Pennsylvania State Budget

Five Takeaways From the Governor's Budget Proposal

Feb 7, 2017 | Commentary by Nathan Benefield

Today Governor Wolf laid out his plan to balance the 2017-18 state budget which faces a roughly $3 billion gap between expected spending and revenues. 

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Employee Compensation Drives Spending Growth

PennLive released a list of state government employees earning more than $100,000 in salary today. While the list should open some eyes, it doesn’t capture the full cost of state employees. Employee benefits, not salaries, are the bigger cost-driver.

In the past year alone, total compensation per state worker increased by more than $4,400even though the average salary per employee declined

In 2015-16, total compensation per state worker reached more than $97,000 per employee, driven by skyrocketing employee benefits over the past decade. While state employee salaries have risen by 1.4 percent since 2007 (in inflation-adjusted dollars), average benefits per employee have increased by an astonishing 76.8 percent.

Benefits per employee now represent 80 percent of the cost of salary—a stunning figure compared to the private sector norm of 43.2 percent.

Commonwealth Agency Employment & Compensation (Inflation-Adjusted 2016 Dollars)

Source: Office of Administration, "2017 State Government Workforce Statistics."  The report details statistics for agencies under the PA governor's jurisdiction.

The biggest increases in the past year were in pension and retiree health care costs. Employee health care and workers’ compensation have also increased dramatically over the past decade.

This puts added strain on the state budget and highlights the pressing need for transformative pension reform. Even though there are 4,200 fewer employees under the governor’s jurisdiction, the total cost for these employees grew by $2.1 billion in the last ten years.

See the chart below for more details.

Lawmakers can address this disparity and rein in the costs of government by bringing public employee benefits in line with the private sector.

For example, moving all new employees to a 401(k)-style retirement plan, which is what is offered to most private sector workers, will lower future costs while offering employees more control over their retirements.  

Promoting parity between private and public sector medical plans is another way to close the compensation gap. According to data obtained from the Office of Administration, public employee contributions are projected to cover approximately 11.3 percent of state health care expenditures. In contrast, private sector employees pay about 20 percent for their share of insurance coverage. 

Aligning public sector benefits with those found in the private sector can help reduce compensation inequality and prevent more tax hikes on working families.

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posted by Nathan Benefield | 09:59 AM

News Release: Wolf Pivots on Massive Tax Hikes, Offers Limited Structural Reforms

Budget Includes Belt-Tightening But Relies on $1 Billion in New Taxes

February 7, 2017, Harrisburg, Pa.—Pivoting from the past two years, Governor Tom Wolf today proposed a state budget that shifts from massive personal income and sales tax hikes and spending increases to streamlining state government. While his proposal is an improved starting point in budget negotiations with the General Assembly, it still calls for $1 billion in new taxes and would increase the state’s tax burden by $315 per family of four.

“On the positive side, Gov. Wolf outlined a budget proposal that recognizes Pennsylvanians want Harrisburg to spend smarter, not more,” commented Nathan Benefield, vice president and COO for the Commonwealth Foundation. “But while offering several important ways to streamline state government, Wolf did not completely abandon his demand for higher taxes on working-class Pennsylvanians or tackle the structural reforms our state needs.”

Under Wolf’s proposed budget:

  1. Government Would Streamline—Gov. Wolf’s proposal shows a concerted effort to control spending. Wolf proposed multiple department mergers that would eliminate unnecessary bureaucracy and improve service efficiency. These include merging four departments into the Department of Health and Human Services, merging the Department of Corrections and the Board of Probation & Parole into one agency, merging the investment offices of the state’s two pension funds (SERS and PSERS), and implementing new sentencing reforms.
     
  2. Corporate Welfare Would Decrease—Gov. Wolf’s proposal to reduce corporate welfare by $100 million is a laudable first step. Unfortunately, Wolf treats scholarship tax credit programs (EITC/OSTC) that help children access a quality education the same as handouts to multi-billion dollar corporations. It’s uncertain how these scholarship programs would fare under Wolf’s proposal. Lawmakers should protect and expand the EITC/OSTC programs, which actually save taxpayer dollars, while completely eliminating $800 million in unfair business handouts.
     
