfalls and recessions, Pennsylvania’s Rainy-Day Fund will get a boost. This year’s budget package deposits $250 million into the state’s Rainy-Day fund. By mid-2017, Pennsylvania had one of the lowest emergency savings accounts, exceeding “only those of New Jersey, Montana, Kansas and Georgia, according to Pew figures.”2
Hoping to set a trend, as part of last year’s budget, lawmakers deposited $22 million into the fund, the first significant deposit since 2009.
Here is what it does not include:
NO BROAD-BASED TAX INCREASES
Pennsylvanians will see no tax increases to sales or income tax.
NO MINIMUM WAGE INCREASE
There will be no increase in Pennsylvania’s minimum wage. In his February 2019 budget proposal, Governor Wolf promoted a plan to increase the state’s minimum wage from $7.25 per hour to $12 per hour with a $.50 increase year after year until 2024 ultimately raising Pennsylvania’s minimum wage to $15 per hour.
A much talked about battle for the last few months, the Senate indicated that they were open to negotiations, but in the final days before budget passage, the House Republicans indicated their strong opposition. There is no doubt that we have not seen the end of this issue.
NO SEVERANCE TAX
Not included in the budget, was Governor Wolf’s proposed Marcellus Shale Tax or Severance Tax to fund $4.5 Billion in Capital projects for infrastructure, flood and blight improvement programs.
NO CNI DECREASE / COMBINED REPORTING
Governor Wolf proposed lowering the corporate net income tax for tax year 2020 from the current 9.99 percent to 8.99 percent, a first step in eventually dropping to 5.99 percent by 2024 while requiring combined reporting. This initiative was not included in this budget.
NO PER CAPITA FEE FOR MUNICIPALITIES WHO DEPEND ON STATE POLICE FOR FULL-TIME PROTECTION
Governor Wolf’s proposal to charge a fee based on a population sliding scale to municipalities who depend on the state police for fulltime protection was not included in this budget.
A few months ago, in a major push, Governor Wolf announced that counties would be required to replace their current voting machines with updated machines sporting new technology that will produce paper records for each individual to review their ballot prior to casting their final vote. This is designed to provide voters peace of mind that their votes have been recorded correctly. Counties were given until December 31, 2019 to comply.
As part of the budget negotiations, lawmakers passed legislation to borrow $90 million to help counties defray the costs of purchasing new voting machines in time for the 2020 elections. As part of the deal, election reform advocates included language to eliminate the option of straight party voting on the ballot and accept voted absentee ballots postmarked on the Friday before Election Day instead of limiting acceptance to those received by the Friday prior to Election Day. Governor Wolf vetoed this measure entirely, ordering a bond issue to borrow up to $90 million without legislative approval to help the counties defray their costs.
Lawmakers have been back in their districts since July and are scheduled to return to session in September. This Fall, legislators will continue to debate issues like property tax elimination, the Pennsylvania Department of Labor’s Proposed Overtime Rule, among others.