What’s Going on With the PA Budget? – What YOU Need to Know (And How It Affects Your Business!)
Pennsylvania state legislators returned to the Capitol on Tuesday, with Republican House of Representatives and Senate leaders looking to finalize an agreement on a $42 billion budget plan with Democratic Governor Tom Wolf before the state loses its spending authority at the end of the week.
Closed door talks are ongoing, but Senate Republicans have said that they are “far apart” from an agreement with Wolf. Without new budget legislation signed by Friday, the state would lose the authority to make discretionary payments.
Most of the holdup is due to the dollar amount going to public education. Wolf is asking for roughly $1.8 billion more for public schools, a 21% increase over the previous budget. Republicans, on the other hand, are wary of overspending with an economic slowdown possibly on the horizon.
Because of the federal stimulus handed out during the height of the coronavirus pandemic, Pennsylvania is flush with new money. Despite an increase in funds in the state’s coffers, lawmakers are not discussing a cut in sales or income taxes.
However, a corporate tax cut is a central piece of budget negotiations, with both Republican legislators and Governor Wolf on board to dramatically reduce the state's 9.99% Corporate Net Income Tax. The Chamber is supportive of cutting the CNI to attract more investment and jobs to the Commonwealth.
While the stalemate is likely to be resolved, it may take longer than tonight’s deadline.
Pennsylvania is no stranger to budget impasses. This year’s political fight has revived memories of 2015 and 2017, where Wolf and the legislature failed to reach an agreement, and discussions lasted months before reaching an agreement. In fact, there were seven consecutive budget impasses in Pennsylvania between 2003 and 2009, when then-Governor Ed Rendell, a Democrat, could not reach a deal with the Republican-controlled State Senate.
How Does this Affect Your Business?
If an agreement is not reached, state-funded businesses, schools and non-profits may be faced with furloughs, salary cuts, reduced programming and more. School Districts will lose funding and be forced to borrow. County finances will also be affected. In 2015, Chester County spent $30 million of its own money to front payments to non-profit organizations and businesses that administer human services. The state could also receive a “downgrade” from Moody’s Investor’s Service if a budget statement were to happen, affecting bonds, investors, and more importantly, taxpayers.
There is much incentive to compromise and pass the state budget, and we hope Governor Wolf and our elected officials in the House and Senate strike a deal that benefits all Pennsylvanians.