Potential Budget Deal in the Works

According to sources, it appears the caucuses have a framework in place for the 2015/16 state budget. The proposed plan would spend an additional $350 million for basic education, an additional $50 million for special education, and a 5 percent increase in funding for higher education.

In the potential budget deal, there will be additional property tax relief. Terms were still being negotiated on how the additional education funding will be distributed. Additionally, officials are trying to impose caps on how much school districts can raise property taxes in the future.

The potential budget deal would include:

• An increase in state spending up to $30.7 billion; that would be a 6 percent increase from last year’s approved budget.
• $500 million in slot-machine gambling revenue that is currently passed along to homeowners as school property tax cuts. That money would be diverted into a restricted account to pay for public school employee pension obligations.
• The loss of the slot-machine money for school property tax cuts would be replaced by about $2 billion expected from a state sales tax increase to 7.25 percent, up from the current 6 percent. The rate would rise to 8.25 percent in Allegheny County, where it is currently 7 percent, and to 9.25 percent in Philadelphia, where it is currently 8 percent.

The proposed budget would not include a new tax on Marcellus Shale; however, a cigarette tax and a tax on banks were still being discussed as potential revenue enhancements. Currently, there has been no specific mention of dollar amounts for health and human services, or providers being reimbursed by the Commonwealth for interest payments being made on loans that providers took out to continue health and human services.

Despite a possible agreement, legislators are still cautious about any last minute hiccups that might derail a potential budget deal. The budget deal could blow up if the governor and legislators cannot come to terms on how new money for schools and property tax cuts would be distributed to each district, and how to further limit the ability of school boards to raise taxes as part of the package of new money.

Some of the other budget highlights include:

• On pensions, the traditional pension benefit would survive, but newly hired public school and state government employees would get a diminished traditional pension benefit, plus a new, 401(k) style plan with a 2 percent contribution. According to estimates, this plan would save the state $12.5 billion in the coming decades.
• Changes to the state-controlled wine and liquor system were still under discussion, although the sides have agreed to make it part of an overall budget deal.

RCPA will provide updates on any budget deal, and encourages members to continue to contact the governor and state legislators to inform them why it’s necessary for them to pass a state budget sooner rather than later. Contact Jack Phillips with any questions.