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State Budget - Look Behind the Curtain

Reading the newspaper, one would think it was a bright new sunny fiscal day in Pennsylvania. We have an early budget and rainbows and unicorns are popping up everywhere. Truly a brighter day… unless you look behind the curtain.

Not to be a Debbie Downer, but Harrisburg is spreading some pretty smelly stuff and telling us that it’s roses. There are no new taxes (they have NEVER been raised in an election year) and there is more school spending. The new school money will be dispersed using the new funding formula, which is great. The bulk of school funding will continue to use the old, unfair formula that stopped counting students in 1991. That’s great for the overfunded schools and too bad for the others.

With no increase in taxes, how did our friends in Harrisburg increase state spending by 2 percent? Some of it is an improving economy, but most of it is from the usual smoke and mirrors served up by our elected officials. Let’s start with the latest gimmick. Off budget.

The legislature moved about $900 Million off budget to pay for human services. Where is the money going to come from? Well it’s off budget so I would guess borrowing. Most of the budget negotiations were behind closed doors, so I doubt even rank and file legislators know. Add another $300 Million that is being taken from lottery funds to pay for Medicaid. Probably reasonable, but hardly transparent. Finally, the state is using one-time sources of cash to pay for another $1 Billion in spending.

That means the reality is that our state’s budget is $2.2 Billion out of balance. If you close your eyes and click your heals together, you can even believe it’s constitutional. And don’t forget the Billions borrowed last year to balance the budget. My guess is that it will have to be paid back. We are literally using every credit card in our wallet, along with visits to a pawn shop to keep our state government operating. But hey, state taxes haven’t gone up. Let’s not spoil things by talking about what this has done to our property taxes. In Pennsylvania, local control means locals pay the bills.

There are ways to right our fiscal house, but it takes leadership in Harrisburg. For instance, Governor Wolf has repeatedly proposed taxing Marcellus Shale natural gas but the legislature refuses to support it. Pipelines crisscrossing the commonwealth are not taxed like they legitimately are in our neighboring states. Reducing corporate tax rates and closing loopholes could spur business development.

Think of the previous discussion as talking about our checking account. Now let’s look at our retirement savings. Two years ago, the state was in the hole by $50 Billion. That amount reflects the unfunded pension liability that was created by Harrisburg through a number of incredibly self-serving actions. Through its efforts the legislature has managed to increase that shortfall to $75 Billion today – that’s $75 Billion we taxpayers will have to pay. In approximately 12 years the pension fund will run dry and retirement checks will have to be paid out of the general fund. Projections put that at 40% of the state budget. Lest anyone think otherwise, teachers and state employees paid their contributions to the fund. The state is the one who dropped the ball and the state needs to fix the problem without reducing the pensions of teachers.

In other words, not only are we using credit cards to pay credit cards, but in 12 years we are going to show up at our kids’ homes and ask them to spend almost half the state budget to keep these pension checks flowing. How they will manage that without reducing spending on other important budget items, or severely raising taxes, is beyond my imagination.

Rainbows appear after a rain storm. Perhaps if we honestly address the fiscal state of the commonwealth we will see real ones. Until then we are just chasing unicorns.

Committee to Elect Dale Hamby, Jim Stager, Treasurer
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