Wolf proposes $2 billion in cuts during budget address

Staff and wire report
  • Facing a projected $3 billion deficit, Gov. Tom Wolf proposed $2 billion in spending cuts.
  • He's proposing no sales/income tax increases, seeking Marcellus Shale tax and $12 minimum wage.
  • Republicans, who control House and Senate, say Wolf's address offers better starting point than past.

HARRISBURG — Gov. Tom Wolf delivered his annual state budget address Tuesday,  facing a $3 billion projected deficit and a stated desire to avoid any sales or income tax increases.

Gov. Tom Wolf

His proposals to the Republican-controlled Legislature included imposing a tax on Marcellus Shale natural gas production and signing off on potentially touchy cuts in spending, including transportation aid to schools.

The Democratic governor also wants to charge local governments that rely solely on state police for law enforcement coverage and lease the huge Pennsylvania Farm Show Complex in Harrisburg in expectation of a $200 million upfront payment. Education would get more money, albeit more modest amounts than Wolf had sought in previous years, and programs for the poor and vulnerable would remain intact.

His requests come with a slew of efficiency measures, including the gamble that he can save huge sums off the rising cost of medical care for the poor. He also targeted hundreds of millions of dollars in what the administration views as business tax loopholes and wants lawmakers to approve an increase in the minimum wage to $12 an hour, counting on the resulting higher tax receipts to help balance the budget.

“Our commonwealth has been operating with a structural deficit for a long time,” Wolf said during a 22-minute address to a joint session of the Legislature in the ornate House chamber. “That means Harrisburg has been living beyond its means. Households can’t do that, and neither can we.”

He called his proposal a “responsible solution to our deficit challenge and a different approach from the way things have been done in Harrisburg for almost a generation.”

All told, Wolf’s $32.3 billion spending plan for the 2017-18 fiscal year that starts July 1 would seek $1 billion in new spending, or 3.2 percent more, including $230 million needed to plug holes on the current year’s books.

Wolf had touted the budget plan as one built on streamlining government rather than proposals rejected by Republicans to wipe out Pennsylvania’s stubborn post-recession deficit with a major tax increase on sales or income.

Response: Republican response was mixed, though most agreed his address constituted a better start than his first two years, which included a monthslong stalemate in Wolf's first budget.

House Speaker Mike Turzai, R-Allegheny, said Wolf had moved toward “a more pragmatic approach to governing.”

“The governor certainly took a few pages from our playbook,” Turzai said. Still, he said, he would like to see more emphasis on privatizing government services, reducing debt and fostering school choice.

House Appropriations Chairman Stan Saylor, R-Windsor Township, said the Legislature's job now is to vet Wolf's proposals to make sure the projected revenue is correct in order to prevent overspending.

Senate Republicans suggested that items such as leasing the Pennsylvania Farm Show Complex, raising the minimum wage and slapping a tax on Marcellus Shale production face steep, if not impossible, climbs in the Legislature.

Pensions: Senate Majority Leader Jake Corman, R-Centre, also questioned whether Wolf’s plan does enough to stop rising costs that have helped drive the deficit, such as public pensions.

“I think we’re all willing to swallow some pain to balance the budget if we solve the problem, but I’m not going to sell the farm show and put it into the general fund as a one-year budgetary fix and then lose an asset for however many years,” Corman said.

Rep. Seth Grove, R-Dover Township, said he's actually glad that Wolf didn't address pensions in his budget proposal because it's such a large issue that it needs to be dealt with on its own.

Republican lawmakers had launched a late push last session to overhaul benefits in Pennsylvania’s two large public pension systems as the state grapples with tens of billions of dollars in pension debt, but the proposed bill failed when leaders couldn't muster sufficient votes for passage.

Saylor said Wolf has shown an openness to pass pension reform, but he didn't want it to overshadow other proposals in the budget.

Plan: The plan seeks $1 billion in tax increases, including what the administration views as loopholes in taxes on sales, corporate profits and insurance premiums. The Marcellus Shale drilling tax has been blocked by Republican lawmakers for nearly a decade, in favor of a lower per-well fee that largely benefits drilling communities.

Protestors rally following Gov. Tom Wolf's 2017-18 budget address at the Pennsylvania State Capitol in Harrisburg, Tuesday, Feb. 7, 2017. Dawn J. Sagert photo

Wolf’s plan touts a $2 billion grab bag of spending cuts, efficiency steps and revenue sources that do not involve raising taxes.

New spending would include $200 million more for public schools, special education and early childhood education. It would maintain services for the vulnerable and fund caregiver help and day services for another 2,000 people with intellectual disabilities or autism.

Wolf touted the gains he and the Legislature have made during his two years in addressing education funding, and he even took time to praise Dover Area School District for creating more career and technical education programs.

Grove said he gave the governor a fist raise in approval of the mention.

However, the new proposal would cut $50 million from school transportation aid because of lower fuel costs, slash tax credits by $100 million and try to push grant programs onto unidentified outside sources of money, according to The Associated Press. It also would eliminate an approximately $30 million grant to the University of Pennsylvania’s veterinary school.

— Dispatch staff writer David Weissman and The Associated Press contributed to this report.