June marks the midway point of the Pennsylvania General Assembly session. Lawmakers traditionally head out on a short break during the summer, making it the perfect time to assess what’s been accomplished so far during this session and what we can expect from the legislative agenda going forward.
As negotiations continue over the 2017/18 PA budget and the deadline approaches – let’s take a look on an issue-by-issue basis at where the General Assembly stands.
Pension Reform in Pennsylvania Finally Passes
Governor Tom Wolf signed a bill passed by the General Assembly making changes to the state retirement system for PA employees hired in 2019 and after. The state has struggled to pay down some $70 billion in unfunded pension-related debt, and so the bill passed with the aim of avoiding spikes in pension costs. Employees now assume the investment risks, instead of PA taxpayers.
The updates include new retirement options such as a 401k style plan that mimics those available in the private sector. Though the bipartisan effort drew criticism from both sides, the general consensus was that finally passing a PA pension reform bill was a good thing.
PA State Budget Deadline Looms
Each year, July 1st brings with it the deadline for the state budget. And each year, lawmakers seem to continue until right up against that deadline — or even surpass it, as we saw last year. This year negotiations continue between Republicans, Democrats and the governor to avoid such a drawn-out stalemate once again.
So where does the PA budget currently stand? Governor Wolf sent his proposed budget in February. In April, the House passed a budget bill that included cuts to several assistance programs. It did not raise taxes, a deliberate move on the part of Republicans to show how the budget could be balanced without putting an additional burden on taxpayers.
We believe that the House approved budget bill will eventually be amended to increase a number of line items that were reduced; yet not dramatically enough to enact any broad-based tax increases. A looming $3 billion structural deficit does not make the negotiations any easier and is the primary reason that a budget will not be finalized by the June 30th deadline. That said, we do expect a 2017/18 budget to be signed in early July.
State Budget Deficit Begets a Gambling Bill
It was anticipated that both sides of the legislature would come together over gaming expansion – initially the revenue generator of least resistance. However, HB 271, which is currently back in the Senate for concurrence, may be too much of an expansion for the Senate to pass. The bill, as amended recently by the House, includes legalizing online gambling and would allow establishments with liquor licenses to have video gaming terminals (VGTs), or slots-like machines.
New Fiscal Year Looms Amid Budget Deadlock
Other possible revenue sources are still being considered, as opposition to tax increases (including broadening the sales tax and additional taxes on the natural gas industry) remains a sticking point.
A bill expanding the liquor privatization act of 2016 is currently in the Senate. The bill changes the way retailers can buy wine, opening the door to private wholesalers to join the market. Private stores and restaurants could sell hard liquor under the reform, and it does away with earlier requirements for stores selling beer and wine to have tables and chairs available. It is doubtful that the Senate will consider the bill.
Tobacco Settlement Fund
In light of the budget shortfall facing the Commonwealth, several key legislators have suggested the idea of floating a bond issue against future proceeds owed Pennsylvania from the 1998 national tobacco settlement. Some believe that this would allow the Commonwealth to bring in over $1 billion. Although there is no consensus on this currently, when the B (billions) word is tossed out…. a lot of folks have and will continue to listen.
A computer tax, a drink tax, and other possibilities exist in order to balance the budget without a broad based tax increase, i.e., personal income tax.
Negotiations on which programs will see funding cuts under the new budget and where else the legislature can find new revenue sources will continue during this final week before the budget deadline, and most likely into July.
Medical Marijuana in PA Moves Into the Spotlight
While the state budget will receive most of the attention over the next week or so, there’s another pressing matter on the docket. The PA Department of Health has just awarded permits for medical marijuana growers, processors and will award dispensary permits next week. A second round of permits is expected next year. However, it is fair to say that there will be protests from those who were not awarded grower/processor permits, which will delay the implementation of the Act.
The issuing of licenses offers a major economic opportunity not only to the successful applicants, but also to a number of ancillary businesses, and, eventually, will be a source of future revenues for the State. However, this nascent industry will be closely watched while the federal government decides on whether state legalization is “legal”.
The first half of the PA General Assembly session has delivered some surprises and some innovation. It will be interesting to see how things progress in reference to the budget, along with other pressing issues facing the state during the second half of the year.
Pugliese Associates is a government affairs firm that monitors legislation and its impact on your business. Have questions about what the General Assembly’s agenda means to your company? Contact us today to discuss your concerns.