  3. Spending Would Rise—Wolf’s budget calls officially for $570 million in new General Fund spending, but this number is actually higher, since he proposes moving some spending off the General Fund books and into the shadow budget. Wolf’s spending increase would be approximately 1.8 percent, compared with 1.16 percent if the state limited spending to inflation plus population growth, as outlined in the Taxpayer Protection Act which the Senate Finance Committee advanced today.
     
  4. Pennsylvanians Would Bear Brunt of Higher Business Taxes—Gov. Wolf proposed targeting businesses for tax hikes by expanding the sales tax to custom software services, commercial storage, airline food, and aircraft sales. As Philadelphians have seen with the soda tax, customers—not businesses—end up paying these taxes.
     
  5. Workers Would Lose Jobs—Wolf’s budget calls for a 60 percent hike in the minimum wage, which would stifle job opportunities and harm those Wolf claims will benefit by forcing business owners to lay off workers.
     
  6. Natural Gas Companies Would Pay an Added Tax—For the third time, Gov. Wolf has proposed an added tax on gas drillers. These companies already pay an impact fee, along with the taxes every other Pennsylvania business pays. Gov. Wolf would add an additional 6.5 percent severance tax to this industry, which is already laying off workers.

“While the governor has outlined several positive steps in the right direction, Pennsylvania still needs transformative structural reforms to end the cycle of budget shortfalls without raising taxes,” Benefield added. “We can continue with one-time fixes, or we can do the hard work needed to solve the budget crisis once and for all. This includes limiting state spending to the growth of inflation and population through the Taxpayer Protection Act, fully privatizing the state liquor system, reforming pensions to create an affordable system for taxpayers that gives workers more flexibility, and redesigning human services.

“The good news is the culture in Harrisburg is shifting decidedly in favor of putting taxpayers’ interests before special interests,” Benefield continued. “Without a doubt, Gov. Wolf has experienced this culture change over the past two years and moderated his positions in response. His budget proposal offers lawmakers a starting point, but now they need to go a step further. Legislators must commit to ensuring every dollar Harrisburg spends is spent wisely before asking taxpayers for more of their hard-earned money.”

Nathan Benefield and other Commonwealth Foundation experts are available for comment. Please contact Gina Diorio at 862-703-6670 or gld@commonwealthfoundation.org to schedule an interview.

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The Commonwealth Foundation transforms free-market ideas into public policies so all Pennsylvanians can flourish.

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posted by Commonwealth Foundation | 04:00 PM

Five Takeaways From the Governor's Budget Proposal

This morning Governor Wolf laid out his plan for the 2017-18 state budget. Here are the five things you need to know:

1. Shift to redesigning government. This is a sharp contrast from Gov. Wolf’s first two budget addresses. His focus has shifted from massive tax and spending increases to streamlining government and making government more efficient. This is a positive development, representing the economic and political reality in Pennsylvania.

2. Good news and bad news on taxes. Gov. Wolf has dropped proposals to raise the income tax or raise the sales tax ratetwo cornerstones of his first two budget proposals. He touts this as “no broad-based taxes” in the new budget.

He does, however, propose imposing the sales tax on several businesses services that are untaxed. Absent tax reductions elsewhere, it will increase Pennsylvania’s tax burdenalready 15th highest in the country.

For the third time, Gov. Wolf proposed a natural gas severance tax. This 6.5% proposal isn’t likely to get traction in the legislature. The severance tax, which targets one group of people, ignores the 5% tax drillers already pay, plus all of the high taxes every other Pennsylvania business pays. With gas prices still depressed, this tax wouldn’t generate much revenue, and would only hinder job growth at a time the gas industry is already laying off workers.

In total, Wolf calls for $1 billion in additional taxes or $315 per family of four.

3. Serious efforts to control spending. From closure of SCI Pittsburgh to reducing corporate welfare, Governor Wolf is making a real effort to control spending.

