As Pa. budget shows, the governor is from Venus, the Legislature is from Mars

No Democratic governor has had even one chamber of the Legislature in his corner since 2010.

• Charles Thompson/PennLive
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  Thompson has covered state government for The Patriot since 1999. Prior to that, he had covered various Cumberland County municipalities and school districts. Thompson lives in Carlisle with his wife, Beth, and their two children.
• Jan Murphy/PennLive
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  I cover state government and basic and higher education policy. Reach me at JMurphy@pennlive.com or at 717-255-4106 or 717-255-4106.

(Harrisburg) — Gov. Tom Wolf picked the big lumber off his policy bat rack Wednesday, unveiling a $37.8 billion state budget proposal that calls for the kind of sweeping change that he started his tenure in office with six years ago.

Wolf proposed a major tax reform that also — and unfortunately for the governor and his allies — can be accurately described by his Republican critics as the single-biggest income tax increase ever seen in Pennsylvania, even though it would only ask the top one-third of state wage earners to pay more, according to the administration’s numbers.

He has proposed a transformative increase in funding to Pennsylvania’s public schools, boosting the main budget line for state aid that districts can use to support their basic education programs by $1.35 million, with a major shift in the formula that drives out those dollars to one that puts schools on more equitable footing.

He proposed a quick-turnaround, $3 billion investment in a variety of economic development programs designed to help Pennsylvania build back better, as President Joe Biden might say, from the pandemic-fueled recession; this one funded by a new severance tax on Marcellus Shale natural gas production.

You have to admire the guy’s ability to go into the policy laboratory and come up with ambitious ideas. But you might also wonder about his ability to read the political tea leaves in Harrisburg.

Wolf, on this day, certainly rallied the spirits of his fellow Democrats, who felt like their policy requests were heard. They are convinced in the rightness of Wolf’s plan, and now must hope they and Wolf can figure out a way to sell this as a tax cut wrapped in a $3 billion tax increase.

“There’s no wrong time to do the right thing,” said House Minority Whip Jordan Harris, D-Philadelphia. “Members are going to have to go back to their districts and say where they are on one of the largest tax cuts for working Pennsylvanians.”

The cut Harris refers to is embedded within the increase proposed in the personal income tax rate, from 3.07 percent now, to 4.49 percent as of July 21. Because of a dramatic expansion of the state’s tax forgiveness program that exempts some income from lower-wage workers, the administration says about 40 percent of all filers will see a cut in what they owe.

“It [the tax cuts and school funding gains] shouldn’t be the fine print,” agreed Senate Democratic floor leader Jay Costa of Allegheny County. “It should be discussed as part of a solution to a crisis that we’re dealing with in our schools – the funding – but also our structural deficit that we have.”

Wolf’s budget would have been pitch perfect were he delivering it in Albany, N.Y., Trenton, N.J., Hartford, Conn, or some of those other Eastern state capitals where the Democratic Party controls both the governor’s office and the Legislature. This, though, is Pennsylvania, where no Democratic governor has had even one chamber of the Legislature in his corner since 2010. Does someone need to tell Tom?

We found lots of volunteers at the state Capitol Wednesday.

“The bottom line is we’re in the middle of a pandemic,” said Rep. Stan Saylor, R-Red Lion and the chairman of the House Appropriations Committee. “And he’s proposing a tax increase to implement this thing right now. He didn’t do it before the pandemic. But all of sudden when everybody’s suffering, he wants to increase taxes to do this. I just find it an absurd time to be doing this.

“You know, look, I know he’s a liberal governor and everything else,” Saylor continued. “But come on, you have to have compassion for the people of this commonwealth.”

The Republicans did their part to make clear that everyone knew that after all the tax shifting is done, an individual making more than $49,000 a year will see a tax increase, as will the parents in a family of four making $84,000 a year. Not to mention all of the small businesses across the state who are taxed through the personal income tax structure.

“The big box stores do not care about increases to the personal income tax,” added Senate President Pro Tempore Jake Corman, R-Centre County. “The mom-and-pop stores will bear the brunt of this proposal. Small employers and middle-class families are what drives economic recoveries. Governor Wolf has put yet another target on their backs.”

What about all that the educational funding? In the schools’ community, they see the governor’s plan as something that could really lift quality of programming and instruction across the state.

But Corman raised another priority altogether.

