A closer look at school funding in Pa. governor race | Analysis

As it was four years ago when Democrat Tom Wolf was elected Pennsylvania's governor, education funding is a major issue in his campaign for reelection.

Wolf is casting himself as the "education governor," and Republican nominee Scott Wagner is using the issue as a campaign centerpiece. But overall, both candidates are sticking to platitudes.

Here is a review of their statements:

Wagner has called for spending an additional $1 billion annually, while also saying Pennsylvania schools "have enough money."

Asked during an Oct. 1 debate how he would pay for the plan, Wagner said he would find savings in the state budget. But while his campaign highlighted programs Wagner would trim, it's unclear how the plan would generate all the projected revenue.

It's also unclear how Wolf would follow through on his goals. Wolf has added more than $500 million to the main subsidy for public education, although school district costs have risen faster. The state is being sued over school-funding inequities, and Wolf says he'd continue to press for more education aid if reelected.

Unlike Wagner, the governor isn't putting a dollar figure to his plan.

The governor, who unsuccessfully advocated for tax increases to fund education in his first term, says he has no plans to push broad-based tax hikes.

He said he would support running all education aid through the state's need-based formula, which now applies only to a portion of state aid. More money would go to some school districts, but the majority would see cuts.

But Wolf says such a change would take time, and that he doesn't support reducing any district's aid.

"It's not possible to make everyone better off and do that," said Mark Price, labor economist at the liberal-leaning Keystone Research Center.

In a recent interview with the Inquirer and Daily News' editorial board, Wolf said that "we need to make sure we're funding our schools adequately and fairly."

"I support the idea of world peace too," he added.

Politicians have previously sought to privatize Pennsylvania's liquor system — and promised to send proceeds to schools. Former Gov. Tom Corbett, a Republican, proposed doing so in 2013, planning to net $1 billion from selling off the stores. But he and lawmakers couldn't reach an agreement.

Wagner campaign spokesman Andrew Romeo said the state would gain recurring revenue by leasing the wholesale liquor system ($200 million a year) and privatizing alcohol sales ($300 million in first year, $100 million in recurring years). The fiscal notes cited by the campaign don't include estimates for recurring revenue.

Romeo said leasing the system would continue to yield revenue because annual permit renewal fees would be based on the permit holder's sales.

"Like any business, once you sell it, you don't get the profits anymore," said Roland Zullo, an associate research scientist at the University of Michigan who has studied state liquor systems, and who on behalf of the Keystone Research Center analyzed a report Corbett commissioned on privatizing Pennsylvania's system. A permit holder is "going to also want to earn their cut of the profit from managing the operation."

Privatization also likely means some loss in tax revenue and higher enforcement costs, Zullo said.

The Liquor Control Board transferred $217 million in non-tax revenue to the general fund in 2016-17. The total contribution, including liquor sales taxes, was $721 million, according to LCB's annual report.

Pennsylvania spends more than $700 million annually on economic incentives programs, directly and indirectly, according to a 2016 analysis by the state's Independent Fiscal Office.

The money is allocated via tax incentives, general fund expenditures, loan programs, and bond issues, and "special fund" expenditures.

Romeo said Wagner would eliminate tax incentive programs "that do not have a positive economic impact" and had already identified two he would cut: Keystone Opportunity Zone and Keystone Innovation Zone. The state awards $15 million annually in tax credits through KIZ.

The Independent Fiscal Office warns that the value of such awards "should not be construed as the revenue that could be gained if a particular tax incentive were repealed, as the economic activity may not have occurred in the absence of the special treatment."

The KOZ program, which accounted for an estimated $90 million in tax expenditures in 2016-17, exempts certain economically distressed areas from most local and state taxation.

The Wolf administration in 2016 rejected applications for the Keystone Opportunity Zone initiative from Philadelphia, Coatesville, and other municipalities seeking the KOZ designation. The administration said at the time that the state needed to save money.

Wagner would seek waivers from the federal government that "will save money as well as secure and protect federal funding," Romeo said. For example, he supports enacting work requirements for Medicaid recipients — one of a number of proposals included in legislation cited by Wagner's campaign.

The fiscal note attached to that legislation doesn't include revenue estimates for many of the proposals. That's because Pennsylvania would need federal approval, said a House Appropriations Committee aide.

Price, of the Keystone Research Center, said it was "certainly possible" for Pennsylvania to spend less on social services.

"That will mean taking money out of things like access to health care for people," he said.

In addition to finding $1 billion for education, Wagner is also pledging to scrap school property taxes — a $14 billion revenue source.

But he isn't committing to how much he would raise sales and income taxes to compensate. Romeo said Wagner would use "zero-based budgeting" to lessen the severity of the hikes.

Analysts said recouping a significant chunk of that $14 billion through the budget was unlikely.

"Could it be done mathematically? Yes, if you look at the entire state budget," said Nathan Benefield, chief operating officer and vice president of the conservative Commonwealth Foundation. "Is it possible politically? Probably not, because every pot of money has a constituency. … If you're taking the money from one to pay for another, you're going to have pushback on a lot of areas."