Major players in budget impasse meet in person; will a deal follow?

The talks are occurring as the budget is more than four months late, and counties and nonprofits increasingly sound the alarm about the standoff.

By STEPHEN CARUSO
Spotlight PA

HARRISBURG — Gov. Josh Shapiro and the leaders of all four legislative caucuses met in person several days last week amid a fourmonth budget impasse that is creating increasingly dire consequences across Pennsylvania.

A state spending plan was due June 30, but that date came and went without a final deal. Since then, closed-door negotiations among the leaders have been stopand- go. Without a budget in place, the state has been unable to send billions of dollars to contractors, counties, nonprofits, and schools to fund key services.

All parties involved in last week’s talks at the state Capitol were tight-lipped about what was discussed, progress made or issues on the table.

“Not right now, guys,” state Senate Minority Leader Jay Costa (D., Allegheny) told reporters on one of the days.

This week’s meetings were the first in-person ones since June 30 to include Shapiro and the majority and minority leaders from the state House and Senate, said a Capitol source with knowledge of the talks who asked for anonymity to discuss sensitive, closed-door matters.

That excludes conversations that have occurred virtually, between staff, or involved just two or three of the negotiating parties.

Getting Shapiro and leaders from the four caucuses in a room has been a frequent suggestion of both those inside and outside the Capitol, frustrated at the lack of progress. What changed at the 120-day mark to bring the meetings — one even featuring pizza and beer — is unclear.

A spokesperson for Shapiro said that the Democrat convened the meetings. “The need for all five parties to be in the room became clear as conditions changed,” said the spokesperson, who did not answer follow-up questions on the timing or reasoning.

Still, the inclusion of the minority leaders likely indicates — per those schooled in the ways of Harrisburg — that a deal will split the majority parties in both chambers and require votes from lawmakers in the minorities to reach the governor’s desk. Previous public comments by state legislative leaders indicate education and energy policy are key sticking points.

Democrats have championed sending more money to the state’s poorest public school districts to respond to a state court ruling and reducing payments made to cyber charter schools.

Republicans say they want to keep spending low and have pushed for Pennsylvania to leave the Regional Greenhouse Gas Initiative (RGGI) — an interstate cap-and-trade program aimed at addressing climate change — and make additional regulatory reforms.

The level of spending that Shapiro and lawmakers agree to will dictate which policy changes are included in the deal. For example, lower spending that could frustrate some Democrats would likely be balanced by fewer policy changes championed by the GOP.

State Senate Majority Leader Joe Pittman (R., Indiana) put it succinctly after the upper chamber approved a $47.9 billion budget proposal: “Just because your priorities didn’t get addressed doesn’t mean that our priorities are no longer relevant.”

Money matters

That GOP budget bill would almost flat-fund the government, but it still represents the party’s highest offer yet. It answered a Democratic plan that would total $50.3 billion — down from Shapiro’s original $51.4 billion pitch.

None of the bills represents a balanced budget. Pennsylvania brought in $46.4 billion last fiscal year, meaning any of the public plans on the table would likely require dipping into the state’s $11 billion in cash reserves.

“Moving the deck chairs on last year’s budget is not an intellectually honest or a balanced budget for the purpose of this year’s cost,” state House Majority Leader Matt Bradford (D., Montgomery) told Spotlight PA, noting the discrepancy between state Senate Republicans’ tough fiscal talk and spending plan.

Long-term financial stability will likely require Pennsylvania to figure out ways to raise more revenue or reduce costs. Conservatives say the solution is supply-side economics.

“When faced with a budget deficit, you need to grow the economy, not grow the government,” Megan Martin, chief operating officer at the free market Commonwealth Foundation, said in a statement after the state Senate passed its latest spending plan. The chamber also passed legislation to leave RGGI and soften state permitting rules.

Combined, the legislation “protects taxpayers, makes Pennsylvania more competitive, and will help unleash our energy potential,” Martin said.

Top Democrats have echoed those points. Both Bradford and Shapiro have repeatedly proposed lowering corporate taxes and making the state’s permitting laws friendlier to businesses, arguing that those changes will grow the state’s economy and increase tax revenues.

They have also said publicly that Pennsylvania should not leave RGGI without adopting an alternative. Ditching RGGI as part of a compromise would upset the party’s environmentalist allies, who are major political donors.

“Gov. Shapiro and House Democratic leadership have stood as firewalls for many years against Republican attacks,” Robert Routh, Pennsylvania policy director for the Natural Resources Defense Council, told Spotlight PA, adding that he thinks Democrats should wait for a pending state Supreme Court ruling on the initiative. “Now is not the time to fold.”

Raising broad-based taxes isn’t on the table for any major player.

Shapiro did propose two new sin taxes — legalizing recreational marijuana and regulating slot-like skill games — projected to bring in hundreds of millions of dollars in new revenue. However, getting either across the finish line requires cutting deals with powerful special interests. That hasn’t happened.

Pittman, the Republican leader in the state Senate, floated eliminating some sales tax exemptions, a proposal that also received little interest.

Lawmakers not involved in the budget negotiations continue to publicly pitch revenue ideas.

During a recent Capitol news conference, several Democratic lawmakers, backed by an array of unions and leftist groups, pitched taxing digital advertising and passive income like dividends or trust funds, and closing the Delaware loophole.

“Our state must take seriously the responsibility of ensuring that a good education, healthy housing, access to healthy food, public transportation, and a livable wage is not something that we wait on from the generosity of the private sector or corporate interests,” state Rep. Rick Krajewski (D., Philadelphia) said.

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