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

Wolf Wants $1 Billion In New Taxes Says CF

Wolf Wants $1 Billion In New Taxes Says CF
$1 Billion’s not much if it’s not my money.

Wolf Wants $1 Billion In New Taxes Says CF — Nathan Benefield of Commonwealth Foundation notes that the budget Gov. Tom Wolf unveiled yesterday, Feb. 7, would raise living expenses by $315 for a family of four.

This is because that Wolf wants to expand the sales tax to several business services and add a 6.5 percent natural gas severance tax, which is an extremely foolish idea.

The bottom line is that Wolf wants a billion dollars more in taxes.

There is no need for this. Pennsylvania’s expenses are bloated and can be easily cut. While Wolf gives lip service to doing so, he rejects simple yet effective solutions such as public pension reform, or the repeal of the prevailing wage law that adds 20 percent to the cost of almost all public projects.

Or once again forbidding teacher strikes that cause the cost of school taxes to rise far above the rate of inflation.

There is not even consideration for small but real money-saving things such as ending the mandate to pay old media for carrying public notices which is something that can be cheaply handled by all government bodies via the web, and be far more useful to citizens than the existing standard.

Pennsylvania voters have to make it a point to reject leaders whose loyalty lies with the special interests and governing class, and not them.

Wolf Wants $1 Billion In New Taxes Says CF

Harrisburg Broken. Really, Really Broken

Harrisburg Broken. Really, Really Broken

Harrisburg Broken. Really, Really BrokenBy Sen. Scott Wagner

In my past articles, I have reported repeatedly many of the findings in Harrisburg where I see first-hand waste, fraud and abuse.

Here is another great example of how mismanaged Harrisburg really is. Last Thursday (Sept. 29) the Auditor General held a press conference and reported the findings of an audit that was performed at the Pennsylvania Department of Human Services (DHS). 

It was reported at the press conference that from July 2013 to June 2014 DHS paid public assistance benefits (CASH) to over 2,300 deceased (DEAD) people.

Click here for a report from TV station WNEP- http://wnep.com/2016/09/29/audit-2300-deceased-people-on-welfare/

I continue to pound on the table that “Harrisburg does not have a revenue problem – Harrisburg has a spending problem.”

Well here is another slogan – Harrisburg is out of control – zero accountability – who cares, it is not our money.”

I have reported previously that there is a total lack of accountability in the various state agencies. DHS is the best example of an agency out of control.

You may ask yourself how an agency could be out of control. Here is the best and most accurate answer: Lack of leadership, direction and accountability.

Where should leadership, direction, and accountability start in Harrisburg you might ask – here is the simple answer – the Governor’s office.

Gov. Wolf has been in office for almost two years and I have not seen any large initiatives in any single state agency to determine how well a specific agency is performing or not performing.

In the last several months I have met with two separate companies and their representatives who have presented to me a scenario where, due to fraud and abuse, there are between $1.8 billion to $4 billion of fraudulent claims being paid by Medicaid through the Pennsylvania Department of Human Services annually – the $1.8 billion and $4 billion are numbers that the federal government has provided based on total Medicaid dollars spent in Pennsylvania. Medicaid is the subsidized health care program for low income people that is managed by DHS.  What is being done about this fraud and abuse?

Absolutely nothing.

Since the beginning of this year I have received continued complaints from private sector companies and the natural gas industry that the Department of Environmental Resources (DEP) is delaying earth disturbance permits for pipeline projects.

Why are these permits being delayed? Here is the answer:  No leadership, direction and accountability.

Just a few weeks ago I received a complaint from a constituent that a specific agency was not returning telephone calls to discuss the constituent’s issue.  I directed a person in my Senate office to work on a resolution and guess what? Our telephone calls went unanswered.

How could our telephone calls go unanswered? No Leadership, direction and accountability.

I could go on for hours of how mismanaged Harrisburg really is. No leadership, No accountability, career bureaucrats and an attitude that instead of doing any heavy lifting and managing the money that already flows into Harrisburg. The first quick solution is to just raise taxes.

Governors come and go. House and Senate members come and go. Career bureaucrats stay below the radar screen to keep their jobs, generous benefits, and their coveted pensions when they retire.

At the end of September I completed my 30th month (two and a half years) in the Pennsylvania State Senate. All I can say is – WOW. I knew that state government was out of control in Harrisburg before I arrived and guess what?  It is 10 times worse than I expected.

