Back in the days of Governor Ed Rendell’s tenure, you could expect strategic -- sometimes daily -- leaks about what would be contained in his budget address in the weeks leading up to the address itself. On the eve of his second budget address, Governor Tom Corbett is again demonstrating that he doesn’t use the Rendell playbook. Details are scarce, replaced with whispers, speculation and outright guesses.
But there are things we know for certain about the state of the Commonwealth and the process that is about to unfold, so allow us to briefly jump into the speculation game and regale you with what we believe will be proposed, and what will ultimately be acted upon, in the weeks and months that follow.
The 2012-2013 State Budget
We’ve already heard from the governor’s budget secretary that revenues are lagging behind official projections, and that there could be a year-end deficit of anywhere from $500 million to $800 million, depending on tax collections this Spring. This is obviously not great news, especially when one considers the “cost to carry” number, which is the true cost of next year’s budget with no spending increases outside of those that are automatic. That is when a $500 million hole can become a $1.5 billion, or larger, hole.
Assuming a Marcellus Shale impact fee bill passes before the budget does, and assuming there is no General Fund loot earmarked anywhere in that bill, this means more cuts above and beyond what was done last year. That is not good news for incumbent lawmakers circulating petitions for re-election.
This year’s Public School Employees Retirement System state contribution level takes a jump up to about $320 million. The whispers are that basic education will therefor see a jump in funding of exactly that number, which means, in effect, they get flat-lined from last year. The worst case scenario is that basic education funding gets cut by exactly that amount, so that when the PSERS contribution gets put into the education budget, it appears as though basic education got flat-lined, while in reality, schools will lose another $320 million over last year.
Higher education can expect another rough budget go-around, as should the Department of Public Welfare. No word on whether or not DPW has found the initial $450 million in waste, fraud and abuse that is was charged with finding this fiscal year, but expect that department to be handed another goal of trimming yet more waste, fraud and abuse.
It would not be shocking, either, to see a much wider range of government services targeted for privatization by the front office, much of it within the walls of DPW itself.
The date to mark on your calendar will be February 13th, when the new Independent Fiscal Office makes its first appearance in front of the Senate Appropriations Committee. It will be very interesting to see if the revenue projections from that office match up with those of the governor’s budget office.
In the end, put your money on one thing: the budget will again be signed on time.
The Other Stuff
We cannot realistically see the Marcellus Shale debate drag out through this year’s budget debate. There is too much at stake for both the industry and the Commonwealth to allow that to happen, so we say a bill makes it to Governor Corbett when the flowers begin blooming.
Expect the governor to roll out his recommendations on a comprehensive transportation infrastructure funding plan during his budget address. It remains to be seen whether or not it is large enough in scope to satisfy the recommendations of his special commission. If it comes in too light, expect advocates to back away, making passage almost impossible. Even at the right number, 26 Senate and 102 House “yes” votes will be very, very difficult to achieve. Put this one in the “maybe” column.
On a related note, expect the House and Senate to come to an agreement on language to finally establish a framework for public-private partnerships. This issue was held up rather unexpectedly when a clash over prevailing wage language surfaced, but cooler heads will prevail on this and get it put to bed.
Lawmakers and the governor have a lot of reconciling to do after the late-June implosion of charter school reform and vouchers/EITC/school choice. What we know for sure is that both sides of the voucher debate will be at full-scale war, as this debate gets completely folded into the 2012 Primary and General Election battles. Both sides are well-armed with cash and don’t mind spending it. We still believe that the most likely scenario is some sort of voucher pilot program with an enhanced EITC component.
Liquor store privatization is another leftover from 2011, and given the state of House Bill 11 as it came from committee (that is to say, unrecognizable), there is a whole lot of work to be done there. It looks like 2012 will not be the year the state divests itself from the liquor business, as the opponents in the House seem to easily outnumber the supporters, at least as of today.
After a year of dormancy, the governor’s Liberty Loan Fund proposal, the cornerstone of his economic development strategy, seems to have been given new life by the State Senate. Once the governance issues are agreed-to (that is, who will exert what amount of control over which grant/loan programs and what role the Commonwealth Finance Authority will play), expect this thing to reach the finish line. With a huge Shell ethylene cracking facility within the grasp of the governor and a persistently high state unemployment rate hanging around, expect lawmakers to refocus on economic development early in the ballgame.
That is all from our Triad Crystal Ball. Of course, there will be dozens more issues in play from now until June 30th, and we’ll do our best to keep everyone apprised of all of them. And away we go!
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