His proposal to reduce corporate welfare tax credits by $100 million is a laudable first step towards ending the $800 million practice of handouts to corporations. Yet, at the same time, he expands certain corporate welfare programs.

In addition, his corporate welfare reduction plan treats the Educational Improvement Tax Credit (EITC) and the Opportunity Scholarship Tax Credit (OSTC) like other tax credits, potentially cutting funding for students’ scholarships. Read more from James about why that would be a mistake, and why we should increase opportunities for educational choice.

Wolf has proposed merging four departments into the Department of Health and Human Services ($100 million savings); the Department of Correction and Probation & Parole into one agency ($10 million savings); and merging the management of the states two pension funds (SERS and PSERS). These mergers are intended to both eliminate unnecessary bureaucracy and to provide more efficient services. In principle, these recommendations are a welcome development. Commonwealth Foundation has long highlighted the need to streamline state government.

Wolf has outlined $2.1 billion in government efficiencies through these reforms—though these proposals will require more vetting and analysis to see if the administration's estimates hold true. More than $300 million of this is not savings but "revenue enhancements."

Gov. Wolf’s estimate of $95 million in new revenue from increasing the minimum wage mandate is the most dubious. Not only is he discounting the individuals who would lose their job under this mandate, but this projection acts as though a law can mandate a more robust economy. It doesn’t—minimum wage laws merely redirect money in the economy. 

Finally, the governor has proposed new sentencing reforms designed to reduce recidivism and help parolees stay in the community. These recommendations are estimated to save $108 million over five years.

4. Modest spending increase above TPA with some accounting gimmicks. Gov. Wolf proposes a General Fund budget of $32.34 billion, representing an increase of 1.8 percent. While a modest increase, certainly in comparison to prior proposals, it exceeds the index in the Taxpayer Protection Act (advanced in the Senate today). The TPA limit—the average increase in population and inflation over the past three years—was only 1.16 percent, as Pennsylvania’s population declined last year.

The baseline for this comparison also includes $234 million in “supplemental appropriations”—spending levels higher than the legislature passed last June. His proposal calls also for $300 million in borrowing to fund programs like health research grants and grants to the arts, which merely shifts spending to the future.

In total, the operating budget would reach $81 billion, or more than $25,000 per family of four ($6,300 per person).

5. Need remains for transformative structural reforms: No amount of new taxes, one-time revenue tricks or borrowing can permanently fix the commonwealth's fiscal woes. Pennsylvania is suffering from a deep-seated structural spending problem.

For starters, almost half of the Pennsylvania state operating budget (49 percent) is spent on Human Services, with the bulk of that on Medical Assistance and Long Term Living (i.e., Medicaid programs). Human Services costs are expected to increase by more than 5 percent every year, while state revenue growth is projected at around 2 percent per year. Yet Medicaid patients experience inferior care, such a long waiting times and difficulty finding a provider.

Structural reforms are essential to solving Pennsylvania's budget crisis once and for all. These structural reforms include limiting state spending to the growth of inflation and population through the Taxpayer Protection Act, fully privatizing the state liquor system, and reforming pensions to create an affordable system for taxpayers that gives workers more flexibility.

 

Governor Wolf's 2017-18 budget proposal is a welcome departure from past massive tax hike attempts. However, it doesn't do far enough to stem the rising costs of state government, which continues to burden families across the state.

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posted by Nathan Benefield | 01:25 PM

Budget Solution: Stop Paying Extra for Construction Projects

'Prevailing Wage' Costs Pennsylvanians Hundreds of Millions of Dollars Yearly

February 6, 2017, Harrisburg, Pa.—Can you imagine taking your car to the shop for a major repair, learning the cost, and responding, “I’d like to pay 20 percent extra!”

No? Then you probably don’t work in Pennsylvania government.

Pennsylvania’s prevailing wage law, enacted in 1961, needlessly raises the costs of construction projects by requiring state and local governments to pay contractors wages that are artificially inflated by as much as 30 to 75 percent. That’s why eliminating prevailing wage is among Commonwealth Foundation’s policy solutions to help state government work for all Pennsylvanians.

