February 3, 2021

Today, Governor Tom Wolf gave his 2021-2022 FY budget address via video to a joint session of the General Assembly. The excitement behind the already anticipated speech was amplified due to a snowstorm pushing the date back one day. Also, this fiscal year’s budget could be one of the most important and contentious in memory due to the COVID-19 pandemic’s effect on the economy.

The Governor’s proposal totals $37.837 billion, which is an increase of $3.78 billion over the current budget, or 11.1% increase in spending. The Governor’s plan aims to remove barriers and cut taxes for working class families while investing billions of dollars into schools and workforce development initiatives.

Education

Since Governor Wolf has been in office, education funding has increased by $1.4 billion. This year’s proposal would more than double that amount, highlighted by a $1.35 billion increase in basic education funding. All existing state-level basic education funding would be directed through the Fair Funding Formula. This also includes an adjustment so that no school district is negatively impacted. An additional $200 million investment in basic education funding is proposed to allow all districts to continue to invest in student achievement.

Other funding includes:

  • $200 million increase in special education funding;
  • $199 million to the Nellie Bly College Tuition Program, to provide financial assistance to full-time students enrolled in the PASSHE system by repurposing existing dollars flowing into the Horse Race Development Fund;
  • $87.17 million in federal funds for Child Care Works, the state’s subsidized child care program;
  • $25 million for Pre-K Counts;
  • $11 million for Early Intervention services; and
  • $5 million for the Head Start Supplemental Program.

Along with the increase in funding, the Governor is proposing to increase the minimum salary for teachers to $45,000 per year. He also wants to lower the minimum administrative set-aside from 20 percent to 5 for the Education Improvement Tax Credit (EITC) and Opportunity Scholarship Tax Credit (OSTC) programs. This move would increase the amount of money available for scholarships by up to $36 million. Lastly, the plan includes comprehensive Charter School Law reform, including applying the special education funding formula to all charter schools, establishing a statewide cyber charter tuition rate, and improving the redirection process, which would retain $229 million more in funding.

Advancing Pennsylvania’s Economic Recovery

One of the Governor’s main goals is to make the Commonwealth the best place to live, work, and do business. Since the COVID-19 pandemic has affected the lives of employees and small businesses, it’s crucial that the economy recovers in a way that gets people back to work and so businesses can succeed.

There are multiple tax-related proposals in the Governor’s plan. First, the special tax forgiveness credit will be expanded and the Personal Income tax rate would move to 4.49 percent. Overall, 67 percent of Pennsylvanians will either get a tax cut or see their taxes stay the same. The proposal increases the allowances for tax forgiveness to $15,000 for single filers, $30,000 for married filers, and $10,000 allowance for each dependent. Filers with incomes at or below these thresholds will receive 100 percent tax forgiveness. The percentage of tax forgiveness declines by 1 percentage point for each $500 above the threshold for 100 percent forgiveness.

Second, the plan would also reduce the Corporate Net Income Tax from 9.99 to 9.49 percent on January 1, 2022, then continue to reduce the tax incrementally to 6.49 percent by 2026. It also closes the Delaware Loophole and shift to combined reporting to tax corporations as a single entity.

Furthermore, the Governor is proposing a Back to Work PA plan to reform the workforce development system. This multi-billion-dollar plan would provide rapid re-employment assistance to workers impacted by the pandemic and address barriers to employment. Funding would come from a severance tax on natural gas extraction that would bring in an estimated $300 million a year, or $3 billion over 10 years.

A minimum wage increase, which we’ve seen in previous budget proposals, was included again this year. The Governor is proposing to increase the state minimum wage to $12 per hour effective July 1, 2021, with annual increases of $0.50 until the minimum wage reaches $15 per hour on July 1, 2027.

Lastly, legalizing adult-use cannabis would generate revenue to support historically disadvantaged small businesses through grant funding and to support restorative justice programs.

Keeping Pennsylvanians Safe and Protecting the Most Vulnerable

Like last year, the Governor is proposing a service fee assessed on every municipality to provide support to the State Police in localities that do not have municipal police coverage. He also hopes to reform the criminal justice system by proposing bail reform, indigent defense funding, a comprehensive expansion to the Clean Slate Law, and probation reform. An additional $1 million will be provided to expand legal service programs that provide assistance to low-income individuals and families.

Moreover, the budget includes $8.3 million to achieve the maximum per capita grant for the ten county and municipal health departments. $1.25 million is proposed for 20 Community Hospital Integration Projects Program (CHIPP) discharges to reduce the state hospital population.

To protect the young population, the Governor is proposing an expansion of the Redevelopment Assistance Capital Program (RACP) eligible projects by $1 billion in the Capital Budget Itemization Act to include grant availability for lead and asbestos remediation projects, with the inclusion of schools as eligible grantees. Also, $1.0 million would go towards reducing the number of children and youth in out-of-home placements triggered by homelessness, housing instability, or inadequate housing.

Governor Wolf is hoping to protect the environmental by joining the Regional Greenhouse Gas Initiative (RGGI), a market based collaboration among nine Northeast and Mid-Atlantic states to reduce greenhouse gas emissions and combat climate change. Participation in the program will begin in 2022, and the Governor plans to use proceeds from RGGI to create the Energy Communities Trust Fund. The Fund would provide direct support to dislocated workers and communities experiencing impacts from the closure of existing power plants and the loss of jobs and economic activities. It would also provide investments in greenhouse gas abatement, energy efficiency and clean and renewable energy programs, as well as helping industrial and commercial sectors to reduce greenhouse gas emissions.