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 meet.

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 gas consumption.

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 black market.

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 population growth.

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 reform.

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 we’ve promised.

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 plan.

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 good budget.

Nathan A. Benefield is vice president of policy for the Commonwealth Foundation, Pennsylvania’s free market think tank.

Obama's 2013 budget plan gets zero votes in House

0-414 vote: House clobbers budget proposal based on Obama's 2013 plan - The Hill's Floor Action

Text of Gov. Tom Corbett's 2012-13 Budget Address

Gov. Tom Corbett:

“We must learn from the mistakes of the past. Government doesn’t tax money to get its needs; it taxes to get money it wants. Big government has a way of spending all the money it can get its hands on, and then some .Not only does this excessive taxation put a ball and chain around our economy, it simply does not solve our spending problem.“

Text of Governor Corbett's 2012-13 Budget Address

Rep. Quigley Supports House Budget

Rep. Tom Quigley (R-Montgomery) released the following statement regarding his support of the $27.3 billion General Fund budget for 2011-12 passed today by the Pennsylvania House of Representatives:

"I am very pleased that we are on schedule to pass a punctual and balanced budget, which will meet the Commonwealth’s responsibilities and sensibly allocate our limited resources. Our economy is still in a state of recovery and we have no reserve funds, so it is important for us to budget with caution and restraint. This budget proposal is reflective of the revenue we have on hand now and what we can realistically expect to collect next year.

"One aspect of this budget I am particularly supportive of is its restoration of some of the funds cut from basic and higher education. We were able to achieve this by rooting out fraud and waste in our welfare system. I believe this approach is in line with the priorities of most Pennsylvanians and appropriately represents the concerns of our citizens. Schools, however, must continue to seek out cost reductions, and the state must constantly look to streamline programs and increase efficiencies.

"This vote does not signify the end of the budget process. The legislation will now go before the Senate for its revisions, and negotiations will be ongoing. The final budget bill could still look very different, but I am hopeful it will be a plan that sets Pennsylvania back on the path to prosperity."

The House Republican budget plan was approved 109-92, primarily along party lines. House Bill 1485 now moves to the Senate for consideration.

PA Still Has A Spending Problem

Pennsylvania spent more than it took in during the month of March, adding to the budget deficit for the current fiscal year, which runs until June 30.

The state has spent $233 million more than it has taken in since the fiscal year began last July 1.

Keep in mind that the current budget is the one signed by former Democratic Gov. Ed Rendell.

Republican Tom Corbett inherited Rendell's mess, but Corbett needs to do more to stop the bleeding.

Revenue Department Releases March Collections

GradingTom Corbett's First Budget Address

Tom Corbett will never be mistaken for Ed Rendell.

His first budget address, delivered Tuesday, was as sharp a contrast as you will get between the slick, polished, media-savvy Ed Rendell and Tom Corbett, a prosecutor who still doesn't feel comfortable in front of large crowds, even after being elected governor of one of the nation's largest states.

Corbett was all business Tuesday as he addressed a joint session of the Pennsylvania Legislature. The subject, digging out of the fiscal mess left behind by Ed Rendell, was a sobering topic.

Corbett tried a couple of funny lines, but his delivery was off. If you're looking for charisma, start changing the channel until you find Charlie Sheen.

Corbett is at his best when he talks straight to fellow Pennsylvanias. It's a refreshing change from "Fast Eddie" Rendell, who had trouble telling the truth.

The Commonwealth Foundation gave Corbett a solid "B" for his message. That's a big improvement considering the same group gave Ed Rendell eight straight "F" grades on his budget addresses.

Here's the CF press release analyzing Corbett's speech:

The Commonwealth Foundation graded Gov. Tom Corbett's budget address a solid B today in its call to end the tax-borrow-and-spend approach to budgeting that placed Pennsylvanian in the present fiscal crisis.

"Unlike the past eight years that earned a fiscal grade of F, this budget puts the taxpayers first and deserves a solid B for not increasing taxes, reducing expenditures, and putting the taxpayers' interests first," said Commonwealth Foundation President and CEO Matthew J. Brouillette. "But much more can be done to limit state government to its core functions and begin reducing Pennsylvania's ranking as the 10th highest tax burden in the nation."

