Paradigm Shift or Pragmatic Politics
Now that 2014 has concluded, ending with a whimper, all attention is turned to 2015 and even fast forwarding to 2016. The year is sure to meet the expectations of drama, speculation, and rumor mongering for politicos of all stripes and shades. New faces and perspectives will fill the void of those retiring, either voluntarily or involuntarily. With a new administration rearranging the furniture and selecting new curtains in the Governor’s office, every prognostication under the sun will be thrown around with the hope that one or two pan out. There is no crystal ball to predict what issues will take center stage and dominate the media headlines. In the spirit of joining with purported soothsayers and offering unsolicited analysis, here are a few items that may creep front and center based on the emerging dynamic between the new kid (Democrat Governor Tom Wolf) and the old-ish guard (Republican leadership in the House and Senate).
Education Funding: Cornerstone or Millstone
The cornerstone of Wolf’s campaign that knocked Pennsylvania election history on its face by defeating an incumbent one-term governor will be a main focus of the 2015-2016 budget that will be unveiled by the Governor in March. Wolf has stated he would like to see the state share of funding increased to 50%, with local governments, federal money and any other revenue rounding out the remaining 50%. The state share in 2014 was approximately 47%. Finding the money to fill the gap will be the issue for legislators as the state stares down a tidal wave of a deficit that is a staggering $2 billion. Wolf could take a hard look at the expenses of the Department of Education and see if there is any fat that can be trimmed. The Department has made the administrative functions of the Department more lean and efficient, having reduced non-education costs 33% from FY 2007 through FY 2013.1 The department is very likely operating as efficiently as state government can operate. The Department has a few patronage type positions that could potentially be on the chopping block but any cuts would translate into political points more than actual cost savings.
Of course the risk in banging the drum for public education is that if the Governor doesn’t deliver in his first budget a barrage of arrows can be expected from both sides of the aisle assailing broken campaign promises, politics over people, and any other analogous sound bite on the six o’clock news. Public unions may be expecting the moon from the Governor and he may need to quickly learn a tight rope routine and temper expectations if the numbers just don’t add up at the end of the day.
New Revenue Streams: No Silver Bullet
Wolf flirted with the idea of a progressive tax income structure but the response has been swift and clear cut from opponents. Horse trading is a common practice but Republican leadership would settle for nothing less than a king’s ransom for this proposal to see even the faintest glimmer of light. A gas extraction tax was another component of Wolf’s plan to offset any education funding increases and has even drawn some support from rank and file Republicans. Initial estimates of what the tax could translate to in real dollars have taken a sizeable hit as gas prices dropped across the board. Initial estimates of $1 billion are now more conservatively being pegged at between $250-500 million. Proponents of the tax argue that the gas companies will continue to drill and that an extraction tax would provide more equitable revenue than the current impact fee. The impact fee method assesses a flat fee on each well, along with a yearly permit cost while an extraction tax would be based on the volume of natural gas taken from a well. Opponents of the extraction tax point to the impact fee as a measure to ensure local communities are compensated for the wells in addition to the higher than average corporate tax rate.
Inner Circle: Friends Close, Enemies Closer?
Shortly after the general election, speculation was rampant about which persons would assume what roles and how that would translate into policy for the state’s 27 agencies operating under the Governor’s authority. It wasn’t long before it was announced that Katie McGinty, a former Secretary for the Department of Environmental Protection, as well as democratic foe in the primary, would be announced as Wolf’s Chief of Staff. Her experience and connections in Harrisburg are viewed as a tremendous asset to the incoming governor. Wolf has said he wants to have his slate of cabinet secretaries ready by Inauguration Day. The Senate will need to confirm all of the department heads and party ideologues are unlikely to receive the warm welcome they would like to receive. Wolf is a numbers guy and has great business acumen and knows the value of justifying each and every dollar. It is good governance, not to mention optics, to retain a few of your predecessors’ agency heads for two reasons. One, it is an early opportunity to pull out the “bipartisanship” card that plays well with moderates in both parties. The second, and more rational reason, is that many departments are apolitical and having institutional knowledge is more of a benefit that bringing in a fresh team.
Lame Duck Session: Power of the Third Estate
Is it possible for the legislature to try and cram partisan legislation through the process prior to Wolf coming into office? After all Governor Corbett will continue to be chief executive from the time the legislature gavels in on January 6th up until the swearing in on the 20th. While it is technically possible, the likelihood is that the first two weeks in January will not feature any tangible drama. Though it would be more than possible in House of Cards, the Third Estate will be keeping tabs on any wisp of suspected impropriety and will be quick to turn any smoke into a five alarm fire. Legislative leadership may need headline grabbing issues as leverage down the road and would be able to share any blowback with the Governor. Accomplishing it before he comes into office will place on blame, or praise, squarely on their shoulders. Those same shoulders would be responsible for carrying the response all the way until the general election in 2016, which is gearing up to be a heated presidential election cycle.
Compromise: A Four Letter Word
If the Governor has ambition to accomplish anything, he will need to find a way to work with House and Senate leaders. While Wolf’s election was an historic event, Republicans were able to shed any links to the previous Governor and grew their ranks in the House and Senate to a level not seen since pre-Great Depression. Wolf has publicly stated he will continue to live at his residence and commute to work, though a few back to back days on I-83 may prompt reconsideration. It will be interesting to see if he uses the Governor’s residence in Harrisburg as a venue to host cordial and exclusive events with House and Senate members rather than a full-fledged residence. With his personality, poise, and calm demeanor it may be the perfect opportunity to cause his detractors to second guess their gut reaction to demonize the novice politician.
Senate leadership seems to be acquiescing to the idea of supporting a gas extraction tax in exchange for much needed pension reform, but any horse trading will involve a plethora of tangential policy issues tacked onto the sides. However, an early deal of such magnitude with all parties having input would foster a great amount of trust between the factions early on that could carry through the first term.
This article can be found featured in the January 2015 issue of Transactions. Not a subscriber? Visit the Transactions page on this website or call PACB at 717-231-7447 to start receiving the magazine.