Pennsylvania State Capitol
Pennsylvania State Capitol
State Budgets

Victory for Taxpayers in Pennsylvania Budget

Pennsylvania taxpayers were victorious in April, as the commonwealth completed the last part of its 2015-2016 budget. Governor Tom Wolf allowed the fiscal code bill to go into effect, marking the end of a protracted fight over taxes and spending in last year’s budget. Contrary to the governor’s original proposal, the budget contains no tax increases and limits the increase in spending to three percent.

The fiscal code is a law that contains funding formulas and limits how the governor can distribute budget funds. Wolf vetoed the fiscal code in March in part because it did not distribute education funding as he wanted. This meant some education funding in the budget would not be available to schools until a fiscal code was enacted. However, the legislature subsequently passed a revised fiscal code with bipartisan support and veto-proof majorities. By allowing the fiscal code to go into effect, millions of dollars allocated for education in the budget will finally be available to schools.

This represents the conclusion of a historic budget standoff in Pennsylvania that lasted 267 days since the governor vetoed the entire budget sent to him in June. At the end of last year, the Wolf line-item vetoed the no tax increase budget sent to him by legislators, in part because he believed it did not contain enough of an increase in education spending. That meant this year a supplemental bill had to be passed to close out the 2015-2016 budget. However, the legislature held the line on taxes and spending, sending the governor a proposal in line with last year’s budget. Most of that budget spending was enacted last month, after Wolf announced in March that he would allow it to go into effect without his signature. However, the governor’s decision to veto the fiscal code held up a significant amount of education funding from being available to schools until a fiscal code was enacted.

The total 2015-2016 fiscal year budget amounts to $30 billion and represents about a three-percent increase in spending from the previous year’s budget. This includes $200 million in additional spending for education. However, this is less than the governor wanted. Wolf proposed increasing overall spending by about six percent and increasing education spending by $400 million. To pay for the increased spending, the governor’s original budget proposal would have dramatically increased taxes in the commonwealth, something Pennsylvania Republicans have opposed since the budget impasse began last year.

Given the commonwealth’s poor performance in this year’s Rich States, Poor States rankings, tax increases are the last thing Pennsylvania lawmakers should be considering. The Keystone State ranked 39th in economic outlook, mostly on account of its high taxes and lack of right-to-work protections. State Representative Seth Grove has the right idea, noting, “Clearly, taxing and spending will never be the solution to budgetary woes. Instead, we should adopt pro-economic growth policies which emphasize limited government and low taxes. Private sector job growth is the best form of revenue generation which also reduces the reliance on government programs and lessens the burden on taxpayers.” This approach will make Pennsylvania more competitive and help to stop the continued exodus of residents and businesses from the commonwealth.

In Depth: State Budgets

Smart budgeting is vital to a state’s financial health. The ALEC State Budget Reform Toolkit offers more than 20 policy ideas for addressing today’s shortfalls in a forthright manner, without resorting to budget gimmicks or damaging tax increases. One way to stabilize budgets over time is to embrace…

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