GOP Leadership Wants Tax Hikes

GOP Leadership Wants Tax Hikes
By Leo Knepper

Not much has changed on the budget since last week. On the plus side, Governor Wolf changed his position on using fund transfers to balance the budget. He went from saying all of the money proposed in the fund transfers (see here) was promised to other projects and there was no way it could be used to balance the budget; his current position is that $500 million is available to use to balance the budget.

On the downside, Republican leadership in both chambers of the General Assembly seem dead-set on making Pennsylvania less competitive by raising taxes on targeted industries. The first target, which now seems to be off the table, was commercial warehousing. According our sources, Rep. Dave Reed (R-Indiana County) was advocated for making lease payments on warehouse space subject to the sales tax. The fact that this tax would have made Pennsylvania non-competitive and put thousands of people out of work seems to have eliminated this proposal from consideration. The latest proposal would be to nearly double the Commonwealth’s hotel tax rate. Again, one of the chief advocates for the higher tax rate is Rep. Dave Reed.

As we have repeatedly noted, a better long-term solution would be to actually cut spending rather robbing from Peter to pay Paul. We’ll let you know about any changes as they develop.

Politicians have long used Orwellian double-speak to hide their true intentions. The latest iteration of this trend in Pennsylvania is the Governor’s, Senate’s and House Democrat’s insistence on including “recurring revenue” in any budget agreement. Recurring revenue sounds much more pleasant than what they’re really talking about: tax increases.

Roughly three months ago Republican leadership in the Senate, ceded their super-majority when fourteen Republicans voted with twelve Democrats to pass a Fiscal Code that balanced the budget on the backs of taxpayers. The Senate’s plan, supported by Governor Wolf, would raise taxes on heating bills, cell phone bills, and online purchases. As our friends at the Commonwealth Foundation noted in a recent blog post, the General Assembly has raised taxes four times in the last eight years. These previous tax hikes haven’t solved Pennsylvania’s financial problems. Instead, it has been like a death from a thousand cuts for taxpayers.

Departing from the usual routine of raising taxes, House Republicans offered alternatives to the status quo. The first plan we told you about would have reduced overhead expenses and saved tax payers $370 million. A second plan, which ultimately passed the House would have used surplus, off-budget funds to fill the gap. Unfortunately, only seven Senators sided with taxpayers and voted in favor of using funds already in state coffers.

The next step in the budget process is House and Senate leadership will establish a conference committee and try to work out their differences. The deals hashed out by conference committees rarely work out in taxpayer’s favor because it is a closed-door process. The public, and most lawmakers, usually do not have time to review the finished product. Remember the 2005 middle-of-the night pay raise? That legislation came out of a conference committee too.

Please, take a few moments and email the General Assembly. Let them know that you will be watching their actions closely and that they need to cut spending and use money already collected by the Treasury in order to balance the budget.

Mr. Knepper is executive director of Citizens Alliance of Pennsylvania.

 

GOP Leadership Wants Tax Hikes

GOP Leadership Wants Tax Hikes

Lowman Henry Budget Glossary

Lowman Henry Budget Glossary

By Lowman S. Henry

Lawmakers returned to Sept. 11 to finish work on a state budget which was due at the end of June. Late budgets have become a hallmark of the Tom Wolf Administration as the governor habitually proposes spending that vastly exceeds available projected revenue.

The governor and legislators are in somewhat uncharted waters as they approved a spending plan by the budget deadline, but have yet to reach agreement on how to fund that spending. Governor Wolf, of course, is advocating for higher taxes and 14 compliant Republican senators joined with Democrats to grant his wish. However, the Senate plan to place yet another tax on the natural gas industry, raise a wide range of consumer taxes and borrow money from future revenue landed with a thud in the state House.

In the weeks since the Senate vote, conservative Republicans in the state House have been working on an alternative that would fund the budget without raising taxes and borrowing from future revenue sources. They say they have found enough dollars squirreled away in difference agency accounts to accomplish that goal.

The budget will be a top priority when the House returns to session. Since budget terms can be confusing follows is a glossary that will serve as your guide to what various terms tossed around in the budget debate actually mean:

State Constitution – A dusty old document used for decoration on state capitol coffee tables, but which is never actually referred to when making laws.

Budget Deadline – A relic of bygone times when the governor and the legislature actually fulfilled their duties by enacting a balanced state budget by the date specified in the state constitution.