Brouillette praised the governor's call to give taxpayers greater control over school property tax increases above the rate of inflation, but encouraged him to go further. "Act 1 of 2006 failed to control property tax increases, and homeowners are paying for that legislative failure today," said Brouillette. "But we should give taxpayers a say over any and all tax increases. These are the taxpayers' schools and they should decide if they want to pay a penny more for them."

The governor also called for wage rollbacks and salary freezes for state workers who received pay increases while the private sector lost jobs. "Gov. Corbett gave great hope that Pennsylvania can end the inequity between private-sector taxpayers and government employees who enjoys better health care benefits, better pensions, better job security, and an earlier retirement," said Brouillette.

"In calling for ‘collective sacrifices' in the union bargaining process, Gov. Corbett asked state government workers to share in the same economic reality and burdens the taxpayers have every day," said Brouillette. "With 17 of 19 state union contracts set to expire in June, this is a reasonable approach to restoring the balance of power back to the taxpayers of Pennsylvania."

Setting the agenda for greater school choice and expanded privatization to include ending the state monopoly over liquor, Gov. Corbett called for "reality-based budgeting" by changing the budget focus from inputs to outcomes and having government prioritize spending based on well-defined core functions.

"This is a big step in the right direction, but it only slows the runaway tax-borrow-and-spend train that is state government," said Brouillette. "Pennsylvania still has a lot of work to be done, but we are hopeful this governor and this General Assembly will keep the promises they have made to the taxpayers."

To earn an A+, the Commonwealth Foundation recommends the complete elimination of "corporate welfare" programs; a more fiscally conservative revenue projection; reducing welfare fraud and abuse; and better financial planning for the coming pension, retiree health care, and Medicaid funding crises.

Libertarian Party of Pennsylvania calls budget 'failure' and 'fantasy'

With Democrats and Republicans in the Legislature conspiring with Gov. Ed Rendell to bankrupt Pennsylvania, it seems the only political force willing to speak the truth is Pennsylvania's third-largest political party.

From a press release issued by the Libertarian Party of Pennsylvania:

The state legislature keeps finding new ways to disappoint Pennsylvanians at budget time. While our last budget was unconscionably late, this one is a mix of failure and fantasy.

This budget fails to cut spending at a time when our fiscal position is precarious. General fund spending increased from $27.8 to over $28 billion while the state’s total operating budget jumps from $65.9 to $66.4 billion. The budget ignores the past two years of revenue collection decreases that led to a general fund $1.2 billion gap last year and a $3 billion gap the year before.

The budget fails to cut pork and reintroduces "Walking Around Money" (WAM) reported by the Pittsburgh Tribune-Review to be between $65 and $100 million. In addition, it provides millions for the construction of the John P. Murtha Center for Public Policy and the Arlen Specter Library Project Center. It irresponsibly ignores both the coming public pension crisis that will require a $5 billion increase in annual payments in 2010 and the coming loss of federal stimulus funds in 2011-2012 fiscal year.

In June, The Commonwealth Foundation released “A Taxpayer's Budget 2010: Responsible Spending for Pennsylvania” which identified opportunities to cut over $4 billion in wasteful state spending in Gov. Rendell's proposed FY 2010-2011 budget. Their report also offered a series of recommendations for resolving the current revenue shortfall and reducing the size and burden of government on Pennsylvanians. The budget failed to take advantage of these opportunities.

Instead, our state legislature fantasizes in their budget calculations that Pennsylvania will see a 3.2 percent increase in revenue collections at a time when unemployment is growing and business is receeding. An even greater fantasy is that the budget calculation assumes $850 million in Federal Medical Assistance Percentage (FMAP) funds that have yet to pass Congress. According to Senate Majority Leader Dominic Pileggi, "No one, including the governor, thinks we'll receive $850 million."

Commented Brian Bergman, State House Candidate in the 119th district, "Yet again, Pennsylvania's government has failed to pass either a balanced budget or an on-time budget. Where are the incentives to do either? There is nothing currently in the PA Constitution or statutes that puts any penalty on the representatives in Harrisburg if they fail in their duties. It's time to hold them accountable - vote them all out and elect new people that will truly work FOR the citizens of Pennsylvania and will enact consequences when the Legislature fails so completely in their duties."

