Budget Update

by Buchanan Ingersoll & Rooney PC

The state budget stalemate continues nearly four months after the due date, but this week we finally saw some movement toward wrapping up the work on the 2017-2018 revenue package. First, the General Assembly checked one item off the budget to-do list, sending a bill with comprehensive amendments to the Administrative Code to the Governor’s desk. Most notably, that bill contains the language to transfer $200 million from the Joint Underwriting Association to the General Fund to balance the books for the current fiscal year. The bill also contains some other goodies, most of which are fee increases for things like death certificates and background checks, and for applications to operate certain equipment, like ski lifts and elevators. Once this bill is signed in the Senate, it will be presented to the Governor, who is expected to sign the bill.

The General Assembly also sent a comprehensive Human Services Code bill to the Governor this week. And while the bill includes some provisions to help address the opioid crisis and protect some commonwealth employees who work in high risk occupations, it also includes a controversial work requirement provision for Medicaid eligibility. With this requirement included, the Governor has vetoed the bill.

Further, the House advanced a Public School Code omnibus bill, but not before amending it one last time. The bill, which includes provisions to address opioid education, school security drills and the Every Student Succeeds Act (to name a few), will need to go back to the Senate for concurrence before it can reach the Governor’s desk.

Rounding out, and also at the center of the revenue and budget package, is a bill to amend the Tax Code. It’s no secret that Pennsylvania is in the red, and it seems the best way to raise the money we need is through some kind of tax increase. The House and Senate have been volleying tax proposals back and forth for months now, and this week, the House amended the omnibus Tax Code bill one more time. It now includes new proposed taxes on fireworks and “marketplace sales” as well as language addressing the monetization of the Tobacco Settlement Fund. The bill was sent to the Senate for concurrence. Though at one point the bill seemed to have a slim chance of reaching the Governor’s desk, Senate Republicans now seem eager to put the budget to bed. Senate Majority Leader Jake Corman (R-Centre) stated this week that with its 102 bipartisan votes, the bill “deserves serious consideration.”

Finally, the imposition of a tax on the severance of natural gas has been bandied about for nearly a decade’s worth of budgets. Now, this year is no different. Having failed to discharge a severance tax bill from the Environmental Resources and Energy Committee last week, the House took a different tact this week, moving a bill out of the Finance Committee. H.B. 1401 (DiGirolamo, R-Bucks), as amended by Rep. O’Neill (R-Bucks) calls for a 3% to a 3.2% tax on natural gas and also includes provisions to address minimum royalty payments to natural gas leaseholders. However, the advancement of this bill probably won’t change the fate of the severance tax: when asked if the bill was likely to see action on the House floor, House Majority Leader was pretty candid.

All this action puts the budget ball pretty much in the Senate’s court; the House cancelled session for next week, but the Senate will be there, hopefully working on the next and final iteration of a budget package. Meanwhile, Gov. Wolf has not abandoned his plan to monetize the state liquor stores, and continues to peruse cost savings measures, like combining the functions of the Department of Corrections and the Board of Probation and Parole.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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