I anticipate that in January of 2017 the Pennsylvania Legislature will be presented with a budget from Governor Wolf that will ask for substantial tax increases.

Who cares?

The current mentality from Governor Wolf is that Pennsylvania taxpayers can afford to pay more taxes.

If you are willing to pay more taxes instead of Governor Wolf providing leadership, direction and holding every person who works in state government accountable, please send me an email so we can put your name on a list so Harrisburg can send you a tax bill.

Out of control government in Harrisburg – the gift that just keeps on taking !

Harrisburg Broken. Really, Really Broken

Pennsylvania Stable Rating Will Be But Temporary

Pennsylvania Stable Rating Will Be But Temporary

By Leo Knepper

Earlier this week, Moody’s upgraded Pennsylvania’s financial outlook from “negative” to “stable.”

The improvement stems from the Legislature and the Governor avoiding each other just long enough to get a budget passed.

No one in the Capitol is rejoicing, however. The looming public pensions crisis serves as a constant reminder that the Commonwealth’s credit ratings can fall at any moment. Pennsylvania Stable Rating Will Be But Temporary

Sadly, not every lawmaker in the General Assembly understands how precarious and downright dangerous this crisis is. Some lawmakers maintain their ignorance purposefully, while others simply don’t understand the math. Members of both parties, in collusion with public-sector unions and special interest groups, are all that stand in the way of genuine reform-reform that could potentially lift the Commonwealth’s financial outlook from “stable” to “positive.”

In an op-ed published last month in the Philadelphia Inquirer, actuary and business consultant Richard C. Dreyfuss provided a frank and compelling summation of the problem:

“Our $63 billion combined unfunded liability for the Public School Employee’s Retirement System (PSERS) and the State Employees’ Retirement System (SERS) is the result of underfunding, poor investment returns, and benefit enhancements. It’s measured in today’s dollars and based on a number of assumptions, including an optimistic annual investment return of 7.5 percent.”

He also provided a relatively straightforward, common-sense solution:

“Pension reform will truly be underway when all new [public employees] participate in a stand-alone, defined-contribution plan and we commit to paying off our pension debt over 20 years.”

Simple right? Well, not to House Speaker Mike Turzai.

In an op-ed published earlier this month in the Pittsburgh Post-Gazette, Turzai laid out his reasons for supporting a watered down solution known as the “stacked hybrid bill.” He says the bill would maintain “elements of the current defined benefit system, while instituting the first 401(k) system in state history.”

“Unlike other ‘reform’ proposals, the stacked hybrid approach doesn’t include arbitrage gambles, funding reductions or gimmicky quick fixes. We fully meet our funding obligations to the retirement systems.”

The hybrid plan does not “fully meet” funding obligations. Even if we switched the entire system from a defined-benefit to a defined-contribution retirement plan, that merely stops the bleeding; it won’t do anything to address the massive unfunded liability that has already accumulated. The stacked hybrid plan being promoted by state House leaders doesn’t even stop the bleeding because it maintains a defined benefit component.

This attempt at reform is, itself, a gimmick. Keeping any elements of the defined-benefit plan virtually guarantees that the unfunded liabilities will not only go unencumbered; they will continue to build.

Political courage may be in short supply these days, but numbers don’t lie. Pennsylvania taxpayers need their representatives to protect them from the “fiscal cliff” Turzai and his fellow lawmakers should know is coming.

The only solution is to stop pretending this Band-Aid of a bill is the tourniquet that will stop the bleeding and finally pass meaningful reform. The General Assembly and Governor Wolf must stop ignoring reality and pretending that half-measure reforms will stop the problem.

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

Pennsylvania Stable Rating Will Be But Temporary

Revenue Scheme Failing In Pa.

Revenue Scheme Failing In Pa.

By Leo Knepper

In the search for revenue to cover the General Assembly’s insatiable need for more spending, the legislature looked for new sources of revenue and taxes. Ignoring the $200 million that they borrowed from other funds, the ill-conceived choices they made are already falling through. Revenue Scheme Failing In Pa.

Lawmakers thought they had a sure winner when they decided to sell casinos licenses to sell alcohol between 2 a.m. and 6 a.m.; they were wrong. Casinos have scoffed at the $1 million license fee. One casino spokesman stated that they likely wouldn’t take the license if it was free. This lack of interest from casinos for the 24-hour liquor licenses creates an immediate $12 million hole.

