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Deficit warning should have Pa. taxpayers on alert: Elizabeth Stelle

Posted 1/9/19

Pennsylvania’s state budget looks an awful lot like a bucket with a hole in the bottom—taxpayers keep filling it up, but billions of dollars keep leaking out.

The latest projections …

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Deficit warning should have Pa. taxpayers on alert: Elizabeth Stelle

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Pennsylvania’s state budget looks an awful lot like a bucket with a hole in the bottom—taxpayers keep filling it up, but billions of dollars keep leaking out.

The latest projections show a $1 billion increase in state revenues will pour in next year, according to the Independent Fiscal Office, a nonpartisan fiscal watchdog. That’s good news: It means our economy is growing.

Then there’s the hole in the bucket — and it’s a big one.

The IFO predicts a nearly $3 billion spending increase leading to a $1.7 billion budget shortfall. That’s a massive deficit, the likes of which, in prior years, have led to borrowing schemes and calls for eye-watering tax hikes.

Why would the state spend $3 billion more next year? The Department of Human Services, with $1.8 billion in projected spending increases, is the main reason. That’s a 15 percent increase!

Between budgetary gimmicks and expanding programs that trap people in poverty, decision-makers have lost their way when it comes to our social safety net. Welfare programs should help individuals find work and escape poverty, not grow dependency and state bureaucracy.

Yet, when the Legislature passed reforms to incentivize work for healthy, work-capable adults, Gov. Tom Wolf vetoed them.

Wolf also recently resurrected a failed welfare program that ended six years ago — without arranging to cover the millions of dollars in expenses.

Low-income Pennsylvanians don’t need a new handout; they need opportunity. Improving the state’s job climate and reforming our food stamp and Medicaid programs will build a bridge to independence.

Handouts don’t work for corporations either. Pennsylvania is addicted to corporate welfare, which has a proven record of failure. Yet, the state offers hundreds of millions to entice employers like Amazon, Kraft and WNS.

Just weeks ago in Luzerne County, WNS shut down after receiving $700,000 of taxpayers’ money as a “job creation” incentive grant, putting 107 Pennsylvanians out of work. Despite similar corporate closures, $847 million — amounting to half of next year’s projected state budget deficit — will be funneled to politically connected corporations.

Elected leaders know taxpayers can’t keep up with the rate of welfare and corporate welfare spending. Thankfully, there are calls to avoid the $1.7 billion deficit catastrophe by plugging the hole in the bucket.

When asked how the budget could be balanced in 2019, a spokesman for House Appropriations Chairman Stan Saylor replied: “Budgets are choices, and that deficit is predicated on the assumption that the General Assembly would enact a budget that’s $35.6 billion, which is a 10 percent increase in spending. There are no votes in the Republican House caucus for that.”

Budget secretary Randy Albright, just before announcing his retirement, also voiced fiscal restraint in a recent budget briefing, saying tax hikes — aside from a natural gas severance tax, a Wolf favorite — won’t be necessary. Here’s a way both sides can show this is more than nice-sounding rhetoric: pass the Taxpayer Protection Act.

The TPA caps spending increases to the inflation rate and population growth, and requires a legislative super-majority to exceed that cap. Spending limits allow government to grow gradually — at a rate working families, who bear the brunt of irresponsible spending, can afford.

Currently, Pennsylvanians pay $4,589 in state and local taxes per person. That’s 10 percent of the average income. In 1970, that number was only $436 — one-tenth what it is today.

If we had enacted the TPA in 2003 and controlled spending, we wouldn’t be facing another deficit. In fact, Pennsylvanians would have kept $10,000 per family of four in their pockets — money they could have used for school tuition, car payments or medical bills.

Notably, the TPA doesn’t cut spending — it simply slows spending growth so it doesn’t outpace economic growth. That’s why the policy is broadly supported by voters from both parties. Pennsylvania taxpayers deserve a break, and spending limits could guarantee it.

When budget season begins in earnest next month, lawmakers should reduce corporate welfare and spend smarter on social services to plug this year’s deficit. Passing the Taxpayer Protection Act would show that such fiscal responsibility is no fluke — it’s the new paradigm in Pennsylvania.

Elizabeth Stelle is director of policy analysis for the Commonwealth Foundation (commonwealthfoundation.org), Pennsylvania’s free-market think tank.