Pennsylvania Governor, Lawmakers Strike Deal on Taxes to Fund Budget

by | July 14, 2016

By Angela Couloumbis

Pennsylvania has an annual budget -- nearly nine months sooner than it took last year.

The Republican-controlled legislature late Wednesday approved budget-related bills that use taxes on tobacco, digital downloads and changes to gaming and wine sales in the state to pay for the $31.5 billion spending plan it approved last month.

The House and Senate still have pieces of the budget code to approve but Gov. Wolf acknowledged that the biggest obstacle had been cleared.

"Today's passage of a revenue package means that we avoid another lengthy impasse, our budget is balanced this year, and we have greatly reduced the commonwealth's structural budget deficit," he said in a statement, announcing his intention to sign the revenue bill into law.

"This package is an important step forward and includes sustainable, recurring revenue that makes significant progress toward reducing our structural deficit."

A side issue involving loosening caps on charter school enrollment, which critics said would have hurt Philadelphia and other cash-strapped school districts, had threatened to derail negotiations. But officials said the issue will have to wait until a later date for a resolution.

Striking a deal on a revenue plan has been a difficult process in Pennsylvania's tax-averse legislature, where many Republicans early on declared they would not raise broad-based taxes, such as the personal income and sales tax.

The problem during this year's talks was that legislators approved a spending plan by the July 1 start of the new fiscal year -- but not a way to pay for it.

The last two weeks have been dominated by closed-door meetings to find ways to raise new dollars.

The plan passed by the House calls for a $1 tax increase on a pack of cigarettes -- from $1.60 to $2.60 -- and wholesale taxes on smokeless tobacco and electronic cigarettes. It would generate about $430 million.

The state's 6-percent sales tax would be extended to include digital downloads of books, music, games, movies, apps and satellite radio services, to raise $47 million.

An additional $100 million would be raised through a tax-amnesty program.

The legislature already has passed a bill to allow private retailers, such as supermarkets, to sell wine. It is among several changes in Pennsylvania's strict liquor laws that could put an additional $149 million in state coffers.

And though Wolf has been critical of using one-time fixes to help fund the budget, the revenue package calls for borrowing $200 million from a surplus in a state medical malpractice insurance fund, to be paid by over a five-year period starting July 1, 2018.

The legislature is also counting on raising roughly $100 million from gambling expansion -- but will not actually settle and vote on the legislation until the fall.

The House had backed a proposal that would legalize online gambling, making Pennsylvania the fourth state in the country to do so, and expanding slots to airports and off-track betting parlors.

(c)2016 The Philadelphia Inquirer