Budget – A document that includes a plan for spending and for the revenue to pay for that spending. This term has been redefined as a spending plan that we’ll somehow figure out how to pay for down the road.

Structural Deficit – This refers to the difference between what the state actually has to spend and what the governor and many lawmakers want to spend. It is viewed as something to be funded with higher taxes, rather than being cut to fit available revenue.

Projected Revenue – The amount of money reasonably expected to be collected from existing taxes and tax rates. This number will fall far short of desired spending and therefore is often adjusted upward to meet that target.

Severance Tax – This is a proposed fourth layer of taxation on gas produced in Pennsylvania’s Marcellus shale region. Since the impact tax was labeled a fee, some lawmakers perpetrate the myth of an industry getting away tax free.

Tobacco Settlement Fund – An annual revenue source generated by proceeds of a lawsuit against big tobacco companies that now is seen as a way to borrow from the future to plug the current year’s budget deficit.

Borrowing from the State Treasury – A process whereby we borrow our own money and charge ourselves interest in an effort to make it look like the state is facing fiscal Armageddon.

Gambling Expansion – Refers to various plans to allow for on-line gaming, the placement of video gaming terminals in bars and restaurants and other expected new sources of gambling revenue. Projected funds from these non-existent sources are often included in the state budget.

Senate Republican Leadership – Senators who abandon their party’s principles upon acquiring fancy titles.

Veto-Proof Majority – Refers to having two-thirds of the seats in a chamber, of which a substantial number will side with the minority on important issues.

House Republicans – Lawmakers blamed for the budget impasse because they are opposed to raising taxes on working families, senior citizens and small businesses.

Reverse Appropriation – This is a new term referring to efforts to cut the approved spending plan to fit available projected revenue. It is not something ever likely to be used.

Taxpayers – The only group of people in Penn’s Woods who don’t have a high priced lobbyist working on their behalf in Harrisburg. They are also viewed as an endless source of revenue by spending interests.

And so, as you hear the governor and lawmakers debate how to fund the state budget, keep in mind that what terms mean in the public sector are often very different than what they mean to everyone else.

Mr. Henry is chairman and CEO of the Lincoln Institute and host of the weekly Lincoln Radio Journal.

Lowman Henry Budget Glossary

Lowman Henry Budget Glossary

 

Shadow Budget Can Be Used To Bring Balance In Pa.

Shadow Budget Can Be Used To Bring Balance In Pa.

By Leo Knepper

At the end of June Pennsylvania’s 2017-2018 budget became law. It was unbalanced and there wasn’t a plan in place for how to pay for it. A significant part of the problem was that the Governor and legislature did nothing to reduce spending in 2016-2017 after it became clear that the revenues they expected were not going to materialize. The Governor and the majority of the General Assembly could have reduced spending in the new budget, but they didn’t. Instead Senate Republican leadership and Democrats in that chamber passed a tax increase and want to rely of borrowing to balance the budget.

The Governor, the media, and Senate Republican leaders have been insisting that the House Republicans were being negligent in not passing the tax hike. CAP and other organizations have insisted that there were other ways of balancing the budget. As we’ve noted it is possible to cut earmarks and overhead. We can add another option to that list as well: tapping the “Shadow Budget“.

Our friends at the Commonwealth Foundation have written extensively on this subject. Now, a group of lawmakers have taken the next step and introduced a proposal to tap into reserves from the Shadow Budget to make up for the revenue shortfall. Per the Commonwealth Foundation:

“…Pennsylvania holds nearly $73 billion in surplus fund balances, including $11 billion in the Treasury’s shared pool. This includes funds for many of the state’s shadow budget programs. The funding for these and other programs are deposited into three investment pools.”

The proposal offered by House members would transfer $1.2 billion in excess reserves, from Treasury’s shared pool. This is money that taxpayers, ratepayers, and/or fee payers have already sent to the Treasury Department. Furthermore, this isn’t money that has been allocated to a specific project. Instead, this is money that is being held well in excess of the expected expenses and future revenues. In some cases, these are structural surpluses that have been accumulating for years or decades outside of the General Fund and normal budgeting process.

Taking money from the Shadow Budget’s unexpended funds won’t affect a single state employee or budgeted expenditure. However, it will save taxpayers from yet another tax increase. The question is whether the majority of Republicans in the General Assembly and the Governor will side with taxpayers or tax-and-spend special interests.

 

Shadow Budget Can Be Used To Bring Balance In Pa.