Mark Crowley, LPPa Media Relations, summarized "It's no surprise that this budget was created behind closed doors. They suspended the rule requiring a public comment period. The disappointing result certainly shows this lack of transparency."

For more about the Libertarian Party, visit www.LP.org or www.LPPA.org

Sen. Mensch: Time to pass a budget that Pennsylvania can afford

It is time to pass a budget that Pennsylvania can afford

By Senator Bob Mensch

Over the next several weeks, the Pennsylvania General Assembly will set the course for Pennsylvania’s economic future as we consider the state budget for the 2010-11 fiscal year that begins on July 1. Foremost in this debate will be two basic options: will we spend only what we can afford; or, do we mortgage the future through increased spending and higher taxes?

In the previous seven years of the Rendell Administration, there has never been a timely budget and at this point it is unlikely this year will be much different.

Last year, Pennsylvania went 101 days into the new fiscal year before a budget was finalized and many residents wanted to know why the debate took so long. It was bloated and unaffordable, just like the Governor Rendell’s budget proposal for FY 2010-11. Perhaps the only difference between last year and this year is that we have one more year of experience in a depressed economy and taxpayers are even more concerned about increased and uncontrolled government spending.

In that light, this year's proposed budget -- including a $1.2 billion increase in spending over last year -- is a potential fiasco. It's as if the Administration is not listening to the public's concerns about expenditures and unnecessary growth in state government.

State spending has increased by 40 percent over the last seven years, yet how many residents have seen a corresponding 40 percent increase in state services? Unchecked spending increases have led to an unaffordable and unsustainable budget situation

For the last 26 consecutive months Pennsylvania has seen revenue collections come in well below projections. So far this fiscal year, we are already $1.2 billion below projections and that total could easily reach $1.6 billion by June 30.

Revenues are down because residents are driving less (gas tax), buying less (sales tax), not purchasing homes (real estate transfer tax) and most sadly, earning less (earned income tax). In fact, the unemployment situation in our state is horrible. We have an unemployment rate of 9.0 percent, but Pennsylvania also has the 2nd most unemployment claims in the U.S. To pay our unemployment claims, we're actually borrowing $100 million per month from the Federal government. Furthermore, Pennsylvania is now down to 45th (we were 44th last year) in the U.S. in new jobs creation.

In spite of those dismal revenue figures and economic statistics, the Governor still wants to increase spending and do so by adding to the burden on Pennsylvania taxpayers. The Administration’s new sales tax "scheme" will cost taxpayers an additional $1 billion and will impact all consumers -- regardless of how anyone tries to spin it. There's also a very burdensome surcharge on employers which will serve to drive even more businesses and more jobs out of Pennsylvania.

Bad tax policies have put us in this economic hole. Pennsylvania is the 11th most taxed state in the nation and we have the absolute worst business tax structure. Our business tax policy is chasing employers and jobs out of Pennsylvania and our personal tax policies are making each of us poorer every day as we try to sustain unaffordable state spending.

In addition, the Administration is insisting on using $1.4 billion in federal stimulus money to balance the budget. This is not a sound fiscal practice since this is the last year for stimulus money and that lapse will mean that next year's state budget will be out of balance by $1.4 billion from the start.

I welcome any and all comments regarding the budget – I along with my legislative colleagues continue to seek the right answers and the right balance in the budget. Let me hear all your ideas, please!

In closing I believe we must reject the proposed budget in favor of a reasonable, affordable, sustainable spending plan that does not impose additional financial hardships on our taxpaying residents and employers. We have to turn the ship now, right away. There are many valuable programs in his budget, but in the interest of Pennsylvania's taxpayers and its future we need to be honest with ourselves about what we can actually afford

State Sen. Bob Mensch is a Republican who represents the 24th Senatorial District, which includes portions of Montgomery, Bucks, Lehigh and Northampton counties.

Sen. Bob Mensch: State Budget Redux

State Budget Redux

By Sen. Bob Mensch

On Feb. 9, Gov. Ed Rendell delivered his eighth — and final — budget, and not surprisingly the greatest applause during the speech was for his statement to have the budget finished by June 30. It's not surprising this comment would be met positively. After all, last year was painful and caused a lot of financial difficulty for Pennsylvanians.

