Ray's Round Up: Three Takeaways - A Response to Governor Wolf’s Budget Address

Harrisburg, PA: Governor Tom Wolf presented his FY 16-17 budget in the annual budget message to the Pennsylvania General Assembly on Tuesday, February 9 ^th, but the budget itself was almost irrelevant to the event.  Here are three takeaways for you and your family to consider in the coming months.

ONE: Throwing the Gauntlet Takes Center Stage, Spending Plan takes Back Seat

Instead of reviewing the programs and issues contained in the proposed spending plan, the Governor delivered a rebuke to the General Assembly, particularly the House Republicans, for their failure to agree to a FY 15-16 budget compromise which had passed the State Senate in December.

The Governor emphasized his view that Pennsylvania is in a fiscal crisis, with a deficit of about $2 billion that he claims cannot be addressed by the kind of one-time fixes which have technically allowed Pennsylvania to operate with a balanced budget in recent years.  The Governor offered the General Assembly two choices - broad personal tax increases, combined with the elimination of some exemptions to the sales tax and a natural gas extraction tax, or severe cuts to human service programs, including programs for older Pennsylvanians.  In his budget address, Wolf offered strongly worded commentary, telling legislators that hard choices need to be made for Pennsylvania to move forward.

"If you won't face up to the reality of the situation we're in...then find another job." – Governor Wolf’s message to the PA legislature.

The reaction of legislators was not positive, to say the least, as Republican leadership in both the House and Senate said this demonstrated that the Governor had no interest in negotiating and his address made the prospects for a budget agreement practically nil.  The short-term consequences until June, when the budget should be signed, could result in more borrowing by school districts and state agencies. If no budget agreement can be reached on either the remaining items in the 2015-16 budget or the proposed 2016-17 budget, the true hardship will come later in the year when educational institutions and social service agencies may once again be forced to seek loans or shut their doors.

TWO: Is PA Too Big for its Budget?

This week’s events point out a fundamental philosophical difference that exists in Pennsylvania government today.  The majority of the General Assembly believe that state government is too big and that Pennsylvanians should not be asked to pay increased taxes to further expand the size and reach of the state government.  The Governor and his allies believe that it is the responsibility of the State to ensure that all citizens have fair access to the programs and services they need to maintain an adequate lifestyle, where services such as education, must be delivered in an equitable way.

Beyond this fundamental difference comes a different argument – whether Pennsylvania is collecting sufficient revenues to pay for the services it currently provides.  The Governor argues that budget gimmicks such as delaying payments to non-governmental service providers and not fully funding the pension system mask the fact that Pennsylvania does not have a balanced budget as required by the state constitution.  The leadership of the General Assembly asserts that these budget maneuverings meet the requirement of a balanced budget and have the added benefit of preventing either tax increases or budget cuts.  The General Assembly also points out that, while the Governor is saying the budget doesn’t balance, he is proposing higher levels of spending, particular in education.  The Governor’s rebuttal is that the education spending is already happening, but is being funded at the local level in the form of property taxes, resulting in an inequitable education system where school districts with higher property taxes receive significantly more funding.

THREE: Spending Cuts Could Result in Service Cuts

A final piece of the budget puzzle involved mandatory vs. discretionary spending.  Many programs funded in the Pennsylvania budget are mandated by either the Federal Government or by previous Governors and General Assemblies.  For instance, it is federal law that the Medicaid program, which is funded almost equally at the state and federal level, provide nursing home care to Pennsylvania residents who have exhausted their assets and qualify by their inability to perform the basic fundamentals of daily living, such as dressing or feeding themselves.  But there are other programs that are not mandated; taking care of the same individual at home instead of in a nursing home is an optional benefit.

Pennsylvania cannot reduce their obligation to fund mandatory spending items.  That could mean the only items available to be cut in the state budget are the non-mandated programs, even if it is not a common-sense approach.  In the example cited above, in a budget crisis Pennsylvania could not reduce spending on nursing home care, but could eliminate spending on home care.  The problem with this approach, of course, is that an individual who is eligible for nursing home care but who could also stay at home with some help could be forced into a nursing home if the help they need is not funded.  Not only is that bad for the individual, but it’s also bad for taxpayers, since on average nursing home care costs 2 ½ times what it costs to take care of someone at home. Not to mention the impact on quality of life. The vast majority of Pennsylvanians would prefer to remain at home and in their communities should they need long-term services and supports.

Hearings on the Governor’s budget proposal begin in the General Assembly on February 22nd.  Just as the Governor’s budget message was a change from budget messages of past Governors, these budget hearings could be very unusual.  Instead of discussing the details of state agency spending, they could provide a forum for a debate about the core function of state government.  With the stark differences of the Governor and the General Assembly seemingly set in stone, such a debate is not likely to result in a solution to Pennsylvania’s budget impasse – instead, it would leave many Pennsylvanians at risk of losing services important to their health, education, and welfare should no budget agreement be reached.

Pennsylvania’s budget impasse is already well into uncharted territory and no one, no matter how well-connected they may be, can predict what the situation will look like six months from now.  Up until now, the vast majority of Pennsylvanians have been unaffected by the gridlock in Harrisburg and have been able to tune out the loud voices coming from both sides of this political argument.  But as this situation drags on, it is likely to touch every Pennsylvanian in some way.  It could be that the local child care facility closes or cuts back on hours and a neighbor is forced to quit their job.  It could be that Aunt Mary can’t get the help she needs to keep Uncle Joe at home and she is forced to move him to a nursing facility.  It could be the retired couple down the street can’t handle the next increase in property taxes and are forced to sell their home and move out of the community.  It could also be that an increase in the personal income tax means your best friend who operates a home business can’t afford to stay in Pennsylvania and moves out of state.  It is likely voters will have stark choices to make as they vote in elections this fall, and in coming years. Most candidates will have dramatically different visions for the future of Pennsylvania at this point in time and with an absence of elected officials willing to accept partial victories, compromise between these two views of the role of State Government and the current fiscal condition of the Commonwealth seems very far away.

 

You can find a video of the address, as well as a transcript, here.

You can also watch the Republican Senate’s response or the House GOP response.

 

“Ray’s Round Up” features updates on current state and federal issues by Ray Landis, AARP PA’s Advocacy Manager.