Pennsylvania faces a budget deficit of at least $1 billion heading into its next fiscal year, which begins July 1.
It also has a pension problem — unless your side of the legislative aisle is blue.
Many Republicans have reform of the public-sector retirement system at the top of their priority list, along with liquor store privatization and property tax reform.
All are perennial hot-button issues in a GOP-controlled General Assembly. They are also topics that some Democrats have grown sick of hearing about in recent legislative sessions, especially at budget time.
“We are going down the same roads and fighting the same fights we have fought over and over again,” said Sen. Rob Teplitz, D-Dauphin County. “And not being able to resolve them is not productive.”
Back to business
Coming off a gubernatorial primary election and Memorial Day, state lawmakers return June 2 to Harrisburg.
The budget — and how to fill the revenue gap — will drive the dialogue throughout the month. It could even push the debate into July this year — something that hasn’t happened under Gov. Tom Corbett, who is seeking a second term.
“There is definitely a potential for July session days this year, unless more Republicans have that moment of clarity and take an honest look at where we are,” said Bill Patton, a spokesman for House Democrats.
Democrats are concerned that peripheral issues are taking eyes off the ball.
“We need to stop wasting time with the allusion of progress on issues just by the fact we continue to discuss them ad nauseam,” Teplitz said. “I think property tax is an important issue, but it doesn’t directly relate to the state budget.”
Republicans in both the House and Senate said they are well aware of the revenue shortfall in Pennsylvania. But they also believe there is enough time before fall recess to resolve lingering priorities. Transportation funding was on the list before a resolution emerged last year.
Tough decisions will need to be made on the budget, said Sen. Lloyd Smucker, R-Lancaster County. However, Republicans are not looking to “surrender” fiscal restraint achieved over the past three budgets, he said: “I think there will be looks at alternative revenue sources.”
But, he added, the ideas so far are not very attractive.
Online gaming has been discussed, though it is still in the early stages. Renewing the severance tax on natural-gas drilling is another.
One “desperate budget” should not be driving decisions, Smucker said, referring to the tax.
Pensions and liquor
Pension reform is needed in “the worst possible way,” said Sen. Mike Folmer, R-Lebanon County.
“If we don’t deal with it properly, we won’t have enough money for anyone,” he said.
Properly is the key word. Several proposals have been tossed out in recent sessions, including plans from Corbett, to address the roughly $47 billion unfunded liability of the state pension system.
They vary from strictly launching defined-contribution plans for new hires to others involving bonding mechanisms to help pay down current unfunded liabilities, as well as hybrid approaches that blend the defined-benefit plans with defined-contribution components.
Democrats have argued the state should let reforms made in 2010 under Act 120 run their course. That reform helped address an anticipated spike in pension costs by “smoothing” the increases over a long period of time. That law also reduced benefits for new hires.
Short-term relief through collar limits on scheduled employer contribution increases has also been part of the dialogue.
“There will definitely be a big push,” said Erik Arneson, a spokesman for Senate Republicans. “If we don’t make long-term reforms, it is irresponsible to make (other) changes.”
Liquor also expects to be a top-shelf item in June, he said.
However, selling off the state-store system does not seem to have the votes, Arneson added. But there are discussions to create more efficiencies in the system and provide greater flexibility for consumers on where they can buy alcohol in Pennsylvania.
Reps. Stephen Bloom, R-Cumberland County, and Seth Grove, R-York County, said modernization attempts are only short-term wins. Bloom said privatization is the long-term solution with the most benefit to the budget.
Maintaining the Pennsylvania Liquor Control Board “permanently entrenches a statewide bureaucracy that will be a burden on taxpayers,” he said.
Grove has proposed a local-option property tax elimination bill — which passed the House — that would allow school districts to levy a business privilege tax, among other options, to reduce or eliminate property taxes.
They also could use a combination approach under House Bill 1189. All funds generated would have to be used to directly eliminate or reduce school district millage rates, Grove said.
It’s unclear what the Senate will take up regarding property tax reform, Arneson said, calling it a priority, but also an issue that could wait until the fall session.
“It will be very difficult to find something that will fit all 67 counties,” Cumberland County Republican Rep. Sheryl Delozier said on the issue. “I think conversations we’ve had on property tax are going in the right direction.”
Also in the mix
Democrats are also hoping to advance proposals to increase the minimum wage in Pennsylvania.
Rep. Patty Kim, D-Dauphin County, has one of the bills. The target has been a $10.10 minimum wage.
Medicaid expansion is another issue, said Bill Patton, a spokesman for House Democrats. He was not as hopeful considering the federal review of the governor’s Healthy Pennsylvania plan, an alternative to expansion.
Sen. Rob Teplitz, D-Dauphin County, also was optimistic that a bipartisan package of bills driven by the near-bankruptcy situation in Harrisburg might keep other local governments from similar situations. Those bills would provide better state oversight of municipal financial deals.
Various state government reform efforts are also in the mix, including a ban on cash gifts and reducing the size of the General Assembly.