State budget pressure shifts toward House
Now that the Pennsylvania Senate has put forth proposals for completing funding of the approved $32 billion 2017-18 state budget, the next step is for the state House to agree or disagree with some or all of them — and unveil new options that it deems workable.
As last week ended, with the Senate having advanced its proposals for a new natural gas severance tax; a gross receipts tax on consumers’ natural gas, electric and telecommunications bills; and assessing the state’s 6 percent sales tax on vendors who reach a certain volume of sales on Amazon, eBay and other online marketplaces, what seemed almost certain was that a long, bumpy fiscal road remained ahead.
That left the commonwealth open to another costly credit downgrade on top of those already imposed over the past couple of years by national credit agencies.
Gov. Tom Wolf’s office has calculated that, if Pennsylvania incurs another downgrade, state taxpayers will be saddled with $10 million in interest costs for every $1 billion that the state might borrow.
Illinois, which earlier this month ended its budget deadlock that had spanned more than two years, says its taxpayers will be facing an interest burden up to $10 million for every $1 billion that that state will be borrowing as a result of its long budget nightmare.
The bottom line is that Pennsylvania needs a beefed-up stream of recurring revenue, not “main solutions” short of that goal.
Keystone State lawmakers — at least most on the Republican side of the legislative aisle — are rightly trying to avoid either a temporary or permanent increase in the state’s personal income tax.
They prefer other revenue-raising steps for closing the current $2 billion-plus shortfall, even though the income tax might provide the most reliable, stable means for achieving the fiscal repair that this state needs.
That’s assuming that an income tax increase wouldn’t just be an excuse for increased spending.
As part of the precarious road ahead, lawmakers on both sides of the aisle need to look back at past fiscal dilemmas and acknowledge that resolving them did not lead to mass political defeat, despite the requirement that taxpayers dig deeper on their state’s behalf.
In 1970, Milton Shapp campaigned for governor on a platform calling for a state income tax, which hadn’t existed up to that time. He won, not once but twice.
Years later, after Shapp no longer was in office, a temporary income-tax increase of three years’ duration was implemented. Again, that didn’t result in a mass defeat of incumbent lawmakers.
For the more than two years that Illinois failed to pass a budget, the state amassed unpaid bills totaling $14.6 billion that its taxpayers now face the burden of having to pay.
And, when the “Land of Lincoln” finally ended the budget logjam earlier this month, Illinois was on the verge of becoming the first U.S. state to have its debt downgraded to junk status.
Under its newly approved spending plan, Illinois upped both its personal and corporate income taxes.
The Pennsylvania Senate has swallowed hard and assembled a platform for serious, responsible discussion. The question now is whether the House is ready for substantive, open-minded debate beyond the stances to which it has remained consistently glued.
“We’ll see” is about the only certainty that exists today.