The second hole opening up is even more tragic. In their abject greed, the General Assembly levied a 40 percent wholesale tax on electronic cigarette and “vaping” supplies. Adding insult to injury, the new tax applies to merchandise that is already in stock. As one small business owner noted:

“‘It’s almost as if the tax was designed to kill small business,’ said Chris Hughes, owner of Fat Cat Vapor Shop in Montoursville.

“Hughes estimated that he would have to cut the state a $40,000 check for the $100,000 in inventory he currently has on hand.”

Because Mr. Hughes does not have the ability to send the government a $40,000, he is liquidating his inventory and going out of business. Now the state will lose the tax revenue Mr. Hughes’s business was generating and the new taxes the General Assembly had counted on to fill in the budget deficit.

These problems could have been avoided if the legislature and the Governor had made an attempt to rein in spending. Instead, they added to the corporate welfare budget at the expense of small businesses. Now business owners like Mr. Hughes closing shop because of legislative greed.
Mr. Knepper is executive director of Citizens Alliance of Pennsylvania.

Revenue Scheme Failing In Pa.

Irresponsible Budget Indicates Incompetent Legislators

Irresponsible Budget Indicates Incompetent Legislators

By Leo Knepper

The irresponsible budget passed by the General Assembly became law without the Governor’s signature early Tuesday morning (July 12). Because spending exceeds revenue projections, the budget was not balanced. Pennsylvania’s constitution requires a balanced budget. The imbalance was corrected, at taxpayers’ expense, on Wednesday.

Irresponsible Budget Indicates Incompetent LegislatorsOn a somewhat positive note, the increased taxes on heating bills was not part of the tax increase. However, there was a lot not to like about the legislation. To satisfy the General Assembly’s insatiable need for spending increases, taxes were raised on tobacco products, e-cigarettes, and digital downloads (music, movies, apps, etc.) among other things. The Pittsburgh Tribune-Review has a full list of the tax increases and sources of additional revenue.

Here are the roll call votes for the House and Senate.

Ed Notes: Of the 31 Republicans in the 50-member Pennsylvania Senate, 17 voted against the tax hikes including Delaware County Republicans Tom McGarrigle (R-26) and Tom Killion (R-9). Andy Dinniman of the 19th District was the only Democrat to vote against the bill. Kudos to them.

Of the 118 Republicans in the 203-member State House, 54 voted for the bill including Delaware County Republicans Bill Adolph (165), Steve Barrar (160), Nick Miccarelli (R-162) and James Santora (R-163). Republican Chris Quinn, who won a special election, July 12, to fill the 168th District seat vacated by Killion for his Senate run, did not vote as he had not yet been sworn in. Of the 84 House Democrats, 11 voted against the bill including, believe it or not, Delaware County Democrat Leanne Krueger-Braneky (D-161).  Mr. Conservative Steve Barrar, mull that one around.

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

McGinnis Describes Bad Budget Bill

McGinnis Describes Bad Budget Bill — Pennsylvania’s General Fund budget plan for fiscal year 2016-17 was passed, yesterday, June 28, by the state House of Representatives by a vote of 132-68. Among those voting no was Rep. John McGinnis (R-79).

He released this statement as to why:

McGinnis Describes Bad Budget Bill
Rep. John McGinnis

By Rep. John McGinnis (R-79)

Here are the top 10 reasons I voted ‘NAY’ on the budget:

No. 10    Increased revenues from tobacco taxes are inherently unfair because we are asking a small and relatively poor number of citizens to contribute to the general expenses of the Commonwealth.

No. 9    Revenues from tax amnesty and gaming are highly unreliable, and it is improper to cover the expenses of necessary government functions with uncertain sources.

No. 8     Running a budget with recurring expenses and non-recurring revenues is perpetuating and aggravating the ‘structural deficit’ problem.

No. 7    The budget was available for full review to rank-and-file members on Monday night and the vote was Tuesday afternoon – not exactly much time for due diligence.

No. 6    The accompanying code bills (the spending instructions) were unavailable for review before the budget vote.

No. 5    Tax votes necessary to fund the budget were scheduled AFTER the budget vote.

