Category: Leo Knepper

Pennsylvania Already Spends More Than Most States, Gov.

By Leo Knepper

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.

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

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.