MAY 17, 2012

Chart: School District Fund Balances Nearly Tripled in 14 Years

PA Independent reported on Monday that Pennsylvania school districts' fund balances reached $3.2 billion in 2011 (they compiled the data from the PA Department of Education's (PDE) school funding portal).

This represents a dramatic increase over recent years, with schools reserves almost tripling since 1997, and doubling in just the last 6 years, according to PDE data.

posted by NATHAN BENEFIELD | 01:30 PM | 0 comment

MAY 17, 2012

Taxpayers Screaming at PLCB Waste

Another day, another story of waste at the Pennsylvania Liquor Control Board. ABC 27's Dennis Owens reports on the PLCB buying extravagant wine, then selling it at a discount (and not charging taxes or the usual 30 percent markup).

In all, the PLCB spent just over $27,000 on eight bottles of Screaming Eagle Cabernet and sold them for just over $20,000 - a $7,000 dollar loss - which leaves critics with a bitter aftertaste. ...

The PLCB did not collect the usual markup. If those taxes and fees are factored in, the losses on those wines is closer to $22,613.

This is just the latest in a long train of abuses. Just in the last two weeks, stories have surfaced about the PLCB's Wine Shrine, the $2.5 million the monopoly seller of wine and spirits lost in broken or missing bottles, and the $100,000 the PLCB spent on an iPhone app.

If anyone is benefiting from the PLCB's monopoly, it is investigative reporters, who don't have to go too far to find another story of government wasting your tax dollars.

Visit FreeMyDrink.com to take action.

posted by NATHAN BENEFIELD | 11:00 AM | 0 comment

MAY 14, 2012

State Budget vs Spending Limits

Last week, the Pennsylvania State Senate passed a budget representing $27.66 in General Fund spending. How does that stack up against inflation and population growth?

If state spending limits like the Taxpayer Protection Act had been in place since 2002, allowing spending to increase with inflation and population growth, General Fund fund spending would be $26.8 billion next year.

The Senate budget represents $800 million more than that (Gov. Corbett's proposal about $300 million above that threshold). When including the sales tax for the Public Transportation Fund—spending that was part of the General Fund in 2002, but was move to a new fund in 2007, and would be covered under all versions of TPA—the Senate budget proposal would exceed the limit by $1.2 billion.

More importantly, had the TPA been around over that decade, spending would have increased at a steady pace. Taxpayers would have kept billions of their own dollars—almost $8,000 per family of four, just by limiting General Fund growth. And the spending cuts of the past few years—even the federal stimulus subsidies that were used to balance the budget—would have been unnecessary.

posted by NATHAN BENEFIELD | 04:40 PM | 0 comment

MAY 9, 2012

Chart of the Day: General Fund Spending and Revenue

Yesterday, the Pa. Senate Appropriations Committee advanced a budget (the full Senate is expected to vote on it today) that includes $27.65 billion in General Fund spending.

Unfortunately, this budget spends about $300 million more than what the projected net revenues will be for next year.

The budget is "balanced" by using the remaining monies left in the account following last year. With federal stimulus funds, and the transfer of the "Rainy Day Fund" and other one-time revenues, the state ended Fiscal Year 2010-11 with more than $1 billion in the General Fund.

Both the current 2011-12 budget and the proposed 2012-13 budget would spend more than revenue, dropping that fund balance to slightly more than $100 million, based on the latest revenue forecast of the Independent Fiscal Office.

posted by NATHAN BENEFIELD | 11:40 AM | 0 comment

MAY 8, 2012

Why Pennsylvania Needs Spending Limits

In a Capitolwire story (subscription), Senate Appropriations Chair Jake Corman notes that the proposed version of the state budget the Senate will take up this week increases spending by less than the rate of inflation and population growth.  He also suggests that is the standard for all future budgets.

"We believe the budget should never increase higher than TABOR would allow, so we can be sure we have sustainable growth in the budget" Corman said.

However, to realistically control state spending growth, lawmakers need to enact a spending limit like the Taxpayer Protection Act, especially a constitutional amendment version to prevent future tampering.  Matt Mitchell explains why fiscal guardrails like the TPA are needed to constrain overspending in Heritage Insider Magazine:

Spending growth threatens to push both federal and state debt-to-gross domestic product ratios past 90 percent in a matter of years. That is the level at which the largest and most comprehensive studies suggest debt begins to dramatically reduce economic growth.

It might seem that the natural solution is to elect politicians committed to reining in spending, especially on the entitlement programs and pensions at the heart of state and federal overspending. The problem, however, is that even fiscally conservative politicians face significant perverse incentives to spend beyond their constituents' means. And even if they do manage to trim the budget, today's cuts can be reversed by tomorrow's leaders.

Luckily, there is hope. Political incentives are shaped, in part, by institutions, i.e., the rules that govern budgeting, electioneering, and legislating. These rules influence the decisions of legislators, governors, presidents, bureaucrats, voters, and even lobbyists. So if we can improve the institutions, we can enduringly diminish the incentive to overspend.

