PA Executive Budget 2021-2022 Analysis

PBPC statement on Governor Wolf’s proposed Fiscal Year 2021-22 budget:

Governor Wolf’s proposed budget for the year that begins in July 2021 is a bold plan to address not only the problems facing Pennsylvania’s students, workers, and businesses as a result of the pandemic, but also the economic and racial inequities that have plagued our state for decades.

The centerpiece of the proposal is a plan to increase funding for K-12 education. It provides more money for Pennsylvania’s school children in a way that reduces historical inequities in state funding of our schools. Currently, school districts in wealthier communities have the local resources to spend 33% more per student than school districts in poor communities. And state funding for schools with a high percentage of white students is 33% more per student than in schools with a high percentage of Black students. Governor Wolf proposes to use the fair funding formula to distribute most of the state’s Basic Education funds to school districts, which would make reduce these inequities. But his plan ensures that not only would no school district lose funding, but that they would all see some increase for next year.

This education funding proposal is paid for by a plan to reduce the unfairness of our tax system. Now, low- and moderate-income families pay state and local taxes at about twice the amount of the top 1%. By increasing the personal tax rate, while also expanding tax forgiveness for Pennsylvanians with low and moderate incomes, the state could raise more than $1 billion in new revenues, while cutting taxes for many Pennsylvanians. More than 40% of Pennsylvania families will see their taxes go down and the taxes for another 27% will stay the same. Only the most well-off third of Pennsylvanians would pay more. After decades of increasing inequality, that has been exacerbated by the pandemic, a tax proposal along these lines is overdue and should be welcomed by all of us.

The governor again proposes to create the Nelly Bly scholarship program to help high school graduates afford college. Given that our state ranks close to the bottom in support for higher education and close to the top in tuition costs, this is big step forward. The program will be paid for by transferring money from the Race Horse Development Fund, which mostly supports rich racehorse owners, most of whom live outside of Pennsylvania.

Another important proposal by the governor is to increase the minimum wage in steps to $15 per hour by 2027. This proposal would not only help Pennsylvania workers on the front lines who have been struggling during the pandemic, but many workers who currently make more than $15 per hour now, as their wages will go up as well. By 2027, more than 1.6 million Pennsylvanians, or 27.5% of our workforce, will receive a raise. The additional $6.2 billion in wages they receive would boost local businesses and help the Pennsylvania economy recover from the pandemic.

The governor also proposes another initiative to help rebuild the Pennsylvania economy at a time when the pandemic has accelerated economic changes that has eliminated many jobs. Refocusing the Restore PA plan on workforce development programs that will smooth the path of young, middle-aged, and older Pennsylvania workers into the jobs of the future, while providing critical support for new business growth, particularly in manufacturing. The Restore PA plan will be funded with bonds paid by a severance tax on shale gas, which the state should have instituted a decade ago. The governor has also renewed his call for $145 million in state aid for small businesses that are struggling due to COVID-19. This plan is much needed to ensure that small businesses, and the jobs they create, are around recover when the pandemic ends.

Other notable and positive elements of the budget proposal include:

• a plan to use Redevelopment Assistance Capital Program (RACP) funds to remediate leads, asbestos, and other hazards from schools;
• charter school reform, which would save money and increase accountability at charter and cyber-charter schools;
• a proposal to reform the Corporate Net Income tax by instituting combined reporting of corporate income, thus closing the Delaware Loophole;
• a plan to legalize adult-use cannabis;
• reforms of our criminal justice system to reduce long-standing racial and economic inequities; and
• proposals to reform government by instituting a gift ban for all public officials, new limits on campaign contributions, a ban on lobbyists working on political campaigns, and new rules requiring transparency in taxpayer-funded expenses.

There are many other thoughtful and helpful proposals in the governor’s budget that we will describe in detail when our full analysis is complete.

Some context for the 2021-2022 PA budget