With accounts flush, budget talks come down to schools aid

HARRISBURG, Pa. (AP) — With a week to go until the state’s budget deadline, Gov. Tom Wolf and leaders of the Republican-controlled Legislature are working through their remaining differences as they try to produce an agreement on a roughly $42 billion budget plan that they say will marshal substantial new aid for Pennsylvania’s public schools and environmental cleanups while cutting corporate taxes.

Greasing the skids this year is a massive influx of tax receipts leaving the state’s bank accounts flush with — by some estimates — $12 billion in reserves and surpluses, boosted by inflation and an economy juiced with federal pandemic subsidies.

There will be no broad tax cut, but there will be substantial new aid for public schools, as well as for services for the disabled, children and elderly that employ low-paid workers in high-turnover professions that suffered during the COVID-19 pandemic.

Lawmakers are also expected to approve significant sums of new money for mental health services and school security, including counseling.

Lawmakers are expected back in the Capitol on Monday, and votes could start soon after.

Perhaps the biggest sticking point is the amount of aid that Wolf, a Democrat, wants to send to public schools.

Talks are going on behind closed doors, as lobbyists circulate the Capitol’s corridors and rank-and-file lawmakers await briefings from leadership.

Budget agreements typically get little public scrutiny before landing on a governor’s desk. In most years, hundreds of pages of budget-related legislation emerge from the closed-door talks before several dozen bills are rushed through floor votes — all within two or three days.

Wolf is seeking what he calls “generational investments” in Pennsylvania’s public schools and public universities.

For public schools, Wolf asked for almost $1.8 billion more for instruction, operations and special education, or about 21% more. Of that, $300 million was set aside for the 100 poorest public school districts and $200 million for special education.

Republican leaders are willing to send more money to public schools, but more like one-third to one-half of the amount Wolf requested. The state must be wary of overspending with an economic slowdown possibly on the way, they say.

On public universities, Wolf had sought $75 million extra for operations at State System of Higher Education universities — almost 16% more — in addition to $150 million in one-time cash from the leftover federal aid and $200 million annually to fund scholarships for students there.

Republican lawmakers have been friendly to Wolf’s funding request for the public universities, now that the shrinking system carried out a cost-cutting consolidation.

But Wolf’s administration is still trying to talk lawmakers into the scholarship program. In recent weeks, Wolf’s office shifted strategy, and pitched a different funding source: an existing 2% tax on gambling at casino table games.

Even with so much money sloshing around, don’t expect a broad-based tax cut on income or sales.

Instead, lawmakers are targeting a corporate tax cut, even though corporate tax collections in Pennsylvania have shrunk from about 20% of all collections to about 15% the past couple decades, largely because the Legislature ended a separate tax on business assets.

Republican lawmakers contend that cutting the state’s 9.99% corporate net income tax rate — one of the nation’s highest — will lure more business activity, jobs and tax-paying residents to boost the state’s economy and sluggish population growth.

Democrats say it is more effective to put more money into infrastructure, schools and quality-of-life issues.

Wolf is an ally in the fight to cut corporate taxes, but has insisted that any tax cut come with structural changes to crack down on tax-avoidance strategies used by multi-state corporations.

Wolf also contends that boosting school funding has the effect of a broad property-tax cut because it means the state picks up a bigger share of public education funding. Pennsylvania puts a higher proportion of school funding on local property taxes than most other states.

The bulk of the new spending will go to keep pace with the rising cost of medical care for the poor and long-term care for the elderly and disabled.

In addition, budget negotiators say they are looking to boost subsidies for nursing homes, child care centers and programs for the disabled, all services that report they are struggling to find workers and, in some cases, beset by closures.

Nursing home trade associations have asked for a Medicaid reimbursement rate increase of $295 million annually, or about 20%, saying they are losing money on each Medicaid enrollee.

Securing tens of millions of dollars in additional aid for mental health programs is a top priority for counties and hospitals.

A lack of services and beds means people showing up to emergency rooms in crisis often stay there for extended periods because of a lack of providers, according to the Hospital and Healthsystem Association of Pennsylvania. Counties and hospitals are also seeking more money for early intervention programs, to ensure more counseling services are available to help prevent a crisis.

Meanwhile, schools are pushing for more money for safety, in light of the Uvalde school shooting in Texas that killed 19 students and two teachers.

That money — possibly $100 million more — could fund physical security features such as metal detectors or security officers, but also school counselors or psychiatrists — a growing need that school officials say has been accelerated by the COVID-19 pandemic and mass shootings.

Wolf and top lawmakers say they are working toward parceling out $2.2 billion in leftover federal coronavirus relief aid approved by Congress last year.

A Wolf proposal to send some of it out as $2,000 checks to households earning under $80,000 a year gained no Republican support.

Still, Republicans are entertaining a Wolf proposal using $204 million of the federal aid to boost property tax and rent rebate checks by $475 for all of the 466,000 people in the program.

Some of the money could go toward a new $250 million “clean streams” program to help improve water quality in the state’s water ways.

At least some of that money would be targeted toward helping the state fulfill commitments to improving water quality in the Chesapeake Bay. More than 90% of the state’s remaining pollution reductions must come from preventing farm runoff, according to the Chesapeake Bay Foundation.

Wolf also is pushing to use some of money for anti-gun violence programs and housing subsidies.

Follow Marc Levy on Twitter at https://twitter.com/timelywriter.