Pennsylvania Shadow Budgets Are Font Of Corruption

Pennsylvania Shadow Budgets Are Font Of Corruption

By Leo Knepper

Pennsylvania Shadow Budgets Are Font Of Corruption  By Leo Knepper  One of the only good things to come out of last year’s budget was a transfer of $300 million from Pennsylvania’s shadow budget to the General Fund to cover the overspending. The shadow budget is comprised of Special Funds
Shadowy Spender

One of the only good things to come out of last year’s budget was a transfer of $300 million from Pennsylvania’s shadow budget to the General Fund to cover the overspending. The shadow budget is comprised of Special Funds that exist outside of the normal budgeting process. Several lawmakers found over $1 billion in excess money in these accounts last year. After a great deal of public pressure, the General Assembly agreed to transfer $300 million from the shadow accounts to the general fund. The $300 million was money already collected by the state and collecting interest in a savings account. To borrow from our favorite clickbait headlines, “You Won’t Believe What Happened Next!”

Rather than taking funds from the extra $1 billion that lawmakers identified, Governor Wolf created a new special fund. For this new special fund, Wolf borrowed $200 million against the State Farm Show Complex through a “leaseback” agreement. The arrangement is basically a loan that will cost taxpayers $191 million in interest over the next twenty-nine years. But wait, there’s more.

According to reporting on the deal:

“The winner was Blackford Ventures, a Lancaster County development company that provides government entities and private businesses with cash. After Blackford won the bid, the company created a separate firm, Municipal Real Estate Funding, in December to handle the Farm Show transaction. Both Blackford and Municipal Real Estate are listed on the contract.

“The company is owned by Richard Welkowitz, a one-time Teamster laborer turned entrepreneur. Blackford’s chief executive officer is Mike Brubaker, a former Republican state senator.” (Emphasis added)

Several members of the Pennsylvania House are exploring legal options to halt the lease. True to form, the Wolf administration may have overstepped its legal authority in entering the agreement. Under the Pennsylvania Constitution, only the General Assembly must approve the issuance of new debt with very limited exceptions. The issue revolves around whether the deal is a lease or a loan. There is also the matter of Governor Wolf creating a Special Fund out of whole cloth in order to subvert the intent of the General Assembly. Given the PA Supreme Court’s recent willingness create new powers for itself, we are skeptical that they would be willing to intervene on behalf of taxpayers in this instance.

Lawmakers are exploring the option of requiring the Wolf administration to make the lease payments from the Executive Branch’s budget. We will let you know if they take that route.

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

Pennsylvania Shadow Budgets Are Font Of Corruption

 

 

Pennsylvania Already Spends More Than Most States, Gov.

Pennsylvania Already Spends More Than Most States, Gov.

By Leo Knepper

Pennsylvania Already Spends More Than Most States, Gov.
The governor of special interests

Last week, Governor Wolf presented his budget proposal to the General Assembly. He primarily recycled talking points from his first three budgets and added an Eagles hat to demonstrate how “in touch” he is with people. The three key points from Gov. Wolf’s proposals are more spending on education, more taxes on natural gas, and a higher minimum wage. None of these ideas are new, nor are any of them sound ideas.

On the issue of education spending, Pennsylvania currently spends more on education than 41 other states. More money is not going to help students in failing schools. A quick look at the 50 worst performing school districts illustrates this point. Many of the schools on the list spend more per student than the cost of tuition at a college or trade school. The worst performing school district, Wilkinsburg Borough, spends over $30,000 per pupil. However, only fifteen percent of their students are proficient in math, and twenty-six percent are proficient in reading. On top of poor performance in math and reading, less than half of Wilkinsburg’s students graduate. More money is not the solution for our education system’s failings, but considering the hundreds of thousands of dollars Governor Wolf stands to receive from the state teachers’ union in his upcoming election, we shouldn’t be surprised that he wants more money instead of increased accountability for schools.

In his budget address, Wolf repeated the lie that natural gas companies aren’t paying their “fair share” and he advocated for raising their taxes. He stated that Pennsylvania was the only state not collecting an extraction tax, but the Governor failed to mention that we are the only state to levy an impact fee. In 2017, the natural gas companies paid over $200 million into Pennsylvania’s coffers due to our impact fee. Natural gas companies are also subject to the Commonwealth’s corporate net income tax, which happens to be the second highest in the country. On top of that, the Treasury gets a cut of any royalties paid to individuals by the gas companies. At what point will Governor Wolf be satisfied that natural gas companies are paying their fair share?

The final item trotted out by the Governor was an increase in the minimum wage. If Governor Wolf wants to make it harder for lower-skilled workers to find employment, setting an artificially high wage floor will undoubtedly make that happen. Minimum wage increases enacted by other states and localities have resulted in the loss of hundreds of thousands of jobs and Pennsylvania would not be exempt from that trend. Instead of declaring that employers should pay a certain amount and be surprised that people lose their jobs, Governor Wolf should take a lesson from President Trump and make it less expensive for business.

Thanks to tax changes at the federal level, at least thirty-three major corporations have announced higher wages, bonuses, and increased employee benefits. Keep in mind those are just major corporations. How many small and medium-sized businesses can now afford to reinvest in their employees or expand their businesses? If Governor Wolf wants to help Pennsylvania’s workers, he should be focused on the regulations that drive up costs in the Commonwealth and the tax policies that make us uncompetitive.

There is no doubt that Pennsylvanians face struggles, but Governor Wolf’s solutions represent a continuation of the same policies that have failed for the last fifty years. Higher taxes and more spending has predictably failed to improve the Commonwealth. It’s unfortunate that the Governor intends to keep going down the same road.

Pennsylvania Already Spends More Than Most States, Gov.