Lawmakers debate size of budget deficit threat
HARRISBURG – What sort of fiscal shape is Pennsylvania in? How big of a budget deficit is the state facing?
Will a tax increase be necessary?
It depends on which lawmakers you ask, especially if they sit on opposite sides of the political aisle.
State Rep. Mike Veon, the second-ranking Democrat in the House, predicts the deficit could reach $2 billion by the end of the fiscal year on June 30.
“This is a serious budget problem,” he insists.
Republican House Leader John Perzel, on the other hand, says the deficit is closer to about a $600 million to $700 million deficit. But he’s not too concerned.
The two leaders spoke Wednesday at an hour-long panel discussion at the Pennsylvania Newspaper Association’s 16th annual Government Affairs Conference. The state’s budget deficit was a recurring issue during the two-day conference for newspaper executives in the state capital.
Ever since Gov. Ed Rendell announced during his inaugural speech last week that the state is facing a deficit that could reach $2 billion this year, Republicans and Democrats in the General Assembly have been sparring.
Veon accused the GOP-controlled Legislature of “setting [Rendell] up for a huge budget deficit” by approving a spending plan last year that was only balanced after Republicans “used a number of one-time fixes.” In doing so, they only delayed the inevitable: a budget crisis and tax hike.
“I predict by June a budget deficit of $1.5 billion to $2 billion,” said Veon, D-West Mayfield. “That’s significant in a budget of about $21 billion.”
But Perzel disagreed, saying, “That’s simply not true. We’re somewhere around a $600 million to $700 million hole … We can close a budget gap very quickly. We can straighten out the problem we have.”
He added, “It’s not that difficult, unless you plan on spending billions in new programs,” referring to the GOP’s estimated cost of the new initiatives Rendell promised during his campaign.
Perzel promised to work with the Democrat governor and approve a tax increase, if necessary.
“If we’re in a short-term crisis, we can raise taxes over the short term,” he said. “We can put up [tax rates] for a year and then take them down.”
But a tax hike may not even be necessary, he added.
“I can go through $1.8 billion we can collect, without raising taxes,” said Perzel, R-Philadelphia.
Lawmakers last year solved a budget crunch and boosted revenues by adding a 69-cent tax to cigarettes and a tipping $4 fee to each ton of trash collected, Perzel pointed out.
Expanding gambling in the state could be one possible new revenue source in the upcoming fiscal year, Veon said.
“I think the votes are there, in the Legislature, to pass [adding slot machines] at racetracks,” he said. “I think it will be part of the budget discussion.”
But Perzel said many questions must first be answered before the General Assembly can vote on slot machines. They include: Who will oversee gambling operations? Which racetracks will be allowed to offer slots? What percentage of the profits will the state get? How will the new revenue be spent?
“I don’t think anybody knows right now what we want to see,” Perzel said.
Gambling will be one of the Legislature’s top priorities this year, along with improving the economy, education, property taxes, medical malpractice, and prescription drug benefits for seniors, Veon said.
Reforming the property tax system, a perennial issue in the Legislature, will be difficult, both leaders agreed.
If legislators give more state aid to school districts to reduce their local taxes, then they expect something in return, Perzel said.
“If you want money, then you have to accept control from here,” he said. “And I don’t think that’s what people want.”
Any change made to the way schools are funded would benefit some, but hurt others, Veon said. For example, eliminating property taxes and using a personal income tax wouldn’t be a panacea.
“It’s very, very challenging problem [with] no easy solutions,” he said. “It’s a tax shift, not a tax cut. We need to be honest about that.”