But when I'm asked if I think the budget will be done on time this year, my response is a skeptical, "I doubt it." The newly proposed budget is, in my opinion, not affordable, not sustainable, and must be rejected by the taxpayers and the legislature — but more on that in a moment.

First, let's look at history. We have not had a budget completed on time in any of the past 7 years — but that has not always been true. To find the next most recent budget that was not completed on time, you have to go back through many administrations, to I believe, Gov. Raymond P. Shafer in the late 1960s. So past performance by this administration is not encouraging.

And when we take a closer look at last year's budget mess, you will realize that the House majority leadership (Democrat) did not even put a budget in front of the House until July 13. That's right, despite the Constitutional requirement for a balanced budget to be completed by June 30, the House majority leadership decided to ignore the Constitution and do what it wanted. More importantly, last year's budget was unaffordable, just as this year's budget is unaffordable, so there is a great probability there will be another "battle" similar to last year’s 101-day impasse.

Some residents just want us all to go along and agree, but had we last year we'd have higher taxes this year, and we'd have even worse spending that we can't afford. Please realize that February 2010 is the 24th consecutive month of negative revenue collections by our state. That's right, we haven't been able to meet our spending obligations for two solid years. Yet this year's proposed budget has a further spending increase of $1.155 billion, and it includes two very significant tax increases — a sales tax increased designed to raise $1 billion or more; and an onerous business tax strategy that will chase more jobs out of Pennsylvania.

We can't afford the increased spending. We can't afford to pay more in sales taxes. We can't afford to lose any more jobs from Pennsylvania. So when someone suggests there is disagreement about this year's budget, instead of someone asking why we can't all just agree, the question should be why must the administration insist we need to spend more than we can afford?

The sales tax proposal will hurt our seniors with new taxes on medical and pharmaceutical services. We'll all pay more for financial and legal services. We'll all pay new taxes on 74 new categories of items to be taxed — we can't afford it.

Our businesses will be further stressed for providing jobs. Pennsylvania is already the 44th lowest state in new jobs creations. But the solution offered by the administration is to "close the Delaware loophole," which is actually a tax increase.

The easier solution is just lower our corporate tax rates to be competitive with other states — we presently have the highest rate in the nation - and then our businesses won't feel the need to incorporate in Delaware. But the strategy offered in the budget is actually a tax increase so don't look for a lot of compromise on corporate net income tax.

I welcome any comments regarding these thoughts. Call me at 215-529-1215 or write me at bmensch@pasen.gov

State Sen. Bob Mensch is a Republican who represents the 24th District, which includes parts of Bucks, Lehigh, Montgomery and Northampton counties.

Auditor General Jack Wagner Urges Round-the-Clock Negotiations to Resolve PA Budget Impasse

"Hard-working Pennsylvanians want to see the commonwealth resolve the budget crisis as soon as possible -- without a tax increase," Pennsylvania Auditor General Jack Wagner said in a written statement. "Suggestions made by me and others, including many Pennsylvania newspapers, show that there is a way to reach a budget agreement without the need either for severe spending cuts or an increase in broad-based taxes."

Auditor General Jack Wagner Urges Round-the-Clock Negotiations to Resolve State's Budget Impasse

And then there were two ...

Pennsylvania could soon be the only state without an approved budget. The Keystone State is one of just two states operating without a budget since its fiscal year began on July 1. Connecticut could have a budget signed any day now, leaving Pennsylvania alone on the dubious list.

From the Connecticut Post:

HARTFORD -- The Democratic-dominated House of Representatives late Monday passed a new two-year $37.6 billion state budget, a full two months after the start of the fiscal year.

The bill passed 103-45 after a four-hour debate. Nine Democrats voted against the bill, including Rep. Terry Backer, D-Stratford, Rep. Kim Fawcett, D-Fairfield and Rep. William Tong, D-Stamford.

While the legislation seemed on track to win ratification early Tuesday from the Democratic Senate majority, Republican Gov. M. Jodi Rell stayed out of the Capitol most of the day and was non-committal on whether she'd support it.

Republican members of the House and Senate said Democrats ignored the warning signs of the state's economic crisis and have maintained levels of state spending at a time when Connecticut should be cutting its budget.

Read the full story at the newspaper's Web site.