 

Shadow Budget Can Be Used To Bring Balance In Pa.

Best Budget Choice Ignored In Pennsylvania

Best Budget Choice Ignored In Pennsylvania

By Leo Knepper

Often times the news media, Gov. Wolf, and the allies of Big Government in both parties present Pennsylvania’s budget choices as raising taxes or shutting down “vital services.” Two weeks ago, we presented several corporate welfare programs and earmarks that were driving up spending. This week we wanted to let you know about legislation that would save taxpayers $370 million by targeting government overhead.

Most people are unaware that overhead, known as General Government Operations in budget parlance, will cost taxpayers roughly $3.7 billion this year. In the private sector, businesses have focused on cutting overhead for years if not decades. Our state government has not been as vigilant in cutting costs as it would have you believe. Most of the cost savings programs that have been implemented merely nibble around the edges. New legislation introduced by Rep. Frank Ryan, a CAP member, would take a bigger bite out of the problem.

HB 1691 would cut the overhead budget line items by 10 percent across the board. Opponents of the measure would present this an unreasonable cut. However, a ten percent cut would still give the Executive Branch, Attorney General’s office, and legislature over $3.4 billion to spend on overhead for the year; that is hardly a paltry sum.

Before Gov. Wolf and the General Assembly try to raise taxes, they should first look at ways to reduce costs. Please, take a moment to let your Representative know that there are options other than higher taxes to get the Commonwealth’s fiscal house in order.

Mr. Knepper is executive director of Citizens Alliance of Pennsylvania.

Best Budget Choice Ignored In Pennsylvania

Pennsylvania Budget Logic Baffling

Pennsylvania Budget Logic Baffling

By Scott Wagner

Coming from the private sector where we actually get things done every day, I continue to be baffled as I watch Harrisburg chase its tail over how to pay for the 2017-2018 budget.

Last week the Treasurer told us the state is going to have to borrow more money or Harrisburg will shut down. But is that necessary?

I sat down and did the math, and here is how we should be looking to solve our budget problems:

You would have to be living under a rock to not know that we have a pension crisis in Pennsylvania. On May 25th, the Auditor General completed an audit of the Public School Employees Retirement System (PSERS) pension fund for the 2016 year, and it isn’t pretty. It isn’t pretty at all.

In 2016 the PSERS pension fund saw an astonishingly low return of 1.29% on $49.2 billion in assets. In dollars, the return was $634.6 million — which may look like a lot on paper, until you factor in that PSERS paid $416 million to money managers. It looks like a lot of money until you recognize that in 2016 most 401k retirement programs saw more than an 8% return. It was an exceptional year for everyone except Pennsylvania taxpayers

An 8% return would have yielded an additional $3.3 billion — which is more than enough to solve our budget problems.

PSERS could have put their money in a bank CD and received a better return (1.45%) — but who in the world would do that — and who would pay $416 million to money managers who would yield such a shameful return on investment?

I’ll tell you who would do that. A governor who’s asleep at the wheel, inept, or just doesn’t care.

Tom Wolf’s mismanagement is the biggest sham against honest, hardworking people that there ever was.

Why is Pennsylvania state government so bad at managing its employees’ money? If I were the Governor of Pennsylvania I would demand the answer to that question – but only after I fired the money managers at PSERS.

Where is our Governor? When he was running for election back in 2014, Tom Wolf presented himself as a “brilliant businessman,” and yet here we are paying $416 million for a return that we could have walked into a local bank and gotten ourselves.

PS: It is no secret that the PSEA (Pennsylvania State Education Association) fiercely hates me and has instructed their teacher members to hate me also. Isn’t it ironic that I am criticizing the PSERS pension fund performance demanding better returns so that all of the Pennsylvania teachers get their pensions paid?

Sen. Wagner represents the 28th District in the Pennsylvania Senate and is seeking the Republican nomination for governor in 2018.

Pennsylvania Budget Logic Baffling

 

Pennsylvania Republicans Twist Thumbscrews On Taxpayers

Pennsylvania Republicans Twist Thumbscrews On Taxpayers — The Republican-controlled Pennsylvania State Senate voted today to pass a tax increase that will see heating, air conditioning and use of communications become more expensive.

