Gov. Wolf launches a budget fraught with deficits, uncertainty

HARRISBURG, Pa. (AP) — Gov. Tom Wolf asked lawmakers Wednesday to raise income taxes on higher earners and give public schools a massive boost in aid, as state government faces a gaping deficit and uncertainty over how much more pandemic relief the federal government will send.

For Wolf, a Democrat in his seventh year in office, his $4 billion income tax proposal and bid to supercharge public school funding is a return to the aggressive and ambitious budget proposals of his first two years in office.

The proposal to raise Pennsylvania’s flat personal income tax and shift the burden to higher-earners revives a concept he discussed in his first campaign for governor, in 2014, but never actually sought in office, until now.

>>STORY: Gov. Wolf says budget proposal will cut taxes for working families, invest more in education

Raising the income tax would allow Wolf to use $1.35 billion — a 20% boost — to help fix long-term inequities in how the state funds public schools.

The idea reflects the long-standing aims of Wolf and many education advocates to end what they see as a politically bent funding scheme that disadvantages school districts that are disproportionately poor or fast-growing.

All told, the budget proposal would increase spending through the state’s main bank account to $37.8 billion for the 2021-22 fiscal year starting July 1. Including a supplemental cash request to cover cost overruns in the current fiscal year, Wolf is seeking authorization for another roughly $5.5 billion in new spending, or almost 17% more.

Most of that increase would go to public schools and social services.

This year’s budget and next year’s budget rely heavily on pandemic aid from the federal government. Counting those amounts, spending on state operations would rise 10% to $40.2 billion.

The biggest parts of Wolf’s proposal are up against long — if not impossible — odds.

Now entering the lame-duck stretch of his second term, Wolf faces the same large Republican majorities in the House and Senate that have rejected nearly all of his big ideas since he took office in 2015.

The cash from a higher income tax also would help fill a projected multibillion-dollar deficit largely inflicted by the pandemic.

Republican lawmakers have not put out a plan to cover the deficit, but suggest they will look tap into off-budget program reserves, while avoiding cuts or tax increases. Meanwhile, state governments may see more federal budget aid from Congress.

Including off-budget proposals, Wolf is asking lawmakers to impose a severance tax on the state’s huge natural gas industry, ramp up borrowing, divert casino tax revenue away from the horse racing industry and raise the personal income tax rate while shifting its burden to higher earners.

In exchange, money would flow to public schools, job training programs to boost an economic recovery from the pandemic and scholarships for students at a State System of Higher Education university.

This is the seventh year that Wolf is proposing a tax on natural gas production in Pennsylvania after campaigning for office twice on making the industry pay its “fair share” in the nation’s No. 2 gas state. Every year the Legislature has rejected the idea.

Wolf’s new personal income tax proposal revolves around increasing the rate to 4.49% from 3.07% to raise what his office estimated to be $4 billion over a full-year, or about 25% more.

By expanding low-income exemptions in the tax, two-thirds of income-tax payers would pay less or the same amount, while the top one-third of earners would pay more, Wolf administration officials say.

Gov. Wolf seeks big increase in school funding, tax increase

Cox Media Group