HARRISBURG — Keystone components of Pennsylvania Gov. Josh Shapiro’s first budget proposal face scrutiny of Republican legislators who are worried by the risk of recession and a structural deficit in commonwealth finances.
The first-year governor proposes a near 54% increase to the maximum rent and property tax rebates for senior citizens, widowers and people with disabilities. And, he looks to raise a monthly surcharge on wireless users to fund investments in county 911 communication systems, offset by the elimination of two taxes on mobile phones and service.
House Republican Appropriations Chairman Seth Grove on Thursday didn’t object to the intent of either plan, rather, he raised concern about spending beyond the state’s means which, he says, could lead to a $10 billion deficit in five years assuming 6% spending increases.
Shapiro offered his $44.4 billion budget in early March and has consistently traveled the state to promote these initiatives and others including a tax credit plan for new nurses, teachers and police officers that Senate Republican Leader Joe Pittman critiqued as being too target-based as other sectors need help recruiting workers, too.
This week, Shapiro told a room full of seniors in Cumberland County, “We can afford it.”
That’s not an opinion shared by Grove and others.
“No. Literally, we can’t afford it,” Grove said.
The Shapiro administration touts the governor’s proposal as conservative, with its revenue projections falling below that of the typically cautious Independent Fiscal Office.
“Governor Shapiro has put forth a commonsense, fiscally responsible budget — one that includes revenue estimates that are $3 billion more conservative than the IFO’s projections — that is filled with real solutions to the most pressing issues Pennsylvanians are facing,” Shapiro spokesperson Manuel Bonder said. “The Property Tax/Rent Rebate is a critical lifeline for seniors in every single county — and the governor’s proposal to expand this lifeline is an effective, responsible way to deliver real relief to Pennsylvanians dealing with inflation and rising costs.”
“The governor has met with folks in communities all across Pennsylvania, and one thing is clear: After 17 years, it is long past time we expand this critical relief for our seniors. Governor Shapiro is focused on bringing Republicans and Democrats together to deliver for all Pennsylvanians — not engaging in the political skullduggery that too often stands in the way of solving problems,” Bonder said.
Grove characterized the plan as one that would eat away at the commonwealth’s healthy reserves — about $11 billion combined in the rainy day fund and rollover funds left unspent. He puts the budget at $45.8 billion, rolling in state police funding moved out of the general fund budget as well as unspent Medicaid reimbursement.
Grove presented year-over-year tax data that shows revenue declines in sales, personal income and realty transfer taxes. Fiscal year-to-date General Fund collections are 3.3 percent above estimate as of April, per the Department of Revenue. However, personal income tax revenue was down 2.7% and realty transfer tax revenue was down 15.3%.
The housing market is particularly troubling, he said, as is Pennsylvania’s population. The Census Bureau estimates the commonwealth lost 40,000 residents from July 2021 to July 2022. Grove said working-age residents are leaving for jobs and other financial opportunities.
“This is what is devastating our economy here in Pennsylvania,” Grove said. “It’s something that should keep us up at night.”
An increase to the Property Tax and Rent Rebate Program is worthy but not how the Shapiro administration plans it, Grove said. He shared data that showed that without the plan, there’d be enough money to add $250 million to reduce the property tax burden on all homeowners statewide, boosting the total from the $864.4 million planned next year to more than $1 billion.
Shapiro’s budget calls for the 911 surcharge to rise from $1.65 to $2.03 beginning in January 2024, raising an additional $54 million for emergency communications. Gone would be the Gross Receipts Tax imposed on wireless phones and the Sales and Use Tax imposed by services.
Estimates shared by Grove shows those savings across the first two years before increasing by a combined $78 million over the following three years. He called the surcharge an “infinity tax,” a Marvel movie reference, since it’s tied to the rate of inflation.
An economic recession appears to be on the horizon. Grove said the latest estimates put the onset at late summer. He said Pennsylvania should prepare for it within the next budget — one with a June 30 statutory deadline that may come and go, again, without resolution.
Grove said he supports Republican proposals to regulate skills games as well as ready-to-drink cocktails, adding tax revenue to state coffers. He’s unaware of any desire to reduce Pennsylvania’s education subsidies to public schools, he said.
He and House Republicans this week offered a package of five bills intended to reform the budget process including one that would require a governor to perform line item vetos to balance a budget in the event it would become law without the governor’s signature.
Grove told reporters to take Pittman at his word when he says the deadline — one missed many times over the years including last year — isn’t concrete.
“Every dollar you save this fiscal year is two dollars you save next fiscal year, particularly on entitlements you save even more,” Grove said. “I’d rather prepare for the worst but hope for the best. Maybe we can do a higher spend next year. Maybe we won’t have a recession.”
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