Pennsylvania Budget Deal Still Requires a Lot of Work

by | November 16, 2015

By Chris Palmer

It took more than five months for Pennsylvania lawmakers to agree on broad concepts for the state's overdue budget.

The bigger obstacle, as usual, may be hammering out the details.

The tentative accord announced Tuesday by Gov. Wolf and Republican legislators -- one they pledged to complete by Thanksgiving -- means they will have to win broad support for more than just their 1.25 percent sales tax increase.

As critical will be the final proposals for issues that have long divided Harrisburg: reducing property taxes, fairly distributing education funding, reforming the state's ailing pension system, and privatizing aspects of the state-run liquor industry.

"There are these really important details that could blow the entire deal up," said Thomas Baldino, political science professor at Wilkes University.

At the core of the $30 billion budget, first due in July, is money for schools.

Under the plan outlined by both sides, the state will add $350 million to its basic education funding allocation this year -- and $50 million more for special education. What has not been decided is how the money will be parceled out.

Officials in poorer districts, such as Philadelphia, have previously called for first restoring funds to areas that were hit hardest by cuts under Gov. Tom Corbett. Many of those districts are represented by Democrats like Wolf, who initially proposed a restoration-style plan earlier this year.

But Republican legislators have signaled the state should instead immediately implement the fair-funding formula unveiled this year by a bipartisan panel.

That group, the Basic Education Funding Commission, recommended a new, weighted formula that factors in traits such as a district's depth of poverty and its tax base before deciding how much per-pupil aid it deserves.

One of the commission's cochairs, State Rep. Mike Vereb (R., Montgomery), said the formula should be implemented as soon as possible. "The time is now," Vereb said last week.

Advocates for poorer districts say applying without first restoring cuts made by Corbett might not be fair.

Such a move leaves "all the current unfairness preserved," said Susan Gobreski, the executive director of Education Voters of Pennsylvania, part of a coalition of advocacy groups called the Campaign for Fair Education Funding. "It would not do anything to fix the starting point."

The group is calling for a $410 million "down payment" this year to restore past cuts while also implementing the new formula.

Another equally divisive plank in the budget framework could be the pledge to reduce property taxes, long the prime funding source for school districts.

Wolf and Republicans say they will be able to reduce the reliance on property taxes by raising the state sales tax to 7.25 percent, the nation's second-highest state tax behind only California. (Sales tax in Philadelphia would climb from 8 to 9.25 percent.)

But there may be philosophical differences about how that reduction is implemented.

Republicans have said that if they are going to raise the sales tax, they want to ensure that local millage rates stay low, so that school districts can't simply raise them again.

"Obviously if we're going to do a property tax relief bill, taxpayer protections are going to be important," said Senate Majority Leader Jake Corman (R., Centre).

Jay Himes, executive director of the Pennsylvania Association of School Business Officials, said any effort to make a millage increase more difficult -- such as requiring a school district to put a tax increase to a vote in a referendum -- could handcuff those who rely on local revenues for a majority of their funding, particularly if they don't receive a big bump in state aid.

"If you tell a lot of districts that surround Philadelphia that 70 or 80 percent of their revenues aren't going to increase [over time], that doesn't add up," Himes said. "You can't make it work unless you want draconian cuts."

David Broderick, spokesman for the Pennsylvania State Education Association, the state's largest teachers' union, put it this way: "It's a disaster waiting to happen. We need to be very careful that we don't change laws to create the next school-funding crisis."

Inquirer staff writers Angela Couloumbis and Matthew Nussbaum contributed to this article.

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