Senate Budget Hearings – Key Points

Monday, March 8, 2021

The Senate Appropriations Committee opened its series of hearings on the Governor’s Fiscal Year 2021-22 budget on Monday, March 8, by drilling down on his proposed massive tax hikes and major increase in state spending during sessions with the Independent Fiscal Office and the Department of Revenue.

Independent Fiscal Office

Job Losses Due to Statewide Business Closures

The COVID-19 pandemic had a devastating impact on the state’s economy, workers and families, according to IFO Director Matt Knittel and Deputy Director Brenda Warburton.  Overall, the state lost about 470,000 jobs in a variety of fields — ranging from service and hospitality industries to positions in higher education — with younger workers (ages 14 to 24) displaced at higher rates than all others.  Knittel said the IFO projects that it will likely take six years for the state to recoup those 470,000 jobs. 

Wolf’s Massive Tax Hike

With the state struggling to revive its economy and stem job losses, Senate Republicans hammered the Governor’s proposed 46.3 percent increase in the Personal Income Tax. The IFO is currently studying the impact of the Governor’s proposal on the 850,000 employers who pay that tax. Knittel expects to have the report completed by early April.

While avoiding specific references to the Governor’s various tax proposals, Knittel stressed that tax rates impact decisions made by business when they consider relocation and that “higher taxes are not conductive to economic growth.”

Department of Revenue

Competing Revenue Projections

Revenue Secretary Dan Hassell faced several questions about the $950 million difference in revenue estimates by the Administration and the Independent Fiscal Office, but adamantly denied that the Governor intentionally “lowballed” his estimates to prop up his tax increase proposals.

Senate Republicans remain concerned about the Governor’s proposal to impose a progressive tax system in direct violation of the Pennsylvania Constitution’s Uniformity Clause, which allows “poverty provisions” for PIT. Secretary Hassell defended the fact that a family of four earning $84,000 would be considered to be in “poverty” under the Governor’s proposal — even though that is $20,000 over the state median income of $62,000.

Natural Gas Development Tax

Senate Republicans and Department officials clashed on the Governor’s Shale Extraction Tax proposal and the impact it would have on the industry and the state’s economy. Department officials maintain the tax will raise $300 million, even as they noted the dramatic decrease in revenues from the existing impact fee — from $251 million in 2018 (paid in 2019) to $200 million in 2019 (paid in 2020). Under questioning, Secretary Hassell admitted that he is unaware of any business or industry in Pennsylvania that has paid more to the state under a special fee.

Along similar lines, Secretary Hassell claimed to be unaware of the “carbon tax” that would be imposed under the Governor’s edict that Pennsylvania join the Regional Greenhouse Gas Initiative.