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Wolf, GOP leaders reach tentative budget deal providing historic education boost

There will be a $350 million increase in basic education aid, plus significant growth in support for special education and pre-K.

By Kevin McCorry for NewsWorks on Dec 4, 2015 03:43 PM
Photo: Emma Lee/WHYY

Gov. Wolf. 

Pennsylvania's Gov. Wolf and top legislative leaders say they've reached an agreement to end the state's budget impasse of more than five months.

The tentative pact includes what would be the largest increase in education spending in at least two decades.

The basic education subsidy would see a $350 million increase, and special education and pre-K funding would each receive a $50 million boost, in addition to $10 million more for Head Start.

"This is a big win for the state of Pennsylvania," said Wolf, who described the increase in basic education funding as "historic" and worth the long wait.

"In a limited-government, free-market economy, there is nothing more important a government can do than investing adequately in education," he said. "Republicans have an overwhelming majority in the Senate and the House, I am a rookie Democratic governor. Having such a historic increase is a nice thing. In my mind, this is a big deal."

The funding increases would be paid for largely by extending the reach of the state sales tax — adding new items, closing existing loopholes, and jettisoning some exemptions for services and items that emerged in recent decades.

Leaders on both sides said they couldn't yet give details on the additional items eligible for the sales tax.

Wolf, along with Republican leaders in the House and Senate, says they will not increase the rates of either the sales tax or personal income tax. Wolf's proposed statewide tax on natural gas drilling would also be shelved.

"That's unfinished business," said Wolf of the gas drilling tax, as well as his hope to reduce the corporate net-income tax. "I'm coming back next year and pull for the same things."

Republican leaders highlighted the fact that some of the boost in education funding would also be covered by trimming spending elsewhere in the budget, but couldn't provide specifics.

"This is something we have achieved without broad-based tax increases," said Senate GOP spokeswoman Jennifer Kocher. "And we've been able to look at cutting spending at the state government level while at the same time increasing the money for education."

Wolf expects the agreement will be finalized "within a few days."

Officials previously announced a tentative budget agreement that included a sales tax hike in exchange for statewide property tax relief. That plan has now been scrapped, after Wolf and top Republicans couldn't reach agreement on the finer details of the proposal. Both say property tax relief remains a high priority, but agreed to continue negotiations outside of the larger budget framework.

Leaders could not confirm how the increased education spending would affect individual districts, including Philadelphia.

The $350 million increase in basic education funding will be distributed, leaders said, based on a "hybrid" approach. Some will come through a new student-weighted "fair" formula (one that takes into account student needs and poverty); another portion will come through a block grant formula, and the rest will be divided using the state's existing system, which largely hands out dollars determined by "hold harmless" provisions to prevent districts from having to deal with sudden drops in aid.

Details of these divisions could not yet be confirmed.

Wolf said education increases in years to come would be completely driven through the student-weighted formula.

Education advocates lauded the tentative deal.

"It helps address how districts lost money and takes steps towards restoring that," said Susan Gobreski, executive director of Education Voters PA. "I'm happy that there seems to be bipartisan support for a good formula and a significant allocation to schools throughout the region and Philadelphia."

Often, Republicans in Harrisburg only agree to education spending increases, especially for Philadelphia, when there's an added "accountability" measure.

"All of that is still being worked out, but we had previously asked every district to submit a plan that details how they will ensure the basic education funding is used in the classroom," said Wolf spokesman Jeffrey Sheridan.

A review of historic data shows this to be the first time in at least the last two decades that there's been a basic education increase exceeding 6 percent.

The $350 million basic ed increase easily exceeds the next biggest dollar increase, which was $300 million in the 2009-10 school year. Dollar increases have been as low as $49 million in 2012-13. Only three times, during the Ed Rendell administration, did they exceed $250 million.

The budget deal also includes two items that have been longtime Republican priorities.

The pension system for future state workers, including teachers, would be modified as a hybrid of a defined benefit and a defined contribution plan — placing a share of the market risk on future individual employees, while removing some from the state and local school boards.

The tentative pact also includes a compromise that would allow wine to be sold in supermarkets and restaurants.

Nearing the end of his freshman round of negotiations, Wolf reflected on the lessons of his first state budget debate.

"I think everybody here wants the best for Pennsylvania," he said. "And we have maybe different ideas as to how to get there — maybe it takes us a little longer than it should have to finally get on the same page — but I think that was a very nice confirmation of what I expected to find."

Dale Mezzacappa and Paul Socolar of the Philadelphia Public School Notebook contributed to this report.

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Comments (66)

Submitted by Nikkei (not verified) on December 4, 2015 4:51 pm

I can't believe it--new public workers will get hybrid 401K/db pensions.   Actual pension reform.  Of course the pensions paid to already retired workers and pensions that are supposed to be paid to teachers already working will continue to devastate school budgets.  But it looks like our lawmakers actually accomplished something.  

