AUGUST 18, 2010

"Across the Board" Budget Cuts are Lazy Policy

Gov. Rendell announced that to balance the Pennsylvania state budget -- after getting $250 million less from Congress than predicted -- he would be ordering cuts of 1.9% "across-the-board," from all departments. He also said about 100 state workers would be laid off, a slight decrease from his earlier prediction of 20,000.

Across the board cuts are good politics, but lazy public policy. State lawmakers need to prioritize spending and eliminate areas that aren’t core functions of government.

For example, a number of House Republicans sent a letter to the Governor demanding the elimination of $100 million in pork-barrel programs often called WAMs. Many of these line items had been eliminated in 2009, but were thrown back in this year, without warning.

Philadelphia Daily News columnist John Baer likes the idea of cutting WAMs, and cites bi-partisan support for it, and some other areas:

Any WAMs, says Rep. Gene DePasquale, D-York, "should be first to go . . . clearly before cuts to health care, education or environmental protection."

Rep. Bryan Lentz, D-Delco, calls cutting WAMs "a good suggestion."

Rep. John Yudichak, D-Luzerne County, says the Legislature "has to put more on the table," including long-hoarded leadership accounts, which he figures at about $200 million and calls "a padded reserve to buttress leaders."

And Philly Democratic Sen. Mike Stack says the state can rake in $100 million by legalizing small games of chance.

Hey, why not? We legalized large games of chance.

So, just like that - with WAMs, slush funds and video poker - we're at roughly $400 million, and that's without savings from salary/perk/pension cuts.

It's just too bad that none of these suggestions come from legislative leaders.

posted by NATHAN BENEFIELD | 06:09 PM | 0 comment

AUGUST 17, 2010

State Budget Gaps and State Budget Growth

In a recent report, Matthew Mitchell from the Mercatus Center provides solutions to the "rock and hard place" situations states are finding themselves in while they try to reconcile state budget deficits.

The study looked at each state's policies and approaches that lead to each state's budget predicament. The patterns that emerged provide lawmakers an idea what not to do:

1. State governments that spent a larger fraction of state income - and had done so for many decades - experienced smaller percentage budget gaps in FY 2010. That is, states that historically spent more per person had lower budget shortfalls, perhaps due to the fact that their tax systems supported over-spending, contrasted with states that recently increased spending during boom times.
   
2. States whose per capita spending levels increased the most over the last two decades had larger percentage budget gaps in FY2010.
   
3. States whose policies permit economic freedom (lower taxation and less regulation) and states with strict balanced budget requirements experienced smaller budget gaps.

Pennsylvania was rated among the states with "weak balance budget requirements" because it allows the deficit to carry over to the next year. States with strict balanced budget requirements had budget deficits 8% to 10% less than the average state.

Based on the report's findings, Pennsylvania can decrease its budget gap by ending deficit rollovers, lowering taxes, reducing regulations, and restraining spending growth.

posted by KATRINA CURRIE | 10:14 AM | 0 comment

AUGUST 12, 2010

Rendell and the Missing $30 Million

Yesterday, Gov. Rendell told lawmakers that after Congress passed legislation to increase federal aid to states for Medicaid (FMAP) and to school districts - and also cut funding for food stamps in future years - the Pennsylvania state budget was $282 million out of balance. This number seemed a bit odd to me, giving the budget had included (against sound judgment) $850 million in FMAP money and got about $600 million.

I don't want to brag, but I'm pretty good at math. Good enough, at least, to know that this math problem doesn't quite work out:

$850 m
- 600 m
$282 m

The answer to my curiosity was answered by Scott Detrow, with a parenthetical comment (emphasis added)

Pennsylvania banked on $850 million in federal aid, but Congress only approved $600 million. That, plus an increase in state medicaid costs, creates the $282 million deficit.

In other words, one month into the fiscal year, Gov. Rendell is already spending $30 million more than was budgeted.

Gov. Rendell also outlined his plans for filling the $282 million gap, which includes a 1.9% "across-the-board" cut from discretionary spending, $50 less in the basic education subsidy, and $70 million from a yet-to-be enacted tax on natural gas.

In contrast, 30 House Republicans sent a letter to the Governor demanding the elimination of $100 million in pork-barrel programs often call WAMs. Many of these line items had been eliminated in 2009, but were thrown back in this year, without warning.

posted by NATHAN BENEFIELD | 08:10 AM | 0 comment

AUGUST 9, 2010

Are Taxpayers Subsidizing Learning or Partying?