“Where [Wolf’s] proposal on education to me lacked was giving parents options to find the best educational environment for their children, which is the most important thing in education,” Corman said. “We are going to be looking at ways to develop opportunities for parents, no matter where they are on the income ladder, to find an educational environment best fitting their children… not just trying to find more money for schools.”

And spiking the severance tax has become a point of pride for many legislative Republicans through the Wolf years.

The balance of power in Harrisburg – after all that political drama of 2020 – hasn’t really changed.

So what happened to that governor who trimmed his policy sails for the last four years, and seemed content to focus on areas where he could find common cause with the Republicans: public pension reforms, legalizing marijuana for medicinal purposes, or permitting wine and beer sales in groceries?

Daniel Mallinson, a professor of public policy and administration at Penn State Harrisburg, suggested there may be a method to Wolf’s 2021 madness, despite the hard ‘no’s’ he’s hearing at the start. It’s sort of the ask for full loaf, so you might be able to at least get enough bread to make a sandwich approach.

“Both sides agree there’s going to be a multi-billion dollar deficit [because of the hit the recession has put on tax collections],” Mallinson said, “so there’s a window here where Governor Wolf can put out some of these bigger ideas he has and see if he can get any traction on any of them with the General Assembly.”

“It may end up that the governor might not get everything he wants. But he’s going to use whatever leverage he can … to try to pull Republicans away from where they are. That may bring up the palatability for things like marijuana [legalization] and severance tax,” Mallinson said.

One great big wild card lurking in the shadows of everyone’s position – and one that could really stand this entire budget cycle on its head – is the possibility that the new Biden Administration may deliver on a large package of fiscal relief to state and local governments.

Such relief is a foundation piece of the aid package that Biden and his Democratic allies in Congress want to deliver, and it could bring billions of dollars to Pennsylvania, tax-free.

Time will tell how that works out.

But in the meantime, Wolf seemed to signal Tuesday that he wants to strive to be a little bit more than that manager / governor of the past several years.

The new 2021-22 legislative session marks the final half of Wolf’s second and last term in office. Muhlenberg College political science professor Chris Borick said the last two years of a governor’s administration are tough because people are starting to look past you.

“You layer that in with the challenge of crisis governing which has taken a toll on his standing. He’s had to make a lot of unpopular choices. Those choices have led to increased battles with the Legislature and diminished public standing. You bring all those things together and you think: ‘OK what moves are available to him?’ One is to think big and come out and look for something that’s impactful. That’s probably part of this,” Borick said.

Wolf took advantage of the unique format of a video address Tuesday that was aimed, this year, as much at Pennsylvania voters and taxpayers as it was lawmakers, to appeal to Pennsylvanians to raise their voices and “call your representatives” if they agree their “family would be better off in a Pennsylvania with fairer taxes and better schools.”

“I know that folks on the other side of the aisle are going to point to this budget and tell you all the things it does wrong or all of the things they don’t like,” Wolf said Tuesday. “But you know what? We’re not in the chamber today… So I’m not talking to them. I’m talking to you.”

Public crusades on tax increases are hard to win in Pennsylvania.

If Wolf is to have any chance, Borick said it’s going to hinge on his ability to sell residents on the good that this plan could do for their school districts, which will see some of the biggest education subsidy increases in history, and could in turn, lower property taxes as well as possibly their personal income tax bills.

Given the proposed income levels where the personal income tax forgiveness and reduction are set, he pointed out some of the benefactors of the tax shift could include folks living in rural areas where lots of the Republican legislators are from. While the folks with higher incomes live in parts of the state that tend to vote much more Democratic will be the ones to bear the impact of the tax increase but see benefit from increased state subsidies for schools.

“I’d be shocked if that’s not a big messaging point coming out of the governor’s office as they are pushing for it,” Borick said.

But Republicans have their counter-argument all set.

“Tax increases are not the answer. They never have been,” said House Majority Leader Kerry Benninghoff, R-Centre County. “As you look out throughout history, no one has ever been able to tax themselves to prosperity.

“Our caucus is about jobs, jobs and more jobs because we know and we’ve seen that a robust economy – like we had 10, 12 months ago – allows people to do the American dream. Go to work, earn a paycheck and be proudly able to go home and take care of their families, not just wait for other government dollars.”

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This story originally appeared at pennlive.com.