Submitted by Public Schools Matter (not verified) on December 4, 2015 5:50 pm

Yes Nikkei, or Bill Green or whom ever you are, the Republicans have served their NY hedge fund manager bosses well. Their will be much to celebrate next Friday at the Waldorf, a new stream of cash for Wall Street's scam "differed 410 k accounts". Go ask the Enron employees who were tricked into "switching" to deffered accounts how did that work for them? Crony capitalism is dying. Nikkei, let old dying dogs go in peace. Incidentally, get ready for the interests rise next week, some Christmas present from the Wall Street degenerates!

Submitted by NYSE (not verified) on December 4, 2015 6:47 pm

Your facts are screwed up.  It's your union that is working with Wall Street, because PSERS invests heavily in derivatives and hedge funds.  PSERS paid $2 billion in fees to hedge fund managers last year in return for phony investment returns.  The fees on hedge funds are much higher than the fees on 401K's so actually it's the big hedge funds that don't want to see db pensions go away.   If you don't believe me than go to the PSERS website and look at all the garbage it's invested in--stock, bonds, private equity, derivatives, and hedge funds.  And, yes, it's time for an interest rate hike.  Zero interest rates create bubbles because it's too easy to borrow money.  That's what caused the 2008 Crash.  Do you really want interest rates to stay at zero?  How is your pension fund going to get any investment returns when a 1-yr. cd pays nothing?    Please stop reading the warped articles in your union newsletter  and start reading NY Times, Bloomberg, CNN Money, Forbes, etc.  And BTW those responses by college-educated adults in that piece "Can you answer these 6th grade math questions" where they were completely stumped by those simple problems was pretty bad.  No wonder you guys think pension money comes from a magic money tree.  

Submitted by Public Schools Matter (not verified) on December 4, 2015 6:03 pm
Thank you for not answering my question re: legislators NOT adopting their own proposals, because just like drug dealers they sell drugs to everone's elses kids except their own. NYSE, I hope that you are part of the cabal because if you are not then there is something wrong with you. Your hatred of workplace provisions that unions defend is sad. The dribble of PSERS and derivitives are laughable. As you probably do know derivitives were illegal outside of highly regulated markets. But thanks to Mr. Greenspan they garned an air respectability that they don't have. They were followed by showers of put options and companies buying back their stock in order to inflate earnings all thanks to the traitors of the privately owned Federal Reserve. Now that Americans have not raises in years, have been abused by under reported inflation and suffered through austerity, aka genocide, now the banks who don't lend money now these thieves want to raise interests rates. By the way, I'm sure you may cause an impression on some with your tone, I don't. Its pedantic, weak and typical of the inheritance crowd around Rittenhouse Square who as men have not accomplished much on their own.
Submitted by Wells Fargo (not verified) on December 4, 2015 6:01 pm

If you have a kid who wants to go to college, I assume you won't mind Penn State's $17,000 a year tuition.  PS has a big pension bill, too.   What do you mean PSERS dribble?  Go to ther website.  It is actually farily truthful.  It's invested in lots of risky junk, it's only 66% funded, and it assumes an unrealistic 8% yield on its garbage portfolio.  In other words, your pension contributions are invested in the artificially inflated stock market you just described.  

Submitted by Public Schools Matter (not verified) on December 4, 2015 5:37 pm

I forgot to mention one thing, I will bet my house that the Republicans who will vote for a "hybrid pension reform" WILL NOT OPT OR APPLY THE SAME REFORMS to themselves or future representatives, right Nikkei? They are good students. They learned from their thieving banking teachers, fees for others and exemptions for us...

Submitted by Eurozone (not verified) on December 4, 2015 6:08 pm

I'll bet they will, because there's no point in being promised a pension that will never be paid. See "Exposing Union Myths and Hypocrisy on Pension Reform".   Unions routinely give their own office workers the very same 401K plans they say are bad for workers.  And yes, you older teachers are crooks because pension contributions from new workers are really paying for currently retired teachers and not being set aside for the younger workers.    When the younger teachers try to retire, there won't be anything left in the pension fund.   

Instead of screaming at me like a typical union member, get out your calculator or some annuity or compound interest charts--and PROVE that db pensions are sustainable.  How much money has to be set aside to fund a stream of pension checks that may go on for 20 or 30 years?   Is PSERS 7.75% discount rate reasonable, if the 10-yr. Treasury Bond only pays 2%?   How will PSERS $50 billion unfunded pension debt be paid?  ($50 billion is MORE than the entire state budget).   

One last thing in regards to your post--judges in Detroit and Stockton did rule that pensions can be cut in a municipal bankruptcy.