Solution #6: Stop Paying Extra for Construction Projects

The prevailing wage law applies to most taxpayer-financed construction projects—from road paving to school roof repairs. Municipalities rank the prevailing wage as one of the most burdensome mandates in the state, according to a Local Government Commission survey. Local governments even frequently defer routine repair and construction projects due to costs mandated by the prevailing wage law.

Eliminating prevailing wage laws could save Pennsylvanians between $880 million and $2.6 billion on construction costs annually.

“Gov. Wolf and lawmakers have prioritized government efficiency this budget season, but state and local governments are required to pay extra when contracting for construction projects,” commented Bob Dick, senior policy analyst for the Commonwealth Foundation. “What could be more inefficient? Lifting this archaic mandate would save hundreds of millions of dollars per year without affecting construction quality.”

In addition to this and other money-saving reforms—like liquor privatization, cutting corporate welfare, tackling the shadow budget, student-focused education funding, and corrections reform—Gov. Wolf and lawmakers must also enact long-term, structural changes to state government.

These include transitioning new public employees to 401(k)-style retirement plans, restructuring welfare to encourage self-sufficiency, and limiting annual state spending increases to the rate of population growth plus inflation.

See also:

Bob Dick and other Commonwealth Foundation experts are available for comment. Please contact Gina Diorio at 862-703-6670 or gld@commonwealthfoundation.org to schedule an interview.

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The Commonwealth Foundation transforms free-market ideas into public policies so all Pennsylvanians can flourish.

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posted by Commonwealth Foundation | 11:42 AM

Budget Solution of the Week: Welfare Reform

No series on budget solutions would be complete without a taking a look at the fastest growing state department, the Department of Human Services (DHS).

The Independent Fiscal Office projects spending in DHS—where welfare programs are housed—to grow by more than $1 billion in 2017-18. The increase alone nearly matches the Pennsylvania Treasury Department’s entire budget, which is the fourth largest in the state.

Calling the system unsustainable is an understatement. Reform is paramount because too often the system harms those it purportedly serves by trapping them in a cycle of poverty and dependence on political whims.

Medicaid is a prime example. It does a poor job of providing quality care and provides little flexibility for our population's diverse health needs. One solution is to seek flexibility from the federal government through a waiver or future block grant to create a program that provides patients control over their care and a smooth transition to private insurance.

If lawmakers have the flexibility to reform Medicaid, they can reduce costs and ensure able-bodied adults aren’t crowding out services for those who need them most. Florida and Rhode Island successfully improved care and reduced costs through innovative waivers.

In addition to Medicaid, SNAP (also known as food stamps) and Child Care Works should command the attention of policymakers. In our brief, Embracing Innovation in State Government, we recommend implementing stronger work requirements for both programs as a way to boost the incomes of beneficiaries to the point where they no longer require government assistance.

When Kansas implemented work requirements for SNAP incomes rose by an average of 127 percent, which led to a $1.3 million annual increase in tax collections. When Maine instituted SNAP work requirements caseloads dropped by 80 percent.

In addition to the reforms above, auditing welfare programs is yet another way to drive down costs and concentrate limited resources on truly needy Pennsylvanians. Lawmakers could authorize “recovery audits” whereby private firms review programs to determine if people are making proper use of government assistance. Any payment to these firms could be made contingent on savings realized by rooting out fraud.

Unfortunately, the Wolf administration has publicly resisted these win-win solutions. In the past week two weeks, the governor announced he is against a Medicaid block grant and lauded the addition of 700,000 Pennsylvanians to Medicaid roles in the course of two years.

Constant expansion of our welfare programs is reason for concern, not celebration. Until we commit to ending the unhealthy cycle of dependency on government benefits, we cannot solve the state’s unhealthy cycle of fiscal woes.

