OFFERING A COMMON-SENSE, CONSERVATIVE ALTERNATIVE TO THE LIBERAL-DOMINATED MEDIA
Thursday, July 07, 2016
GUEST COLUMN: Spend-first, tax-later is flawed budgeting in Pa.
By Nathan Benefield
Last June, Gov. Wolf sparked a fiasco by vetoing the General
Assembly’s budget in its entirety. The resulting 9-month impasse
crippled nonprofits and threatened to shutter schools across the state.
To avoid the political fallout of a repeat performance this year, the
Legislature passed a spending plan Wolf says he’ll sign.
One problem: Lawmakers never said how they’ll pay for it.
Strangely, that was part of the plan. One legislative leader bluntly
stated, “We want to agree on a general appropriations bill, and then
we’ll get to work on how to pay for it.”
That’s not how budgeting should work — just ask any family or
business. It’s easy for the Legislature to say they’ll spend 5 percent
more this year than last. It’s harder deciding how to make those ends
Almost certain to come, though, are tax increases.
Legislators and the governor have declared “broad-based” tax
increases off the table. But they are considering a new tax on natural
This would raise home-heating bills for 2.7 million Pennsylvania
homeowners—families, seniors, low-income households, and small business
owners who use natural gas. In other words, a “broad-based” tax increase
by another name.
Pennsylvanians can also expect a major cigarette tax increase. This
tax falls disproportionately on low-income households, while increasing
smuggling across state lines. Lawmakers’ spend-first mentality may mean
balancing the budget on the backs of the poor while incentivizing a
Pennsylvania already heavily relies on revenue from tobacco,
gambling, and alcohol to fill budget gaps — in fact we lead the nation
in so-called “sin taxes.” These revenue sources are unpredictable,
decline over time, and create perverse incentives.
The state needs Pennsylvanians to keep smoking, drinking, and gambling to enable lawmakers’ addiction to overspending.
Beyond the faulty spend-first, tax-later approach, the budget itself
represents the largest spending jump in a decade — $1.6 billion over
last year’s budget. This is five times the rate of inflation and
Politicians often cite a “structural deficit” to justify such
spending increases. However, the “structural deficit” exists only
because of years of legislative inaction on pension reform and welfare
Pension costs have skyrocketed over the past decade as previous
legislatures and governors ignored calls for reform. Yet, we continue
pushing costs onto future generations instead of paying now for what
Welfare spending growth also outpaces the growth of our economy,
making it unsustainable for taxpayers. Elected officials must tackle
this long-term problem and control welfare spending growth.
Unfortunately, the current budget addresses neither of these cost-drivers.
It also does not address the $700 million in corporate welfare
subsidies the state doles out at taxpayers’ expense — more than any
other state in the nation. Instead, the budget adds $10 million in
corporate handouts and pork barrel projects.
Meanwhile, the rush to pass a budget by the deadline after months of procrastination came at the expense of proper scrutiny.
For example, page 400 of the budget bill authorizes the Department of
Human Services to borrow an unlimited amount of money from the Worker’s
Compensation Fund to pay excessive Medicaid bills. There’s no way to
know how much this will cost taxpayers.
Similarly, the Senate moved $95 million in spending off-budget,
hiding the true cost, though taxpayers will still pay the bill. In
reality, the Senate added $74 million in spending to the House’s budget
This new spending won’t reduce the “structural deficit.” Neither will
an $18 million increase (plus an $8 million retroactive increase for
last year) in the Legislature’s own budget.
Despite these criticisms, taxpayers can be thankful lawmakers
rejected Wolf’s call for higher income and sales taxes to fund about
$1.7 billion more in spending. The budget also expands the highly
successful Education Improvement Tax Credit, which will provide better
educational options for thousands of students.
Yet, as it stands, this budget leaves families trapped in a game of
tax roulette — praying their taxes don’t go up this year. Next year,
let’s hope taxpayers don’t have to choose between an on-time budget and a
Nathan A. Benefield is vice president of policy for the Commonwealth Foundation, Pennsylvania’s free market think tank.