Analysts: Schools short-term winners, long-term losers in new budget

Katherine Ranzenberger

Pennsylvania budget analysts agree schools are the biggest winners — at least in the short term — with the 2015-16 budget set to become law.

The new budget will go into effect Monday. Gov. Tom Wolf announced Wednesday he would not veto the budget, as he previously had threatened to do.

Analysts from the two state policy think tanks looked at the numbers Wednesday and offered varied views on winners and losers in the state budget resolution.

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Student Cooper Vigue leaves Locust Grove Elementary School for the day in Red Lion, Wednesday, March 23, 2016. Dawn J. Sagert photo

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PBPC's take:  An analyst from The Pennsylvania Budget and Policy Center (PBPC) said Wednesday schools are going to have to fight to remain a priority into the next fiscal year, which starts in about three months.

"We have a huge fiscal deficit that we aren't facing," said Marc Steir, director of the Pennsylvania Budget and Policy Center "This is probably going to cause another credit downgrade. There really is no way to close that deficit gap. Clearly, by allowing this budget to become law, they aren't facing the structural deficits."

The state's credit rating is AA3 on Moody's Investors Service. Standard & Poor's 500 rates Pennsylvania at AA-minus. Only Illinois, Kentucky and New Jersey have worse credit ratings.

In order to fix the current deficit, Steir said, education spending would have to be cut by a billion dollars if no new revenue source is found. Human services funding would also have to be cut by $600 million.

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"Much of the budget has been cut to the bone in recent years," Steir said. "Education and human services are always the first to go. We had a billion dollar cut in education in 2011-2012, and we all saw how that went. It wasn't pretty."

Education became a major issue in the 2014 gubernatorial election after Wolf's claims that former Republican Gov. Tom Corbett slashed spending by a billion dollars.

However, with the new fiscal year starting in June, Steir said, local taxpayers are going to be hurting in the future.

That's because most of the budget is mandated, including prison funding, state police funding and pay for public officials. Steir said lawmakers can only trim so much from the budget. Education and human services are the first to be cut, he said, leaving some schools in the lurch for money.

"Between limited funding and potential cuts next year, we're looking at increased property taxes across the state to make up for revenue," Steir said.

Steir believes long-term winners in the current budget are the big businesses in Pennsylvania, which he said helped create the budget deficit as the beneficiaries of corporate tax cuts.

"If you don't want to see an increase in taxes and don't care about children's education or human services, then I guess you're a winner, too," Steir said.

Commonwealth Foundation's take: James Paul, a policy analyst with the Commonwealth Foundation, said this budget contains a record $200 million increase in funding for public schools.

"This will prevent school closures," he said. "The public schools and the school children who have basically been held hostage by Governor Wolf are the big winners in this situation. There were plenty of times to throw in the towel before this. Luckily, lawmakers didn't give in for their constituents' rights."

Pennsylvania taxpayers are also winners, Paul said, because they won't see an increase in their taxes during this fiscal year.

Paul said Wolf's original budget proposal is the "ultimate loser."

"He wanted to increase taxes from income to daycare to funeral costs," Paul said. "That agenda is now dead. He's now not going to get a dime of that — which is incredible."

Paul said the key takeaway from the drawn-out impasse is the importance of planning.

"You have to be setting a marker in reality that will avoid this kind of situation in the future," Paul said.

Final takes:  PBPC's Director Steir said he believes it's time for people to accept the need for new revenue sources — including increased taxes. He added that corporate tax reform and imposing taxes on natural gas drilling could add revenue to help avoid taxing low-income residents.

Both men say they are looking ahead to the next budget.

"On Monday morning, attention will turn to the '16-17 budget," Paul said.

"There are going to be some serious policy debates over how to move forward in Pennsylvania," Paul added. "There's no appetite for widespread tax increases. Today has brought good news, but there will be more fights ahead."