Wednesday, July 11, 2007

On second thought

I've had a recurring nightmare the last couple of nights. That image of Ed Rendell laughing it up at the podium when he announced a budget deal is something I can't get out of my head. Ed Rendell may have put one over on us again.

This is after all the man who promised to cut property taxes in 2002 standing on his head and still hasn’t delivered a penny of tax relief. This is the man who coerced a Republican Legislature to pass a 10 percent income tax hike in 2003. The man who ushered in 61,000 slot machines in 2004. The man who signed the pay raise into law in 2005. Maybe this budget deal that Rendell said was a "win-win" for both sides of the political aisle isnt what we thought.

The blogosphere and talk radio are up in arms over the budget agreement between Gov. Ed Rendell and the Senate GOP leadership. Solid information about what’s contained in the budget is hard to come by, but I like the analysis done by The Commonwealth Foundation, which borrowed my "Good, Bad and Ugly" analogy from last month.

As the budget is being finalized for final debate in both the House and Senate, here are some points to ponder, courtesy of the Foundation:

The Good (with some caveats)

No new taxes. None of Governor Rendell's proposed tax increases were included in the agreement. But tax increases were a moot point because taxpayers were over-billed by Harrisburg by $650 million in the 2006-07 fiscal year. Indeed, the policy debate should be over the depth of tax cuts for working Pennsylvanians, not tax increases when excess revenues are flowing into state government coffers.

Independent consideration of most of Rendell’s legislative agenda. With some exceptions, most of Governor Rendell’s legislative agenda will have to be considered independently of the budgeting process. Although the governor was willing to shut down public services and furlough state workers to force his legislative agenda through the General Assembly, the current budget agreement will allow for consideration of his policy priorities on an individual basis.

Spending growth at 5.3%. According to Gov. Rendell, spending will increase 5.3% to $27.5 billion over last fiscal year’s original budget of $26.1 billion. This amount is below the average 6.37% increase in spending during the first four years of the Rendell Administration. Therefore, relative to past budget deals, this budget grows spending at a slower pace. However…

The Bad

Spending growth at 5.3%. Inflation over the past three years was an average of 2.95%; last year it was 1.3%. The 5.3% spending increase is also 68% higher than the 3.15% limit embodied in the Taxpayer Protection Act—a proposal that has co-sponsorship from 30 of 50 state senators.

WAMs and “corporate welfare.” It has been reported that tax revenues used as “walking around money” which is handed out to politically connected businesses and organizations by the governor and legislative leaders will be less than last year’s budget. However, these pork-barrel spending projects are expected to be higher than what was included in the budget passed in the Senate with a 49-1 vote on June 20, 2007.

The Ugly

Largest government takeover of preschool education. Instead of expanding the highly successful and far less expensive Preschool Educational Improvement Tax Credit program, Gov. Rendell got $75 million to dramatically expand the government’s creation of new taxpayer-funded preschools that will force many privately funded schools out of business. The eventual expansion of universal preschool throughout Pennsylvania will cost taxpayers billions of dollars in higher property taxes, while simultaneously running private and religious preschools out of business.

Transportation policy will be set back for decades. Despite the strong recommendation from the Pennsylvania Transportation Funding and Reform Commission that “no additional funding should be provided for highways, bridges and transit unless a series of parallel actions are taken to reform funding structure and a number of transportation business practices” [emphasis added], this proposal not only provides more money, but it dramatically increases taxpayers’ indebtedness and expands the authority and control of the patronage-ridden Turnpike Commission. Pennsylvanians will be paying interest—rather than earning interest from a Turnpike lease—and an opportunity to bring private-sector capital, incentives, and innovations into Pennsylvania transportation policy will be lost. Finally, the entire transportation deal is premised on the tolling I-80, despite clear interpretations of federal law that would prevent such a scheme. What is Plan B if this proposal fails to receive federal approval?

A Fistful of Unspent Dollars

Taxpayer Protection: Rhetoric or Reality? A majority of Senators (30 out of 50) have co-sponsored legislation and a constitutional amendment that, if applied to the current fiscal year budget, would limit the growth in General Fund spending to 3.15%—or $823 million more than the last fiscal year. How these 28 Republicans and 2 Democrats vote on the FY 2007-08 budget will determine if their co-sponsorship of the Taxpayer Protection Act and Taxpayer Protection Amendment is just rhetoric or reality.

Additional borrowing for corporate welfare? Gov. Rendell’s proposals for billions in additional borrowing remain on the table and will be voted on in the fall, including:

  • $850 million in bonded debt (or other source of funds) for the Governor’s energy plan to deliver handouts to politically selected alternative energy companies;

  • $500 million in bonded debt for the Jonas Salk Legacy Fund; and

  • An increase of the debt limit for the Redevelopment Assistance Capital Program, which provides grants to politically selected projects across the state.

Pension and Health Care crisis continues. This budget did nothing to address the multi-billion liability that is continuing to accrue on taxpayers’ backs. The day of reckoning will be upon Pennsylvania very soon.

Peter DeCoursey of also had an interesting piece Tuesday about the fuzzy math the Rendell administration is using. The $27.369 billion budget announced Sunday by Rendell jumped to $27.494 billion by Tuesday.

"This was supposed to be the year of openness and transparency in state government," DeCoursey writes. "But when it came to the simple act of telling Pennsylvanians how much they are increasing spending in this new budget, both sides resorted to their old budget tricks to pretend they are spending far less than they are."

The governor apparently forgot to count $125 million. When you’re dealing with billions, what's another $125 million among friends?

DeCoursey also points out that Senate Republicans are having problem with their math.

"Senate Republicans are saying the budget is really $27.178 billion, a 3.3 percent increase over last year's budget. How do they get there? They are not counting the $317 million that is going to a dedicated mass transit fund for this year and into the future," DeCoursey writes.

The problem with that math is those funds were in the budget last year. So dropping that $317 million out of sight by assigning it to another account in this budget, simply is a gimmick, DeCoursey said.

I'm getting this uneasy feeling that Rendell and Co. have sold us down the river again. It's time to get on the phone or get to a computer and tell your legislators that you're tired of the voodoo economics promised in Harrisburg. It's too late to punish Rendell for his deception, but you can vote out a lot of House and Senate members next year.

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