Missed a previous budget solutions blog? You can read the entire series here: Part I, Part II, Part III, & Part IV

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posted by Bob Dick | 05:27 PM

Audio Blog: Fixing the Spending Problem: Cutting Corporate Welfare and Privatizing Liquor

Recently, CF’s Elizabeth Stelle appeared on WNPV Radio’s “Regarding Your Money” with host George Toth to discuss Pennsylvania’s growing deficit. Our budget deficit this year is projected to pass $500 million. With pressure to raise taxes, Gov. Wolf and lawmakers may be tempted to look for ways to bring in more revenue rather than reduce spending.

Elizabeth urges lawmakers and Wolf to avoid tax hikes and instead look to restructure government. Specifically, she offers a number of reforms to address spending, including corporate welfare reduction and full liquor privatization.

Pennsylvania gives about $800 million in corporate welfare to companies all over the state, with little evidence that this spending helps job growth or stimulates the economy. Adam Millsap, Research Fellow at the Mercatus Center, found the unseen consequences of corporate welfare often inhibit overall economic growth. Elizabeth explains why reducing or eliminating corporate welfare should be a priority for lawmakers.

Full liquor privatization, meanwhile, would not only enhance consumer choice and convenience but also generate revenue for the state through the auctioning of wholesale and liquor licenses.

Raising taxes has been tried, and an enormous debt still looms over us. Elizabeth explains why we must fix the fundamental spending problem, not just the symptoms.

Click here or listen below for the full interview: 

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posted by Don Lim | 11:12 PM

Pennsylvania Deficit Watch: February 2017

Revenue collections underperformed again in January, according to the Department of Revenue. This is the third straight month—and the sixth of the last seven—in which revenue collections fell short of official estimates.

The state collected $2.6 billion last month—$49.8 million or 1.8 percent less than anticipated. To date, revenue collections are approximately $416.8 million below estimates.

 

The $1.3 billion revenue package enacted in July has not generated enough revenue to pay for the state’s $1.6 billion spending increase. The package included $650 million in tax hikes, which not only failed to balance the state budget but also destroyed jobs throughout the commonwealth.

The latest revenue estimates from the Independent Fiscal Office (IFO) suggest the state will end the year with a deficit exceeding $700 million absent any significant policy changes or revisions to the state’s balance sheet.

The IFO warned about optimistic revenue projections back in August. At the time, the IFO identified major problems with the legislature’s assumptions and adjusted projections to account for them:

  • The legislature moved the Commonwealth Financing Authority (CFA) out of the General Fund Budget and created a new fund via the fiscal code. Legislative leaders have expressed an interest in passing gambling expansion to generate $100 million to cover CFA spending, but the proposal is still in the early stages of the legislative process. The IFO deducted $95 million from sales tax revenue to pay for CFA’s expenses.
  • The legislature predicted Act 39 (wine modernization) would raise $149 million in 2016-17. The IFO projected this number would be just $73 million—a $76 million difference.
  • Official projections over-estimated tobacco tax revenue (including taxes on cigarettes, e-cigarettes, loose, and roll-your-own tobacco). The IFO's estimate was $38 million less than official projections.
  • Official estimates assumed $75 million from the Philadelphia casino. The IFO does not expect the casino will generate revenue this fiscal year.

Though some of the above projections have changed, its clear Pennsylvania's current state budget was unbalanced from the start.

Acknowledging the seriousness of the commonwealth's financial position, legislative leaders and Gov. Wolf have committed to restructuring government. To achieve this goal, policymakers have a number of options, including a host of ideas found in our policy brief, Embracing Innovation in State Government. Our recommendations include, but are not limited to, the following:

With five months left in the fiscal year, revenue collections aren’t likely to improve much, if at all. A plan to reduce spending is needed soon to ensure spending matches revenues come June. The last thing Pennsylvanians need is another tax hike.

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posted by Bob Dick | 10:44 PM

Op-Ed: Opportunity Knocks for State Budget Innovation

“Nothing is more expensive than a missed opportunity.” Pennsylvanians should heed these words from author H. Jackson Brown, Jr. in the upcoming budget season. Governor Wolf and key legislative leaders repeatedly called this year’s state budget an “opportunity”—and rightly so.

