Good News, Bad News on State Budget

News about the 2016-2017 budget negotiations is starting to trickle out of the Capitol. The good news is that Governor Wolf has dropped his demands for increases in the sales and personal income tax. His original budget request was completely detached from reality and included an eleven percent retroactive personal income tax increase. The Governor’s willingness to move away from his original fantasy budget is a step in the right direction.

The bad news is that members of the House and Senate are talking about increasing state spending by over $1 billion this year. To put that number into perspective, budget growth indexed to population growth and inflation would mean an increase of $300 million in spending, a massive disparity.

With broad-based tax increases off the table, you’re probably wondering how the General Assembly plans on funding a renewed spending spree.

There are two main funding options under serious consideration. The first option is an expansion of gambling and allowing new forms of gambling in the Commonwealth. Details on what exactly this would look like are sketchy, but it could include fantasy sports, "video gaming terminals" at bars and other venues, and other online gambling. According to media reports, the expansion of gambling could net the state an additional $250 million to $400 million in revenue.

The second major funding source being discussed is a $1 increase on the tax paid per pack of cigarettes, tax increases on other tobacco products, and a tax on electronic cigarettes. These changes would purportedly bring in nearly $500 million per year to the state coffers. However, that revenue figure should be taken with a grain of salt. As the Commonwealth Foundation noted in their write-up on the subject, there is a host of problems associated with higher tobacco taxes that would decrease revenue, increase the appeal of cigarette purchases made on the black market, and incentivize smuggling.

Despite a report from rank and file members of the House and Senate detailing $3 billion in potential savings and significant changes to the budgeting process, "leadership" appears to be content in maintaining an unsustainable spending trajectory. Rather than addressing corporate welfare, the mandated cost increases associated with prevailing wage, or any number of other ways to reduce government waste, the General Assembly appears to be content to find new ways of extracting more money from hard working Pennsylvanians.

Please, contact your Representative and Senator today and tell them it’s time to get their priorities in order.