In final budget address, Pa. Gov. Tom Wolf announces $43.7B spending proposal

(*This story was updated at 2:30 p.m. on Tuesday, 2/8/22 to include additional reporting.)

After seven years, often defined by partisan standoffs over his far-reaching financial proposals and use of executive power, Gov. Tom Wolf leaves office next year. 

But as he delivered his eighth — and final — budget address to the Republican-controlled General Assembly on Tuesday, the Democratic governor tried to strike a conciliatory note, lauding the commonwealth’s financial state and promoting a $43.7 billion spending proposal for education, worker support, public safety, infrastructure, and economic growth.

“We are no longer digging out of a hole. We’re ready to build,” Wolf, who vowed to leave Pennsylvania with a budget surplus at the end of his term, said during a joint session of the House and Senate. “And this year’s budget does exactly that, making new investments that will build a brighter future for Pennsylvania families.”

In particular, the proposal calls for $1.55 billion in new education funding, a topic on which Wolf staked his legacy. Of that increase, $1.25 billion would go to the Fair Funding Formula, which decides school funding, $300 million for the Level Up initiative, which prioritizes Pennsylvania’s poorest districts, and $200 million for special education.

The governor again called for an increase to the minimum wage, raising it to $12 per hour on July 1, 2022. The plan comes with an annual $0.50 increase until it reaches $15 in 2028. 

The budget outline also incorporates $35 million for gun violence reduction and prevention, something Democrats advocated for ahead of the 2021-22 budget. The proposal also includes a $141 million increase for Pennsylvania State Police, reducing reliance on the Motor License Fund — its primary funding source — and $7.7 million for law enforcement video recorders and body cameras.

Wolf’s plan assumes that $5 billion of federal stimulus money already in the state’s General Fund will be spent this year on general government operations and some targeted programs to, for instance, help nurses and local EMS.

Given a proposal to cut the state’s corporate net income tax from the current 9.99 percent to 7.99 percent in 2023, 6.99 percent in 2026, and 5.99 percent in 2027, which could reduce revenue, administration officials said they did not want to run afoul of federal rules that prevent stimulus money from financing state tax cuts.

That leaves $2.2 billion for new relief programs. Wolf dropped a plan to use that federal money last week, calling for $1.7 billion in spending for property tax rebates, child care subsidies, small business aid, and conservation programs. Any federal spending would be on top of new programs established in the budget.

Pennsylvania faces a murky fiscal future. Projections by the Independent Fiscal Office, a non-partisan research agency, anticipate that the commonwealth will face multi-billion dollar deficits again, beginning as soon as the next budget year.

Administration officials have argued Wolf’s plan recognizes this. According to their projections, the state would finish next year with almost $3.4 billion left in the General Fund, plus the $2.9 billion already in the rainy day fund.

Combined with his offices’ higher revenue and lower spending projections in the coming years, Wolf called for lawmakers to build on the last seven years of fiscal improvements in his final budget.

“Paying our bills and investing in our people put us on the road to our commonwealth’s comeback,” Wolf said. “And paying our bills and investing in our people will pave the way for many more days of opportunity ahead.”

But legislative Republicans have already rejected Wolf’s math as “voodoo,” arguing its projected growth rate for spending was too small and revenue growth too bullish. Starting from such a “fiscal fantasy land,” they argued, means that the state must save as much of its current windfall to pay future bills — including any unused federal stimulus money. 

Speaking immediately after Wolf’s address, Senate Republicans responded to the governor’s proposal, cautioning against the spending plan to ensure a balanced budget in the future.

Senate President Pro Tempore Jake Corman, R-Centre, a GOP candidate for governor, described the proposal as being drafted in a “fantasy land.”

Senate Majority Leader Kim Ward, R-Westmoreland, added that a $4.5 billion spending increase will not help Pennsylvania, saying “we’ll pay for that” later with tax hikes or budget cuts.

Senate Appropriations Committee Chairman Pat Browne, R-Lehigh, said that while Wolf’s proposal makes sense on the surface, the spending plan does not use “realistic” projections from the Independent Fiscal Office, estimating a $5 billion difference between the agency and Wolf’s numbers.

Legislative Democrats praised the governor’s proposal, specifically its investments in education and worker relief.

“We are back here from ‘Fantasy Island’ to talk about the truth and to talk about the reality of the opportunities that the historic investments that the governor has proposed to us are in front of us,” Sen. Vincent Hughes, of Philadelphia, the ranking Democrat on the Senate Appropriations Committee, said, following Wolf’s remarks.

All told, the state has about $11 billion in excess revenue heading into the new budget, according to legislative Democrats’ estimates. They’ve argued that money should be used now to make investments that eliminate the deficit and attract new and retain old Pennsylvanians.

The commonwealth has long faced a structural deficit. Analysts have pegged the cause to a mix of factors, including fewer workers and families paying income and sales taxes; increased state human services and pension expenses as the commonwealth’s population ages; and the 2015 elimination of a different corporate tax, shifting state’s revenues to less reliable streams, such as sin taxes on cigarettes and gambling.

“You can’t really see” that deficit right now, Browne said, because of the influx of federal cash. How the General Assembly manages this money — whether with fiscal restraint or by emptying “the piggy bank” — will determine if the next governor faces a budget hole or a balanced budget when they take office in 2023.

The fiscal woes have gone unaddressed by Democrats, who have held the governor’s mansion for 16 of the last 20 years, and Republicans, who have had near-total control of the General Assembly for the last three decades.

Wolf is term-limited after serving two consecutive terms as governor. His replacement will be picked by the voters in November.