The vote was 26-24. Fourteen of the 34 Republicans in the 50 member body voted yes. The guilty ones were:

Sen. Pat Browne
Sen. Jake Corman
Sen. John Gordner
Sen. Tom Killion
Sen. Tom McGarrigle
Sen. Chuck McIlhinney
Sen. Bob Mensch
Sen. John Rafferty
Sen. Joe Scarnati
Sen. Mario Scavello
Sen. Tommy Tomlinson
Sen. Randy Vulakovich
Sen. Don White
Sen. Gene Yaw

What good are these people? What does party Chairman Val DiGirogio say?

Hey did you see where Pennsylvan taxpayers are on the hook for a $477,591 public pension?

Hat tip Leo. Knepper.

Pennsylvania Republicans Twist Thumbscrews On Taxpayers

 

Pennsylvania Republicans Twist Thumbscrews On Taxpayers

Budget Approaches Fail Taxpayer

Budget Approaches Fail Taxpayer

By Leo Knepper

On Monday, (July 10) Gov. Wolf allowed the state budget to become law without his signature despite the fact that the budget didn’t balance. The budget passed by the House and Senate spends more than the Treasury is likely to collect. The House and Senate shouldn’t have passed the budget without a clear plan to fund the expenditures. The Governor should have either vetoed or line-item vetoed the budget. As it stands, credit rating agencies may downgrade the Commonwealth again. A downgrade won’t solve our problems, and the two “solutions” under consideration won’t be good for taxpayers.

On one side: a Democrat governor who wants to raise taxes and leave a legacy of suffocating costs. On the other side: a Republican House and Senate looking to borrow their way out of trouble and leave a legacy of crushing debt. The solution nobody in Harrisburg wants to discuss? Spending reduction, which would leave a legacy of budget corrections that would eventually pay off for taxpayers.

There are ways that the General Assembly could cut costs. First, they could dissolve the Race Horse Development Fund. The Fund subsidizes “purses” for horse racing. In 2015, some of that money went to a billionaire from the United Arab Emirates.  Considering Pennsylvania’s financial needs, this doesn’t sound like the best use of resources. A second option, would be to reform the welfare code to add work requirements. In 2014, Maine added a work requirement for able-bodied childless adults. In two years the number of able-bodied childless adults receiving food stamps dropped by over 90 percent. This change not only saved taxpayers money, but it also added people to the tax rolls.

There are a number of other ways that the General Assembly could put taxpayers first. It’s up to “leadership” in the General Assembly to step up to plate to make that happen. And, based on their track record that doesn’t seem likely.

Mr. Knepper is executive director of Citizens Alliance of Pennsylvania.

Budget Approaches Fail Taxpayer

Budget Approaches Fail Taxpayer  By Leo Knepper  On Monday, Governor Wolf allowed the state budget to become law without his signature despite the fact

Pennsylvania Budget 2017 Explained

Pennsylvania Budget 2017 Explained

By Nathan Benefield

If Gov. Wolf is looking to leave a legacy of unusual—and unconstitutional—budget happenings, he remains on track.

Here’s a quick run-down of what’s going on with the state budget:

As you know, last Friday the House and Senate sent the governor a $32 billion budget (a spending increase of $500 million) with no plan to pay for it.

Gov. Wolf had 10 days to sign, veto, or line-item veto the budget. The state constitution requires a balanced budget and the state Administrative Code mandates that the governor line-item veto any spending above existing revenue. The deadline was Monday. Gov. Wolf took no action and the budget became law. Gov. Wolf has yet to sign a Pennsylvania budget in his tenure.

Now, the focus remains on a revenue package. GOP leaders have expressed frustration with Gov. Wolf’s rejection of their revenue plans that included borrowing and no tax hikes. According to reports, Gov. Wolf wants more tax hikes.

Multiple tax hikes have been rumored:

  • A drink tax on bar and restaurant patrons
  • A new tax on families’ cable TV bill
  • A new tax on homeowners’ gas heating bill
  • An additional tax on energy jobs

Additionally, borrowing gimmicks continue to be discussed as a way to bridge the budget gap.

It’s important to continue to reach out to your lawmakers so they know that Pennsylvanians cannot afford more tax hikes.

But here’s good news: Lawmakers are also discussing substantive changes in government to balance the budget without higher taxes—including letting grocery stores and other private retailers sell liquor and reducing government subsidies for horse race prizes. And yesterday, the House passed meaningful welfare reforms that will help improve our state’s safety net.

Click here to send a message to your lawmakers now.

You can get the latest on the state budget from the CF team on our PolicyBlog, Facebook, and Twitter.

Mr. Benefield is vice president and chief operating officer of Commonwealth Foundation.

