HARRISBURG — Pennsylvania’s budget is late for the fifth year in a row.
The Republicans who control the state Senate sent their members home on the Tuesday deadline without a deal, and said in a statement that the week’s talks had given them “necessary clarity on many outstanding issues which were delaying completion of this year’s budget.”
They estimated that a deal will be in the offing “in the days following July 4th” and said they’ll return to session once final language is ready.
The Democrats who lead the state House were less positive in a news conference later Tuesday.
“The Senate Republican majority is failing again, not leading, not working, not compromising, and most importantly, not finishing the job we’re all charged to do,” House Speaker Joanna McClinton (D., Philadelphia) said.
A spokesperson for Democratic Gov. Josh Shapiro, who didn’t attend the news conference, did not return a request for comment.
One of the biggest issues overshadowing budget talks is the state’s longstanding structural deficit. In recent years, lawmakers have dipped into the state’s cash reserves to make up for spending more than Pennsylvania generates in revenue. Now virtually all that’s left is their emergency reserve fund.
Democrats have proposed using some of it, noting that it’s flush with nearly $8 billion. Republicans argue that’s fiscally irresponsible. Democrats, in turn, say they’ve advanced multiple revenue proposals — such as legalizing and taxing recreational marijuana and regulating and taxing skill games — and Republicans haven’t come to a consensus on any of them.
Other policy debates are complicating the picture.
Along with being Harrisburg’s likeliest new revenue option, skill games across the commonwealth are in peril after the state Supreme Court ruled last month that they are operating illegally. The court stayed enforcement until October, but if lawmakers don’t legalize and regulate the machines by then, they’ll be subject to seizure.
Recent weeks have also featured considerable action on data centers. House Democrats passed two conflicting proposals — one, backed by Shapiro, would add conditions to a state tax exemption in an effort to incentivize better behavior from developers; another would repeal the benefit entirely.
Senate Republicans also proposed cutting the data center tax exemption, adding the measure this week to a sweeping package that would also expand a tax credit that funds private school scholarships and eliminate a 5.9% state tax on the sale of electricity — both of which would make the budget deficit worse. The electricity tax cut in particular is estimated to cost the state $1.7 billion in the next fiscal year.
The state House passed its own version of that electricity tax cut. Neither chamber has directly addressed how it would affect the overall budget picture. House Minority Leader Jesse Topper (R., Bedford) argued that the cut would “rejuvenate” the economy by lowering customers’ utility bills. He added that the state “should look at places to get rid of stuff” to cover revenue gaps.
“When we cut taxes, it forces the government to make decisions that they need to make or should have made years ago,” Topper added.
Topper also said lawmakers have intentionally left some of Harrisburg’s more contentious issues out of budget talks in an effort to smooth the process, including “more robust” school choice programs, increasing the state’s minimum wage, and legalizing and taxing recreational marijuana.
State House Education Committee Chair Pete Schweyer (D., Lehigh) indicated in an interview with Spotlight PA that lawmakers are approaching overall education policy in a similar way.
The issue has been a major point of budget tension in recent years, but Schweyer said that while last year’s education code was “extremely dense and had a lot of things in it that we were extremely proud of,” this year’s likely wouldn’t “be quite as robust, but I don’t necessarily think it has to be.”
There is little impact on the state if the budget is late by a matter of days or weeks.
The state has a constitutional obligation to pass a balanced budget by June 30 each year, and up until 2009, that deadline was a big deal. If lawmakers missed it, many state payments had to halt, including to state workers.
However, amid a long budget impasse in 2009 that saw state workers protesting at the Capitol, the Pennsylvania Supreme Court ruled that the federal Fair Labor Standards Act overrode state constitutional language that said most state funds couldn’t be spent without an enacted budget.
That meant state workers would no longer go unpaid. It was a relief for them, but also did away with one of the most potent disincentives for a late deal.
Still, nonprofits, libraries, schools, counties, and many other recipients of state funds eventually suffer if an impasse stretches for months.
After last year’s impasse, which dragged on until mid-November, public schools across the commonwealth cut programs, spent down their reserves, or took out loans as the state failed to make billions in critical payments. The strain also extended to safety net programs like rape crisis centers, nonprofits like those that run early childhood intervention programs, and county-administered services such as foster care and homeless assistance.
Asked Tuesday what the biggest remaining sticking point in talks was, state House Appropriations Committee Chair Jordan Harris (D., Philadelphia) said of the Senate, “They’re not here.”
“They got on the highway,” McClinton said.
Stephen Caruso, Kate Huangpu, Jaxon White, and Ethan Young contributed reporting.