No. 4    The 6 percent increase in education funding is good money after bad. Spending per pupil is up nearly 50 percent net of inflation over the past 20 years without any significant improvement in student performance. We are clearly not living up to the constitutional requirement for an ‘efficient system of public education

No. 3    The 6 percent increase in funding for the Legislature is indefensible, as we should be leading by example on fiscal discipline.

No. 2     The 4.8 percent increase in overall spending includes unwarranted increases in discretionary expenses, well in excess of population growth and inflation. McGinnis’s First Law of Taxation:  It’s the spending, stupid! If you spend a dollar you must tax a dollar, and this is a budget that says taxpayers are NOT doing enough. I reject that claim.

No. 1    The budget is unbalanced as it has insufficient pension contributions to keep the pension debt from growing, and that is unconstitutional.”

The legislation, Senate Bill 1073, sets total state spending at $31.55 billion, which is $1.49 billion, or 4.8 percent, more than the current fiscal year. The budget plan does not call for any new or increased income or sales taxes.

The proposal raises new, recurring revenues from a mix of sources, including increased taxes on tobacco products, reforms to the liquor sales system, expanded gaming and a tax amnesty program. The bill now heads back to the Senate for concurrence.

McGinnis Describes Bad Budget Bill

Pension Debt Grows $15M Per Day

Pension Debt Grows $15M Per Day

By Rep. John D. McGinnis
$15 million of new pension debt each and every day over the last 15 years! That’s what our state government has dumped on the taxpayers of the Commonwealth, all the while falsely claiming to have had balanced budgets and making Pennsylvanians some of the highest taxed and most debt burdened citizens in America. No wonder the demographic projection for Pennsylvania’s future is dire.

The new pension bill that passed the House on June 14th does nothing to stop the increasing pension debt and, frankly, is a joke, albeit a cruel one. Even if all the assumptions baked into this convoluted plan hold true (and none of them likely will), the total present value of taxpayers’ “savings” over the next 35 years is about $1 billion. Compare that to the present value of the unfunded liabilities of the state pension systems, which is $70 billion and grows $1 billion every ten weeks, and you get an idea of how unserious elected officials are at addressing the single worst financial calamity in the history of Pennsylvania. Pension Debt Grows $15M Per Day

It is particularly disappointing that rank-and-file members were excluded from trying to improve the bill through the amendment process on the House floor. Using sleight-of-hand parliamentary maneuvers that would have impressed David Copperfield, and manipulating the requirement for actuarial analysis of all pension bills, House leadership shut out all meaningful reform. No House member even had a chance to look at the actuarial analysis for the stacked hybrid pension amendment before they voted on it. All other amendments were ruled out of order because the House wouldn’t wait two weeks (or two hours for that matter) to review legislation that will have a fiscal impact on the Commonwealth for more than 80 years.

In 2001 and 2002, legislators expropriated for themselves and other public sector employees a $15 billion pension surplus that belonged to taxpayers. In 2003 and again in 2010, legislators voted to divert taxpayer dollars intended for pension funding to other line items in the budget. These acts would be called theft and misappropriation of funds if it weren’t for the folks writing the law.

The upshot is that taxpayers, still shackled with paying for and indemnifying exceedingly costly public sector retirement plans, are also stuck with paying off $70 billion of pension debt. As private sector employees struggle to fund their own modest retirements, public sector employees are guaranteed the most generous retirement benefits anywhere. Who’s the master and who’s the servant in this relationship?

Supporters say the new pension bill is a step in the right direction. Folks, if you are on a beach when a tsunami is about to hit and you take one tiny step away from the ocean, it’s not going to make any difference. It is past time for the incremental approach to fixing the financial house of our state pension systems.

Supporters also say the bill will slow the deteriorating financial condition of the state pension systems. That’s not true, but even if it were, what difference would it make to drive off a cliff at 55 m.p.h. instead of 60 m.p.h.?

The governor and supporters of the stacked hybrid plan will claim that bipartisanship is alive and well in Harrisburg. The sad fact is it always has been with respect to public sector pensions. The party of stupid and the party of evil always find a way to agree to do what is both stupid and evil. Taxpayers today and into the distant future will have a hard time appreciating this “spirit” of cooperation. Or, as growing numbers of citizens are already doing, they will just leave the state.

John D. McGinnis represents the 79th District in the Pennsylvania House

Pension Debt Grows $15M Per Day