Facing $3B deficit, governor proposes shale tax
HARRISBURG — Building on an ambitious bet that he can squeeze savings out of state government, Gov. Tom Wolf asked lawmakers Tuesday to help fill a $3 billion projected deficit by 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 to the Republican-controlled Legislature come with a slew of efficiency measures the governor rolled out Tuesday, including shifting more of the rising cost of medical care for the poor to the federal government. Wolf 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 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.
In the background is fear in the Capitol that Wolf and Republican lawmakers are headed for the kind of monthslong stalemate that marked Wolf’s first budget.
Democrats embraced Wolf’s plan, while Republican response was mixed.
House Speaker Mike Turzai, R-Bradford Woods, 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.
Senate Republicans suggested that items like leasing the farm show complex, raising the minimum wage and slapping a tax on Marcellus Shale production face steep, if not impossible, climbs in the Legislature.
Senate Majority Leader Jake Corman, R-Bellefonte, also questioned whether Wolf’s plan does enough to stop rising costs that have helped drive the deficit, such as long-term nursing care for the elderly.
“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.
Also driving the deficit has been the rising cost of pension obligations, in part because of the state’s failure in years past to make timely payments.
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.
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.
However, it 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.
It also would eliminate an approximately $30 million grant to the University of Pennsylvania’s veterinary school.
In the meantime, state government would rely on fewer employees and consolidate agencies and functions, while closing the state prison in Pittsburgh and potentially an undetermined number of state health centers.