On day 99 of the state budget impasse, and after nearly six hours of debate, Gov. Wolf and House Democrats failed by a vote of 73 to 127 to get enough votes to pass what they called a compromise budget revenue package that would raise the Personal Income Tax and impose a new severance tax on natural gas producers to help fill a $2.3 billion structural deficit and provide an additional $400 million for basic education.
This is the third time the House tried to act as a body on a state budget since the Republicans passed (112 to 77) their own budget in June that was vetoed by Gov. Wolf.
In August, House Republicans failed in 14 attempts to override the Governor’s veto on certain line items by a vote of 115 to 83.
In September, Senate and House Republicans (117 to 83) passed a stopgap budget including what they said were “agreed-to” items that was also vetoed by the Governor.
What next?
House Majority Leader David Reed (R-Indiana) issued this statement after the vote: “Today, the governor finally saw what we have been telling him for months – there is not enough support to pass his tax package. It is really as simple as that. We put his plan up for a vote, as promised, and as predicted, it failed.
“We hope the governor and his administration will look at this vote in a realistic manner so we can move forward on negotiating a budget that makes sense for the taxpayers of Pennsylvania. It is time to come back to the table and honestly negotiate a reasonable and responsible spending plan to fund our schools and core functions of government.
“Our constituents want to ensure their tax dollars go as far as they can, and that’s why we need real public pension reform. We also need some type of liquor reform to grow revenues and improve customer convenience. And to protect residents from growing local school costs, we need real dollar-for-dollar property tax relief for all taxpayers.
“These are the issues we hope to address with a final budget. Tomorrow will mark 100 days without one. We hope to spend it meeting with the governor in earnest negotiations so we can get badly needed funds to our schools and human service agencies, while keeping state government in operation.”
Some southeast Republicans, however, did see a need for more revenue.
Rep. Gene DiGirolamo (R-Bucks), who proposed his own PIT and severance tax proposal in August, invoked the Serenity Prayer during the debate to draw attention to the need enact a budget that includes more revenue: “God grant me the serenity to accept the things I cannot change; courage to change the things I can; and wisdom to know the difference.”
Gov. Wolf/House Democrats
Gov. Tom Wolf said after the vote that what happened on the House floor was important. “We made real progress today.” “This was a show and we did very well. It exceeded my expectations on what we could put together.”
There was broad recognition there is a fiscal problem, he said, and that the structural deficit is real. They (Republicans) now understand this and (the way we handled the budget in the past) has lead to credit downgrades and local tax increases.
Wolf said it also demonstrated broad Democratic support for doing the right thing. “We showed we don’t need too many Republicans (votes) to get a deal.”
This vote, Wolf said, gives us the chance to increase education funding and get property tax relief done. “This puts us on the path to a responsible budget.”
House Democratic leaders said the vote Wednesday on a revenue package designed to close Pennsylvania's deficit and make critical investments in schools, human services and tax relief to thousands of state residents adds critical momentum to bipartisan negotiations toward a Pennsylvania budget.
"While the vote on this specific plan was not successful, the debate showed widespread acknowledgement from both Democrats and Republicans that Pennsylvania's fiscal challenges are serious," Democratic Leader Frank Dermody (D-Allegheny) said.
"It also showed, contrary to claims we've been hearing for months, that Democrats could put up significant votes for the broad-based revenues and natural gas extraction tax which Gov. Wolf has called for and we know Pennsylvania needs."
"In his remarks today, the Republican leader challenged all members of the House to think outside the box as we continue to work toward a budget solution," Democratic Whip Mike Hanna (D-Centre) said. "We will continue to do that in the Democratic Caucus, and we hope Republicans will join us, as well.
"The previous Republican proposal that the governor vetoed in June certainly wasn't 'outside the box.' As a repeat of the last four Corbett budgets, it simply did not provide the recurring, sustainable and predictable revenues necessary for a workable, balanced budget," Hanna said. "We cannot go back there. We need to continue moving forward."
Democratic Appropriations Chairman Joe Markosek (D-Allegheny) stressed that Democrats still believe new revenues must be part of the eventual budget solution.
“The reality of the budget situation is that without new, recurring forms of revenue, the budget gap will continue to grow, property taxes will continue to climb and our schools and human services providers will continue to be underfunded," Rep. Markosek said. “We still have a lot of work to do, but I am optimistic we can pass a responsible state budget.”
Rep. Markosek added this vote proves House Democrats are a player and (House Republicans) can’t ignore us.
The Democratic proposal would have increased the Personal Income Tax from 3.07 percent to 3.57 percent, but did not propose any increase in the Sales Tax or its exemptions. The Governor also dropped proposals for higher business and cigarette taxes.
It would have enacted a natural gas severance tax of 3.5 percent + 4.7 cents per thousand cubic feet, versus the original 5 percent proposed in February. The proposal would leave the Act 13 drilling impact fee in place as the Governor’s original proposal did.
Here’s a summary of amendment A03468 House Democrats offered to House Bill 283 (F.Keller-R-Snyder). Click Here for a copy of the amendment. Click Here for the roll call vote on the amendment.
House Democrats warned if the General Assembly passes a budget [like Republicans did in June] without new recurring revenues from a PIT increase and severance tax, bad things would happen like—
-- Another $1 billion cut to education funding. Under the current funding scheme, these cuts would again hit Pennsylvania's poorest school districts the hardest, increasing disparity and putting thousands of kids even further behind;
-- Under previous education cuts Pennsylvania lost 20,000 teachers and other education workers such as nurses and guidance counselors;
-- More than 80 percent of school districts were forced to cut education offerings during the last round of cuts;
-- More than 75 percent of school districts were forced to raise property taxes repeatedly during the last round of cuts;
-- Pennsylvania would suffer additional downgrades to its credit rating, leading to higher borrowing costs;
-- Recent downgrades under the previous unbalanced budgets have already increased our debt costs;
-- Further downgrades would increase borrowing costs to more than 100 basis points, or about $10 million for every $1 billion of new debt issued;
-- Human services would continue to be underfunded and struggle year-after-year with unpredictable and unsustainable sources of funding; and
-- Underfunding and unsustainable funding at the state level pushes the cost of mandated services down to the local level, forcing local governments to pay more and driving up local property taxes.
Video: Reed Discusses Latest On Budget Plan