The governor’s approach this year is vastly different from his 2015 plan, which called for the largest tax increase in state history and triggered the longest budget impasse in modern memory. It’s also a world away from Wolf’s retroactive income tax increase proposal last year.

Instead, Wolf recently promised, “I'm not going to call for an increase in the personal-income tax or sales tax. We have to make sure the Commonwealth lives within its means." This is a welcome change of heart.

In a matter of months, the policy discussion has flipped from demanding more from taxpayers to cost-cutting and restructuring state government. But closing this year’s estimated $524 million budget shortfall and tackling next year’s estimated $1.7 billion deficit while protecting Pennsylvanians from tax increases is no small task. It will require nothing short of reimagining how government operates.

Luckily, many immediate and long-term solutions exist. If Wolf and lawmakers want reform opportunities with cross-party appeal, here are three not to miss.

First, end unfair taxpayer subsidies to big business.

This year, state government will spend more than $800 million to bolster billion-dollar corporations like Amazon and Netflix, subsidize sports stadiums, and prop up the horse-racing industry.

Pennsylvania leads the nation in these corporate welfare handouts but has little to show for it. Despite more than $6 billion funneled to politically favored businesses since 2007, Pennsylvania trails the nation economically: Between 2005 and 2015, the state ranked just 35th in job growth and 31th in personal income growth.

Meanwhile, the ten states spending the least on corporate welfare from 2007-2015 enjoyed greater job growth than the top ten spenders.

House Majority Leader Dave Reed (R—Indiana) recently expressed interest in reducing corporate welfare spending—a great first step toward alleviating budgetary pressure.

Next, fix Pennsylvanians flawed sentencing system.

Since 2005, corrections spending has spiked 55 percent and is now the third-largest General Fund expense. Despite a welcome drop in the state’s prison population last year, Pennsylvania’s incarceration rate remains the highest among Northeast states. The culprit? Not an abnormally high crime rate but flawed sentencing, according to the Council on State Governments.

This year, inmates will cost the state $48,200 each on average, nearly equaling Pennsylvania’s $53,599 median household income. Parolees, though, cost about 90 percent less—averaging just $4,200. Because probation and parole violators account for nearly one-third of the inmate population, there is a huge opportunity for cost savings. Swifter and more predictable sanctions can prevent parolees from becoming resource-draining inmates, saving tax dollars without compromising public safety.

This is just one of several corrections reforms ripe for implementation as a follow-up to 2012’s universally acclaimed Justice Reinvestment Act.

Finally, Wolf and lawmakers must rein in the shadow state budget.

The General Fund budget, which monopolizes headlines, is just 40 percent of state government’s true $78 billion cost. Hidden in the remaining 60 percent are more than 150 “special funds” whose existence and cost is largely unknown.

These funds have been used, for example, to bankroll pool feasibility studies and golf course acquisitions, subsidize well-paid farmers on the backs of the poor, and funnel additional tax dollars to initiatives already funded through other government means. Worse, these funds are often on autopilot—growing each year without review from elected officials.

Consequently, the commonwealth’s total operating budget has climbed 184 percent since 1970—an inflation-adjusted $3,975 more per person. Redirecting or reducing duplicate and questionable funds will stop the shadow budget from diverting more and more tax dollars each year.

This budget season, Wolf and lawmakers will be tempted to rely on targeted tax increases—like last year’s e-cigarette and digital download taxes—to balance the budget. Indeed, Wolf has already proposed a new natural gas severance tax. If they choose higher taxes over reform, they will once again miss a critical opportunity to change the state’s trajectory. And nothing could be more expensive for Pennsylvanians.

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posted by Elizabeth Stelle | 01:36 PM

Budget Solution of the Week: Reduce Special Interest Spending

In our budget solutions blog series, we’ve covered the benefits of a government efficiency review, the need to modernize the commonwealth’s corrections system, and the importance of school choice. This week, we shift attention to special interest spending.

In Embracing Innovation in State Government, we recommend reducing spending on corporate welfare and in funds outside the General Fund Budget. Combined, these programs cost more than $2.6 billion.

