Finance - July 28, 2017


PA Budget Process Limps On

On the last day of the fiscal year, the PA General Assembly put a $32 Billion spending plan on the Governor’s desk. The problem is that they didn’t have a plan to pay for it.

The Governor, for the second year in a row, did not sign the spending plan, citing the Constitution that requires a balanced budget – and this one, technically, was $32 Billion out of whack.  The Constitution also allows legislation to “lapse” into law without the Governor’s signature. The result is that we now are well into the FY17-18 year with no money to pay for state services.

The Pennsylvania Senate took a stab at completing the budget process by enacting a revenue plan that passed by the slimmest of majorities – 26-24. Despite general aversion to new taxes, the Senate package includes about $600 million in recurring revenue through a gross receipts tax on natural gas, an increase in the gross receipts tax on electricity and telecommunications, a two cent per thousand cubic feet severance tax on natural gas extracts, the closing of a sales tax loophole for third-party internet vendors, and a 12 percent tax on fireworks. The package also includes borrowing $1.225 billion to cover the remaining deficit.

The revenue package faces an uphill battle in the House where anti-tax advocates dominate the Republican side of the aisle. It is unclear whether the House leadership will accept, amend, or flat-out reject the Senate plan.

Most observers believe that the impasse will drag well into August.