Pennsylvania Governor Proposes Dramatic Changes to How Education Is Funded

by | March 4, 2015

By Karen Langley

Gov. Tom Wolf today proposed an expansive plan for Pennsylvania state government that would shift the burden of education funding from the property tax toward the personal income tax while drawing on natural gas drilling to increase money for schools.

MORE: Text, highlights and video of every governor's annual address.

Mr. Wolf described his plan as one to rebuild the middle class by investing in schools, cutting taxes on homeowners and attracting employers that pay middle-class wages.

"It's time to do something different, and work together to get the state back on track," Mr. Wolf planned to say, according to his prepared remarks. "Our budget should be as bold and ambitious as Pennsylvania has been for over 300 years."

The first-year Democratic governor called upon the Republican-controlled General Assembly to send him a state budget raising about $4.6 billion in new revenue, half of that from boosting the personal income tax rate in July from 3.07 percent to 3.7 percent.

Most of the new revenue from the personal income tax would be used to lower property taxes assessed by school districts. The administration said its plan would result in an average reduction of 50 percent in homeowner and farmstead property taxes.

An additional $1.5 billion would be brought in to the state by raising the sales tax from 6 percent to 6.6 percent and broadening it to include services, according to budget documents. Allegheny County has an additional 1 percent sales levy.

Mr. Wolf ran on increasing state funding for education, targeting the losses public schools experienced when federal stimulus money expired. His first budget proposal calls for increasing the main K-12 funding line by $400 million, or 7 percent, and special education funding by $100 million, or 9.6 percent.

The governor has called for enacting a severance tax on natural gas drilling to provide new funding for K-12 education.

His administration described the increases as part of a four-year goal of increasing funding for pre-kindergarten through high school by $2 billion.

"Our state is never going to get stronger as long as we make our schools weaker," Mr. Wolf said in his prepared remarks. "That is why the very first thing my budget does is restore the $1 billion in cuts to public education that occurred under the previous administration."

In higher education, Mr. Wolf proposes increasing funding for the State System of Higher Education by $45 million, or 11 percent, and funding for community colleges by $15 million, or 7 percent. At the same time, he asks the state universities and community colleges to freeze tuition for the next academic year.

The administration noted that Pennsylvania faces required funding increases of more than $1.6 billion, with $900 million of that in human services and $500 million in pension costs.

Republicans have called for the state to make changes to its state and school employee retirement plans beyond those enacted in 2010.

Mr. Wolf proposes refinancing $3 billion in the debt of the Public School Employees' Retirement System while changing investment strategies to reduce management costs.

He is also calling for the state's pension payments to be held in a restricted account to ensure the full obligations are met.

The governor reiterated his call for reducing the corporate net income tax from 9.99 percent, one of the highest in the nation, to 5.99 percent, which the administration said would be the 14th-lowest. His plan would reduce the rate to 4.99 percent in another two years.

It also would require companies to file a single return that includes all subsidiaries, a practice known as mandatory combined reporting, with the intention of finding corporations that are sheltering income out of state.

Mr. Wolf also called for the state to raise its minimum wage to $10.10 per hour, the rate for which Democrats have advocated, from the federal rate of $7.25.

In a prepared response, Senate Republicans said that their caucus "does not believe that massive tax increases will help make Pennsylvania a stronger state ... Today's budget certainly clarifies that Gov. Wolf is fixated on taxing and spending his way out of the state's problems."

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