To spend or save? Wolf, Legislature begin budget talks with different views on Pa.’s fiscal future

Wolf has proposed using the federal relief dollars to support pandemic-related impacts, including a $1.7 billion spending plan for property tax rebates, child care subsidies, small business aid, and conservation projects

By: - February 23, 2022 4:42 pm

(Capital-Star photo).

It’s budget season in Pennsylvania.

And with Democratic Gov. Tom Wolf, who leaves office this year, proposing a $43.7 billion spending plan, the Republican-controlled Legislature is already pushing back against the plan and its use of one-time federal relief funds — money GOP lawmakers want to save.

The House and Senate Appropriations committees have started the process to evaluate the proposed spending plan and assess department needs. The hearings will run for the next four weeks, with negotiations between the Legislature and the governor expected to last months.

Lawmakers and Wolf have until midnight on June 30 to reach a deal on the budget.

“These are days of opportunity for our commonwealth,” Wolf said earlier this month, delivering his eighth and final budget address. “That’s because, at long last, our fiscal house is in order.”

The governor has promoted a projected $6 million to $7 million budget surplus by the end of the current fiscal year, saying Pennsylvania should continue to fund relief plans such as the bipartisan health care and front-line worker initiative signed into law last month. Pennsylvania also has access to roughly $2.2 billion in federal pandemic funds allocated as part of the federal American Rescue Plan.

Wolf has proposed using the federal relief dollars to support pandemic-related impacts, including a $1.7 billion spending plan for property tax rebates, child care subsidies, small business aid, and conservation projects. Any federal spending would be on top of new programs established in the budget.

He also proposed reducing the corporate net income tax rate from 9.99 percent to 7.99 percent, with an eventual path to 4.99 percent.  

“We are no longer digging out of a hole,” Wolf told lawmakers during his budget speech. “We’re ready to build. And this year’s budget does exactly that, making new investments that will build a brighter future for Pennsylvania families.”

Republicans, however, have cautioned against calls to spend the funds. Senate Appropriations Committee Chairperson Pat Browne, R-Lehigh, said at a press conference last month that while the state’s growing surplus might look good in the short run, current reserves need to cover future bills.

Republicans have cited an estimated $1.3 billion deficit, amounting to a $13 billion deficit by the 2026-27 fiscal year.

Browne reiterated that concern Tuesday during the first Senate hearing related to the 2022-23 spending plan.

He emphasized that Wolf’s blueprint does not comply with projections by the Independent Fiscal Office, a non-partisan research agency, which anticipates that the commonwealth will face multi-billion dollar deficits again, beginning as soon as the next budget year.

“We wouldn’t want to … [make] decisions now on a bipartisan basis and have to, at the end of the day, have to come back and try to correct some of the challenges we have because our financial position isn’t where we thought it was,” Browne said.

IFO Executive Director Matthew Knittel told lawmakers on Tuesday that officials aren’t sure what the impact will be once the one-time funds are spent. He added that the Wolf administration’s economic assumptions differ from the IFO.

“The administration is a little more optimistic than we are,” Knittel said, saying the Wolf administration also estimates more job growth than the IFO. “We think it’s going to be over and above average. We have 80,000 jobs, and they’re closer to 210,000.”

He added: “So right in the budget year, there’s a wedge being created between our two forecasts.”

The IFO also estimates an average of 3.3 percent growth rate per year, and the Wolf administration expects a 4 percent increase, Knittel said.

In a statement released by his office Wednesday afternoon, Wolf again promoted his proposed spending plan, calling it “responsibly balanced.”

“We not only have the means to support my budget plan, but we have the data and the forecasts to show we can do this responsibly,” he said in a statement. “To deprive Pennsylvanians by short-changing our state programs and services for the sake of hoarding revenues is irresponsible and fiscally unwise.”

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