No. 1 for the next governor? A huge budget gap

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PHILADELPHIA – Job No. 1 for whoever wins this fall’s election for Pennsylvania governor likely will be trying to solve the state government’s messy fiscal situation.


Tax collections have been disappointing. Costs are rising by more than $1 billion a year, primarily for health care for the poor and public employee pensions. Gov. Tom Corbett, the Republican seeking a second term in the Nov. 4 election against Democrat Tom Wolf, and the Republican-controlled Legislature have been unwilling to support a broad-based tax increase to balance the state’s operating budget.


But even after Republicans engineered cuts to education and certain health care and social service programs, the state is still facing a massive deficit budget analysts expect will hit $2 billion next year, if not more.


In an interview this past week with an Associated Press panel, Corbett swept aside questions about whether he failed the promises of his 2010 candidacy when he ran as a fiscal conservative who would govern the state’s fiscal affairs responsibly and transparently.


“We were promising the people of Pennsylvania we wouldn’t increase the tax burden on the people of Pennsylvania, OK? We were going to continue to work to reduce our spending, and we have. We promised that we were going to look for efficiencies in government, and we clearly have,” Corbett said. “You have to take a look at the entire, total picture, and I believe that we’re in a better position with government.”


Corbett arrived at a difficult time in 2011. Temporary federal aid to bail out recession-wracked state budgets was expiring, and pension costs were increasing after years of state government putting off its obligations. The result was a multibillion-dollar deficit, and he says the highlight of his administration was closing it without raising taxes.


It didn’t solve the longer-term problem, however.


In April of this year, an unexpected collapse in tax collections – thought to be a consequence of federal tax policy – tore a gaping hole into the state’s already threadbare finances. To deal with it, Republicans devised a $29 billion no-new-taxes spending plan that increased spending by $943 million, or about 3.3 percent, while relying on about $2.5 billion in one-time fixes – or gimmicks, to critics.


That helped prompt Moody’s Investors Service to downgrade Pennsylvania’s bond rating for the second time in three years.


“Whoever is the next governor is going to have to deal with the consequences of having done smoke and mirrors and a lot of gimmicks in the budgets that have gone through,” Wolf told the AP in July. “I mean, there have been a lot of games played.”


Wolf, who has run a family building products supply business in York for most of the past three decades, puts the blame squarely on Corbett.


“If their model was working, if their proposals were working to actually make Pennsylvania economically stronger, we shouldn’t be facing this,” Wolf said.


For now, neither Corbett nor Wolf has ruled out a tax increase of some sort, but neither is embracing a broad-based tax increase, say on sales or income.


Corbett said he has been saddled with fixing mistakes he inherited and negotiating a sluggish national economy. He said he expects that, in his second term, he will benefit from a stronger economy that generates healthier tax collections for the state treasury.


“We’re looking for revenue growth (that) hopefully will match it,” Corbett said. “If not, then we’re going to have to face ‘What do we do? Do we do more cutting?’ And, frankly, more cutting will be difficult to do.”


Wolf said he believes a shift to his policies will help the economy pick up.


To plug the immediate deficit, he plans to propose slapping higher taxes on the booming natural gas industry, scaling back public subsidies for charter schools, expanding Medicaid under the 2010 federal health care law and plugging loopholes in tax laws.


“But the long-term solution to Pennsylvania’s structural budget deficit is economic growth,” Wolf said. “And we cannot keep going from the top of the charts to the bottom of the charts in job creation. We cannot have lagging gross state product growth.”



Marc Levy covers politics and government for the Associated Press in Pennsylvania. He can be reached at mlevy@ap.org.


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