Indeed, due to decades of overspending, even modest growth in this year's budget isn't enough to protect Pennsylvania's fiscal house.  The proposed Senate budget would spend about $300 million more than net revenue collections next year (based on Independent Fiscal Office projections), and doesn't begin to address cost drivers in corrections, welfare, and government workers' pensions. 

When the economy rebounds, and tax revenues start increasing, future lawmakers will be tempted to repeat the same mistakes and overspend taxpayers' money.  Passing the Taxpayer Protection Act now would limit the growth in government spending, prevent future fiscal disasters, and provide tax relief to families.

posted by NATHAN BENEFIELD | 00:10 PM | 1 comment

MAY 7, 2012

This is the Change You've Been Looking For

I had the opportunity to hear Scott Rasmussen speak last week. The theme of his speech was "change"—as in how policy change happens. The lesson he gave was that policy change takes a long time to happen, and that it is driven not by political leaders in Washington, but that it follows from public opinion.

His example was women's suffrage. Suffrage didn't begin with the 19th Amendment, but rather Congress acted after numerous states had already given women the right to vote, and voters' opinion (given many women were voting already) had clearly shifted.

Rasmussen argued that, though many now will mock "change" as a campaign slogan, Americans do in fact want policy change. Specifically, Rasmussen argues that voters want to see government cut its spending, and he backs this up with polling data.

The problem, he notes, is that total government spending in the United States—federal, state and local— has increased every year since 1955. For historical perspective, the hit TV show of the day was Davy Crockett: King of the Wild Frontier.

What interested me is how the national perspective so closely parallels what is happening in Pennsylvania. Last year's total state operating budget cut spending for the first time in more than 40 years. As a result, Pennsylvania's economy has started to rebound. And while special interests continue to protest for higher spending, voters want to see this type of change, not more of the same overspending of their tax dollars.

posted by NATHAN BENEFIELD | 10:13 AM | 0 comment

MAY 2, 2012

Good April Tax Collections, but State is Spending More Than Revenue

Two new reports show that Pennsylvania's fiscal crunch for the current year is not a dire as previously thought.

Pa. Department of Revenue monthly reports on tax collections shows higher than forecast General Fund revenues in both March and April. For the year to date, the state is still $288 million behind estimates, but the shortfall is much smaller than when Gov. Corbett outlined his budget proposal.

Based on the latest data, the Independent Fiscal Office's revenue estimates for 2011-12 are about $400 million higher than those included in the Governor's budget in February. Many have already used these trends to call for increases in government spending.

Unfortunately, the state is still spending about $800 million more than net revenue collections this year. As the General Fund began the year with more than $1 billion still on hand, and Gov. Corbett froze about $160 million from the enacted budget, the state will be able to pay all its bills and still legally have a balanced budget.

Nonetheless, spending more than revenue is clearly an unsustainable trend.

More importantly, the current year's fiscal problems are dwarfed by the four-alarm fire facing the state budget. Welfare spending, corrections costs, debt payments and pension obligations threaten to consume even more tax dollars in the future.

Unless we prepare for these future costs with budgetary reforms, including limiting the growth in state spending, taxpayers will be burdened with new and higher taxes, or major cuts will have to occur in other state programs.

posted by NATHAN BENEFIELD | 04:50 PM | 0 comment

APRIL 26, 2012

GAO Sounds the Fiscal Alarm on State Medicaid Costs

The U.S. Government Accountability Office has a new report on state and local government finances. Of greatest concern are the expected increases in Medicaid spending and health care for government employees and retirees.

The primary driver of fiscal challenges for the state and local government sector in the long term continues to be the projected growth in health-related costs. Specifically, state and local expenditures on Medicaid and the cost of health care compensation for state and local government employees and retirees are projected to grow more than GDP.

This should be a major concern for Pennsylvania lawmakers and taxpayers, as Medicaid spending has been growing significantly faster than the economy.

Welfare spending, driven by Medicaid, is one of the four alarms that threatens Pennsylvania's economy. As we have written about before, and noted in the GAO report, Medicaid costs will rise even faster under the new federal health care law, PPACA, which increases eligibility and includes a "maintenance of effort" requirement that prohibits states from making significant changes to existing programs.

For more on the fiery threat of rising Medicaid costs, check out our report, Ending the Cycle: Reforming Welfare in Pennsylvania.

posted by NATHAN BENEFIELD | 00:04 PM | 0 comment

APRIL 23, 2012

Chart of the Day: Pennsylvania School Revenue per Student

Critics of state spending cuts claim there is a lack of funding for public schools. But from the 1995-96 school year through 2009-10 (the latest year with data available from the Pennsylvania Department of Education), public school revenues increased 44 percent, after adjusting for inflation, from $10,000 to more than $14,000 per student.

posted by NATHAN BENEFIELD | 02:12 PM | 0 comment