Pennsylvania Gov. Tom Wolf said Tuesday night that the broad outlines of a budget agreement are in place, including a commitment from legislative leaders for an additional $350 million in basic education funding.
"We're very pleased that the leaders are on board, and we're working together with this framework," Wolf told reporters at the state capitol in Harrisburg.
While the unfinished business is extensive, both sides hope to end their five-month old stalemate over the roughly $30 billion spending plan by Thanksgiving.
That deadline could be ambitious, even though many local school districts and social service agencies that depend upon state reimbursements have sounded alarm bells.
"Even if there's a framework, which there is, it will take weeks to finalize details," said Drew Crompton, chief of staff and counsel to Senate President Pro Tempore Joseph Scarnati, R-Brockway. "We know what we're doing. We can work fast, but we also have to go carefully."
The first-year Democratic governor spoke after members of his administration and leaders of the Republican-dominated legislature bickered publicly over the education funding amount.
At play is a proposal to raise the sales tax from 6% to 7.25% to cover a $2 billion property tax reduction for homeowners and farm owners. In addition, the state would divert $600 million in gambling revenue to the general fund to help defray escalating pension costs.
"There's a lot of details to be worked out," said House Majority Leader Dave Reed, R-White Township. "Pretty much all the big items that have been out there on this table at least for this budget discussion and quite frankly, some of them have been out there for 40, 50, 60 years."
Nathan Benefield, vice president of policy analysis for the free-market think tank Commonwealth Foundation, called the tax shift a backdoor $600 million tax increase on working families.
"That is, if the plan were to increase the sales tax by $2 billion next year, property taxes would only be cut by $1.4 billion—with $600 million directed to new spending," he said.
The education component would include the extra $350 million for basic education in fiscal 2016, an additional $50 million for special education and 5% further for higher education. One day earlier, Republicans disputed comments by Wolf spokesman Jeffrey Sheridan that the GOP had agreed to a $750 million increase for basic education over two years.
Apparently off the table is a severance tax on natural gas companies that drill in Marcellus Shale regions. Neither Wolf nor legislative leaders referenced it Tuesday.
The impasse is forcing some school districts and charter schools and to shorten school days or weeks, cut programs and even consider closing schools.
State Auditor General Eugene DePasquale said last month that school districts statewide have had to borrow $431 million to compensate for last payments to schools, and that interest and fees alone on the money borrowed could reach $14 million.
Moody's Investors Service last week downgraded Pennsylvania's pre-default intercept programs for school districts to A3 from A2, citing the budget impasse.
Notably affected were school districts in Philadelphia – which had to borrow $250 million, among other moves – as well as Chester-Upland and Reading.
Pennsylvania has been late with nine of its last 13 budgets. In 2003, lawmakers and then-Gov. Ed Rendell agreed to a spending plan after many school districts said they could not afford to open after the December holiday break.
Moody's rates the commonwealth's general obligation bonds Aa3. Fitch Ratings and Standard & Poor's rate them AA-minus. All three downgraded Pennsylvania last year, citing budget imbalance and an unfunded pension liability estimated at $53 billion.
Pennsylvania has not fully funded its actuarially required contribution to its pensions, or ARC, since 2004.
