Six weeks of work by a cadre of 18 rank-and-file House Republicans – self-described “budget hawks” – was brought to fruition Tuesday as the group unveiled their long-anticipated budget plan that balances last year’s books and the $31.99 billion spending plan passed in June by utilizing special fund transfers, closing tax loopholes, moving around excess funds and other funding maneuvers to avoid a tax increase and borrowing from the state’s Tobacco Settlement Fund.
In more detail, the plan proposes $1.25 billion in one-time fund transfers by leveraging 41 different accounts to transfer enough money, they say, to cover the one-time deficit left by FY 2016-2017 overspending.
Proposals include transferring $4.2 million from the $7.32 million Compulsive and Problem Gambling Treatment Fund; $4.8 million from the $9.53 million Justice Reinvestment Fund that provides money to improve the delivery of criminal justice services; $120 million from the $189.7 million Multimodal Fund that goes to install, enhance, or rehabilitate transportation assets; $357 million from the $506 million Public Transportation Trust Fund that provides dedicated funding for public transportation; $27 million from the $38 million state Racing Fund that goes to support the state’s horseracing industry; and $25 million from the $56 million Volunteer Companies Loan Fund that goes toward providing money toward helping volunteer fire, ambulance and rescue companies acquire and replace equipment and facilities.
In addition to the one-time transfers from special funds to the General Fund, the budget plan also utilizes $1.113 billion in transfers from other off-books money, including $200 million from the Joint Underwriters Association, $400 million in lapses, $5 million in transfers from each of the four legislative caucuses' budgetary surpluses, $189 million from money the governor has put into budgetary reserves and $39.9 million in mass court settlements.
The budget plan also counts on three Tax Code changes to provide $72.6 million in recurring revenue from closing sales tax loopholes for third-party internet sellers, booking agents (like Expedia and Orbitz), and a 50 percent reduction in all tax credits except the EITC/OSTC education credits. Additionally, the budget relies on allowing advertising on state-owned buildings to bring in an additional $1 million annually.
Recurring revenue can also be found in $100 million from increasing the assessment of Medicaid Managed Care Organizations and $100 million in redirected revenue from off-books revenue sources, bringing the total amount of recurring revenue to $273 million.
"The Taxpayers’ Budget is a result of our in-depth examination of the state budget, which uncovered taxpayer dollars already paid-in, but sitting idle in special government accounts that have inordinately high reserve balances; some of them appear to be dormant having been untouched in several years,” said Rep. Dan Moul (R-Adams), the member widely seen as the leader of the group of Republican members.
“Until and unless every source of reserve revenue is exhausted, we should not and are not asking more of our taxpayers. We are simply doing what we should be doing: serving as good stewards of their hard-earned tax dollars.”
According to members who developed the budget, the list and amounts from funds were developed utilizing resources from the State Treasurer, the governor’s budget documents, House Appropriations Committee staff and caucus attorneys to vet and approve the list.
Right out of the gate, the proposal was excoriated by the Wolf administration, which said Tuesday that it continues to remain unclear exactly what the House Republican Caucus has in terms of votes to pass a viable revenue package.
"Today’s proposal fails to address our challenges. Raiding these funds will mean cuts to programs. There is no way around it. Taking funds from 911 centers and volunteer firefighters means less funding to improve public safety response in local communities. Shifting money from public and multimodal transportation sets back progress in municipalities small and large across Pennsylvania," said Wolf press secretary JJ Abbott.
"This is not complicated. These funds support essential commonwealth programs. If the money is not there, every Pennsylvanian will be negatively impacted. There is no guarantee this plan to raid funds has any broader support – similar to the plan proposed in July. Time is running out. Now is the time for responsible action."
That broad support might be hard to come by.
While legislative leaders in the House Republican Caucus have backed the plan, as of Tuesday, Republican sources have indicated that the more moderate southeastern Pennsylvania Republicans – more than 20 in number – are not likely to be universally in favor of the plan without some other sources of significant recurring revenue.
On another Republican front, Senate Republicans said Tuesday that they will wait to study the plan until after it passes the House, but they have some initial concerns.
"While the leaders are open to new ideas that are passed by the House, we are fearful that the new House plan would harm agricultural, environmental and transportation projects across the Commonwealth while not addressing the state’s long-term budgetary concerns," said caucus spokesperson Jenn Kocher.
Moreover, House Democrats are likely to not be behind the plan.
While House Minority Leader Frank Dermody (D-Allegheny) said the caucus will review the plan, he was not shy about adding his skepticism toward certain aspects of the proposal.
“At the outset of our review, I question the legality of raiding accounts that are restricted by law for special purposes. Then there’s the larger question of whether their math is correct. Is this money truly available in the amounts they claim? I’m deeply concerned this plan would lead to destructive cuts in programs and services that Pennsylvanians need to have, such as education, health care and a half-billion dollars cut in transportation," he said.
“Our perennial budget problems of the last decade resulted from the overuse of one-time gimmicks and faulty revenue estimates. Fantasy budgeting won’t cut it anymore; it’s time for a reality check. House Democrats believe that an honest budget solution must include the use of recurring revenue sources such as a severance tax on gas drillers and a higher minimum wage for Pennsylvania’s workers, among other steps. We are committed to working in a bipartisan way with Republicans to do the job that must be finished.”
As it currently stands, it appears that talk of other Republican-led revenue discussions like gaming expansion, more liquor privatization, and even a severance tax are off the table as of Tuesday.
Moving forward, the House is not expected to return to session until Sept. 11, at which time the plan unveiled Tuesday will be caucused by members setting it up for a vote potentially later that week.
Members were informed last week that they should prepare to remain in Harrisburg until all budget-related bills are passed.
Jason Gottesman is the Harrisburg Bureau Chief of The PLS Reporter, a news website dedicated to covering Pennsylvania’s government.