If lawmakers reduced this spending by half—through program elimination or structural reforms—it would save approximately $1.3 billion. This savings could then be used to close a projected $1.7 billion shortfall in the 2017-18 budget.

All the corporate welfare programs and funds identified above deserve a thorough review, but a few stand out either for their extravagance or futility. Pennsylvania’s Film Tax Credit falls into the latter category. The Independent Fiscal Office analyzed the tax credit in 2013 and found most of the production-related wages went to nonresidents. And the return on investment was just 14 cents for every dollar in tax credits.

The credit is little more than an ineffective handout to the wealthy. According to a recent investigation by PublicSource, film production companies have sold off 99 percent of all credits redeemed. Effectively, the credit transfers wealth from taxpayers to corporations like Apple, Comcast, and Exelon.

Pennsylvania First is another corporate welfare program with a record of failure. In 2013, the Department of Community and Economic Development gave a Lehigh Valley Kraft plant almost $340,000 in subsidies to expand its operations. The plant eventually closed its doors late last year. After the announcement, the state vowed to recoup the subsidies—a move that could have been avoided had the state not taken on the role of an economic development agency.

In addition to corporate welfare, Harrisburg funds a collection of programs best described as nonessential. The most prominent example is the Keystone Recreation, Park, and Conservation Fund. Its past projects include pool feasibility studies, golf course acquisitions, and sports complex rehabilitations. Funding these types of projects while the state taxes businesses out of existence is indefensible.

For reformers looking to redesign government, eliminating ineffective and nonessential government programs would be a great place to start. Reducing special interest spending would shrink the budget deficit in the short-term and allow time for larger, long-term reforms to take effect.

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posted by Bob Dick | 10:43 AM

Budget Solution of the Week: School Choice

Earlier this month, House Majority Leader Dave Reed challenged his colleagues to change the way Harrisburg operates: “Now is the time to reimagine and redesign government, our state and our future.” A change in Harrisburg’s culture is surely needed. Decades of high taxes, wasteful spending, and poorly designed policies have sunk the commonwealth’s finances and stymied economic progress.

What's most devastating is when poor policies impact the future of our children—which is why reimagining our education system is so critical. Too often, Pennsylvania’s education model prioritizes systems over students. School officials—rather than parents—are given precedent to make consequential decisions affecting the education of more than 1.7 million students. This top-down management style has produced subpar outcomes in too many schools, forcing parents to seek alternatives to traditional public schools.

Unfortunately, not every family is lucky enough to send their son or daughter to a high-performing school. The education establishment will place the blame on funding shortages, but as my colleague James has noted, education spending is at its highest level ever. School districts spend, on average, $15,800 per student. This figure could always grow higher, but inflating school budgets will only add to Pennsylvania’s high tax burden, without guaranteeing any improvement in academic achievement.

The solution to the state’s educational woes doesn’t require more political control. It requires more parental control. To a limited extent, Pennsylvania encourages parental control with programs like the Educational Improvement Tax Credit (EITC) and Opportunity Scholarship Tax Credit (OSTC). But more needs to be done.

Every student deserves a quality education. And every family deserves to determine what a quality education looks like. Expanding school choice programs can help make these goals a reality. Putting parents firmly in control of educational decisions has led to improved student outcomes and savings for taxpayers. The latter is especially relevant in the context of the state’s fiscal outlook.

Pennsylvania is staring down a $600 million shortfall for the year, and will need to deal with a projected $1.7 billion projected shortfall in 2017-18. To address these challenges, CF released Embracing Innovation in State Government, detailing how policymakers can reduce state government’s cost to avoid another round of tax increases.

School choice is one of the cost-saving measures included in the report. The costs of the EITC and OSTC represent just a fraction of student funding in a traditional public school. For example, in 2013-2014, the average EITC scholarship was $1,587 per student, whereas funding in a traditional public school exceeded $15,000 per student. Moving students to the less expensive, more effective alternative nets taxpayers significant savings.

Taking a hard look at how Pennsylvania funds education will play a critical role in controlling spending and truly reimaging government. 

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posted by Bob Dick | 10:13 AM

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