Pennsylvania Budget 2017 Explained

Pennsylvania Budget 2017 Explained

 

Spending Cuts Missing In Pa. Budget

Spending Cuts Missing In Pa. Budget

By Leo Knepper

It looks like the General Assembly is in full-on “kick the can” mode on the budget. An article from the Patriot-News lays out the options the General Assembly is considering for closing the budget gap. None of them involve cutting spending.

One of the top contenders is using the tobacco settlement fund as collateral for a loan. Other options include expanded gambling and a “by the drink” tax for bars and restaurants on alcoholic drinks. Right now, the tax is somewhat hidden from patrons because it is collected at the wholesale level, i.e. per bottle paid by the establishment. The new proposal would move that to a per drink tax paid directly by the consumer. From the budget crafters perspective, they’re missing out on revenue because the price paid for a bottle of alcohol is much less than the price the establishment collects by selling by the glass, etc.

Another item under consideration would be to add a financial transaction tax on electricity transmissions. From the Patriot-News article:

“Senate Republicans are also vetting a new financial transactions tax that would be centered solely on the obscure business of buying and selling space on energy transmission lines.

“Pennsylvania plays host to this roughly $2.5 billion-plus market by virtue of our role as host to the business end of PJM energy grid. Some have drawn a parallel here to the state taxes collected by New York on Wall Street transactions.

“Those familiar with the issue say a 5 percent tax on this relatively small slice of PJM’s activities could net the state about $125 million per year, with minimal impact on the industry.”

Remember when Governor Corbett and the members of the General Assembly assured us that the tax they were raising on gasoline wouldn’t be passed onto consumers? That fallacious argument is rearing its head again on this tax. If this goes through, don’t be surprised to see your energy bill go up to recoup the cost.

Please, take a moment to contact the General Assembly. Tell them to get serious about cutting spending and stop the tax and spend shell game.

PS: CAP is trying to raise $5000 in the month of June. If you value our work, please make an investment in our organization today.

Mr. Knepper is executive director of Citizens Alliance of Pennsylvania.

Spending Cuts Missing In Pa. Budget

Spending Cuts Missing In Pa. Budget

Magic Wolf Claims Spending Cut With Higher Budget

Magic Wolf Claims Spending Cut With Higher Budget

By Leo Knepper

Magic Wolf Claims Spending Cut With Higher Budget By Leo Knepper
Magic man says he’s cutting while adding.

On Feb. 7, Gov. Wolf gave his latest budget address. Since he has his eye on re-election, this was the Governor’s most realistic budget to date. There are still a lot of problems with what he’s asking for, but it’s much less terrible that what he has wanted in the past.

 

For starters, Wolf acknowledges that there is room to cut spending and this is a step in the right direction. The problem arises when we look “under the hood, ” and then the cuts disappear. The state budget is made up of several different parts: the general fund, special funds, federal funds, and other funds. These various parts all add up to give us the total operating budget. The current year’s total operating budget is $80.1 billion. In his budget address, Gov. Wolf notes that there will be a $3 billion deficit next year. He purportedly solves the problem with $2 billion in spending cuts and “savings initiatives” and increases taxes by $1 billion to make up the difference.

Let’s direct our attention to Gov. Wolf’s spending “cuts.” If the current budget is $80.1 billion and the Governor’s proposed budget cuts $2 billion in spending, the proposed budget should be $78.1 billion. Here is where the magical math comes into play. Instead of being $78.1 billion, the Governor’s proposed budget is $81 billion, an increase in spending of nearly $900 million. How does a $2 billion cut turn into a $900 million spending increase?

The purported spending cuts turn into a spending increase due to “baseline budgeting.” In baseline budgeting, the previous year’s budget is the starting point and the next budget increases from that point by a certain percentage. In other words, politicians like Gov. Wolf can claim they are cutting spending, but in reality, they are only increasing it by a smaller percentage than they wanted. It’s the equivalent of Orwellian newspeak. Gov. Wolf and others rely on the ignorance of taxpayers to get away with it.

If the Commonwealth spent $2 billion less next year than they are this year, then there wouldn’t be any need to discuss tax increases. Please, contact Gov. Wolf and the General Assembly immediately. Tell them that cutting spending means cutting spending and not making it grow more slowly.

Mr. Knepper is executive director of Citizens Alliance of Pennsylvania.

Magic Wolf Claims Spending Cut With Higher Budget