Submitted by Public Schools Matter (not verified) on December 4, 2015 7:36 pm

Ah when reason and all else fails access -ageism- the old vs. the young play book. Very predictable and again weak. Banks are no longer banks, they are zombies who do not finance production rather speculation and further derivitives. The hatred againsts unions, pensioners and every day folk is well documented. Read about the years leading up to Hitler, pensioners, both civilians and veterans were gutted, unions outlawed and banks BAILED OUT by the same elements which decried the "unsustainability" of paying Germans citizens. Result? Lunatics rise to power, who blamed a very different looking minority at the time much like the poison Trump is serving about very different looking people today without offering a detailed economic plan. When you don't have answers, play the numbers game. Absent from your algorithm is the "calculated" non payments into PSERS for years by hedge fund bought politicians who don't address the stress they promote but rather the "concerns" they have regarding the sustainability of pensions that they deliberately underfund... Please... 

Submitted by matt (not verified) on December 5, 2015 12:34 am

I'm on track to receive a pension and actually wish I'd had 401K offered (optionally) as an alternative. I would feel more secure with the money put in and the money gained being mine and with the stock and bond picks being mine. The money put into a pension fund cannot be stolen, but all of the money that grows from that investment can (potentially) be stolen [so that the money invested becomes a mandated, interest-free loan to the government]. Whereas, the same is not true for 401K. The money invested and the money grown belong to the individual. Over time, the stock market rises - it's not a gamble. Over time the policy makers will do what with the money they are "holding for me" - that's a gamble.

People screaming for pensions to be taken away from those who have invested in them for years have corrupt ideas of what is fair. Teachers weren't offered a choice between a pension system and a 401K. They were required to invest in the pension system. It would be evil to renege on pension payouts.

But people screaming that the pension system should continue for incoming employees are also misguided. The government does not do a good job managing money. They do not do a better job that the average citizen managing money. (Most of us do not take long to create budgets that work for us. And although debt is a large problem in America, most of us do not incur the levels of debt that all parties and platforms of government seem to regularly). Individuals are better off controlling their money than leaving it in the government's hands.

Simple solution. Do what they're doing. Incoming employees move toward more control of their savings. And the government, for the next few decades, foots the bill for their lack of regular promised contribution and general mismanagement of money in pension funds. That's logical, fair, best for current and future teachers, and best (in the long run, but not the short term) for taxpayers and government budgets.

Submitted by glynnis.gradwell (not verified) on December 5, 2015 7:32 am

 I am seriously disappointed in Wolf. The CORNERSTONE of his campaign was his promise to tax the gas drillers. He WON the election on the strength of this promise. This gives him a mandate to do it! Clearly, the citizens of Pa. want it to be done. He should dig his heels in for AS LONG AS IT TAKES to get it done-NO MATTER WHAT the ongoing problems the Republicans cause in their attempts to keep their promises to their big business masters and contributers. The chips should fall as the may- (Republican districts are hurting too-with this budget impass.)Wolf should keep his promise. If he gives in on this issue-he will NEVER acomplish it in a future year. That is pie-in-the sky. I am already wondering who I can support in the next primary. I am not the only person who is this digusted.

Submitted by Anonymous (not verified) on December 8, 2015 7:00 am

Wolf is a politician and not even a good one.  He lives and earned his money based on Republican values, got elected as a Democrat and has governed in a manner that screws both.  His arrogance is astounding.  He made everyone believe he was just a normal guy by driving a jeep.  Hey, if I get to drive a jeep to the factory I own and then drive to my mansion, I'll be a normal guy any day of the week.  Wake up people!

Submitted by Anonymous (not verified) on December 5, 2015 8:45 am
At least the current state workers get to keep our pensions intact. I don't give a rat's furry behind about the anti PSERS rhetoric. Deal with it.
Submitted by StalMate (not verified) on December 5, 2015 11:47 am

It is noteworthy that there is so much conservative based opinion posted on an education blog, it proves how much effort the Wall St. spinsters will make, in their attempt to mislead and misinform. They want to continue to sway public opinion to the crooked capitalism which they alone have manipulated for far too long.

 

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Submitted by Retired Teacher (not verified) on December 6, 2015 6:24 pm

As a retired teacher, with many friends still teaching, it's comforting to know that we might still get our pensions.  However it will still take many many years to make PSERS flush.

 

Submitted by Taxpayer (not verified) on December 7, 2015 7:06 pm

Kudos to the Republicans for not giving into Wolf's demands of broad based tax increases on the middle class so he can hand off our money to his public sector union cronies.

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At least the current state workers get to keep our pensions intact. I don't give a rat's furry behind about the anti PSERS rhetoric. Deal with it.

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