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 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 8, 2012

Correcting Corrections Correctly

A look at Senate Bill 100

Over the last 30 years, Pennsylvania's incarceration rate has increased by 500 percent and corrections spending has skyrocketed 1,700 percent. The unprecedented prison population growth at unsustainable costs was caused by a breakdown in our criminal justice system, not an increase in crime or statewide population growth. 

Evidence-based policy reforms should embrace the following three principles:

1. Keep Low-Risk Cases Out of Prisons. Research indicates that while imprisonment keeps offenders from committing crimes while in prison, it does not deter crimes after release, and may even make low-risk offenders more likely to commit future crimes.
2. Reduce Recidivism. Inmates must be rehabilitated by addressing behavioral and substance abuse issues. Nearly 45 percent of Pennsylvania offenders return to prison after three years. A significant factor is technical parole or probation violations such as breaking curfew, not new crimes.
3. Fund Results, Not Just Punishments. Criminal justice reforms should protect citizens, lower crime rates, and control spending.

Senate Bill 100

This legislation primarily addresses how the state correctional system handles nonviolent offenders with drug and alcohol addictions. 

• Risk Assessments Guidelines. An up-front risk assessments tool is added into the state's sentencing guidelines.
  • This will sort out high risk cases that should be in state prison from lower risk cases that may be better managed in less expensive alternative programs.
• Alternative Program Eligibility. As an alternative to traditional prison, offenders may be sentenced to one of the state's alternative sentencing programs, designed for nonviolent criminals, often dealing with substance abuse. SB 100 makes the following changes:
  • Allows eligible offender to be sentenced to a state-level alternative program even if a mandatory minimum sentence applies. Currently, minimum sentences disqualify many otherwise eligible offenders.
  • The age criteria for an inmate to be sentenced to Quehanna Motivational Boot Camp increased from age 35 to 40. Modeled after military boot camp, it delivers a rigorous, regimented schedule. Successful program completion earns inmates a reduced sentence.
  • Offenders with low-quantity drug trafficking offenses may be sentenced to County Intermediate Punishment. Offenders serve their sentence and receive appropriate treatment at the county level instead of state prison.
• County "HOPE" Courts. Counties can establish an innovative probation program that provides swift, predictable sanctions on probation violators. Modeled after Hawaii's Opportunity Probation with Enforcement (HOPE) program to incentivize probationers to stay drug and alcohol free.
  • In a HOPE program, drug offenders must call every morning to see if they must report to court for a drug test. Failure can result in immediate jail time. As a result, positive drug tests have dropped more than 70 percent and new arrests cut in half, saving an estimated $4,000 to $8,000 per offender.
• Counts Jail Time towards Prerelease Center Eligibility. One of the time-eligibility requirements an inmate must satisfy before entering a prerelease center is serving at least nine months of their sentence in prison. Under this law, time served in county jails and would count towards this minimum. Violent and sex offenders are ineligible.
  • Prerelease programs provide low-risk offenders opportunities for reintegration into communities through work, education and vocational training release as well as community centers for specialized additional treatment and guidance and counseling.
  • State corrections facilities receive a significant number of offenders with short sentences that would be better served in community centers than state prisons.

Recommendation for Improvement

• SB 100 makes small expansions in eligibility criteria for the state's successful alternative sentencing programs. This should be extensively expanded, particularly allowing more inmates convicted of substance abuse.
  • At a minimum, the list of offenses ineligible for alternative sentencing should not be expanded.
• A sentencing judge should be able to order an offender to participate in an alternative sentencing program without approval by the prosecutor.
• There should be incentives for counties to establish a "HOPE" court style program or require counties to participate.

posted by KATRINA CURRIE | 09:50 AM | 0 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 4, 2012

HOPE for PA Corrections Reform

Launched in 2004, Hawaii's Opportunity Probation with Enforcement (HOPE) is an innovative supervision strategy that provides swift, predictable sanctions on substance-abusing probationers.

Research shows the program has reduced probationers' positive drug tests more than 70 percent and traditional probationers are three times more likely to have probation revoked than HOPE participants, saving taxpayers saving an estimated $4,000 to $8,000 per offender.

Senate Bill 100, which would treat nonviolent offenders with drug and alcohol problems, includes language for counties to establish "HOPE" Courts. This legislation could be improved by providing incentives for counties to establish a "HOPE" program or requiring counties to participate.

Pennsylvania's corrections spending is part of the four-alarm fire that threatens Pennsylvania's fiscal house. Learn more about principled corrections reforms here.

posted by KATRINA CURRIE | 05:30 PM | 0 comment

MAY 3, 2012

Reform Bills Would Begin to Reduce Fiscal Fire

While the fiscal fire is raging across Pennsylvania, Rep. Eli Evankovich's pension reform proposal begins to extinguish the flames that threaten to consume the commonwealth. We've been on record for years with a five-step solution to the pension crisis. 

Rep. Evankovich's bill would place all future lawmakers and their staff into a defined contribution plan similar to the 401(k) plans common in the private sector. Currently, state teachers and government employees are under a defined-benefit plan that guarantees benefits based on salary and years of service.

Currently, taxpayer contributions for our two statewide pension plans, PSERS and SERS, are projected to increase from $1.7 billion in 2011-12 to more than $6.1 billion in 2016-17— a 257% increase. Evankovich's bill, along with bills introduced by Rep. Krieger, Rep. Petri and Rep. Boyd are a step in the right direction, as are Gov. Corbett's now numerous statements of concern about pensions.

EDITORS NOTE: This post originally implied Rep. Evankovich's bill would require public school teachers and state employees to enroll in a defined contribution plan.

posted by ELIZABETH STELLE | 06:05 PM | 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