The good news: Penn State is no longer the #1 party school in the US, according to the Princeton Review's (user account) annual student-produced rankings. It has fallen to #3.

The bad news: Pennsylvania's 2010-11 budget still allocates about $333.9 million to the institution, a number only slightly lower than the 2008-09 expenditure. Temple will receive $172.7 million and Pitt will receive just under $168 million.

Legislators should reconsider state funding for colleges in light of "Leisure College, USA," a new paper published by two California professors. The authors find college students are studying on average 10 hours less than their 1961 counterparts and are still receiving good grades. They identify technological advancement and relaxed standards as the culprits- allowing students to get by while maximizing leisure time.

Patrick Allitt elaborates on the study, concurring that educational standards have become lax. If students spend only 14 hours per week studying, they have time to pursue many other activities. At Penn State, one of these seems to be drinking, as the school ranks #2 in the "Lots of Beer" category.

Facing massive budget shortfalls, lawmakers should question the efficacy of higher education subsidies. Are we funding learning or partying?

posted by LEAH ACHOR | 03:00 PM | 0 comment

AUGUST 5, 2010

Rendell's Made-Up Government Workers Layoffs

Here is a letter to the editor I recently submitted on Gov. Rendell's threats of layoffs if Congress doesn't give him FMAP Money:

Gov. Rendell has been busy lobbying Congress, claiming that if they don't give Pennsylvania $850 million in federal taxpayer funds for Medicaid, 12,500 state and local government workers will be laid off. Unfortunately, too many in the media have run this number, even though it was pulled from thin air. Just last week, the Governor pegged the number at 24,000.

The state has no plan in place if the federal funding doesn't come, nor do local governments have plans if they don't get state aid. Thus, there is no way of knowing the impact on government jobs.

This is the same tactic Gov. Rendell has used year after year-threaten layoffs or cuts to popular services to push more spending. It seems like a "mad libs" game: all you have to do is insert a dollar amount and a tragic outcome.

Additional federal dollars will only briefly satiate state spending. Instead, we must address out-of-control state spending. Gov. Rendell grew the state budget by $8 billion - double what it needed to keep pace with inflation. Overspending continues on pork-barrel programs like WAMs, borrowing for projects like the Arlen Specter Library and the Jack Murtha Center, nation-leading corporate welfare grants, and spending millions to lobby Congress for more money.

Over the past year, Gov. Rendell has slimmed down by sticking to a strict diet. He needs to do the same with state government.

As I've noted recently, if you follow me on Twitter, at the same time Gov. Rendell and others are threatening layoffs among school teachers (and the equally popular firefighters and police), the National Center for Education Statistics reports that, nationally, school employment grew by 1.8% last year, while enrollment dropped. And Pennsylvania teachers are striking for higher wages and benefits. Maybe, just maybe, our education system isn't as underfunded as Gov. Rendell would have you believe.

posted by NATHAN BENEFIELD | 02:57 PM | 0 comment

AUGUST 2, 2010

What Happens to PA Budget without FMAP Money

Gov. Rendell is supposed to meet with lawmakers today to discuss options if Congress doesn't approve the $850 million in federal FMAP funds.

Pete DeCoursey (subscription) breaks down the effect on welfare spending, which I try to summarize in fewer words, using a chart breaks down the spending.

The bottom line is, even if Pennsylvania does not get the federal Medicaid money, the cuts have to come from elsewhere. The state can't change eligibility and continue to receive stimulus funds, because of the "maintenance of effort" requirement.

posted by NATHAN BENEFIELD | 09:47 AM | 0 comment

JULY 28, 2010

How to Reduce Welfare Fraud

Following Matt Brouillette's commentary on whether Tom Corbett (should he win) can balance the budget and keep his 'no tax' pledge, we got an email from a reader wondering how we can realize savings in Medicaid and welfare, just because there is fraud.

To start with, check out Elizabeth Stelle's testimony on welfare fraud and abuse for solutions, including administrative action (the Rendell Administration cut investigations into welfare fraud by 50%, largely simply to boost the number of "people served"), whistleblower protection laws, and enabling recovery audits. In fact, the entire hearing is quite informative.

The House GOP includes reducing welfare fraud in their Solutions for PA. The highlights of their legislation on welfare reform can be found here. In addition to these Rep. Bryan Cutler has legislation (HB 1637 and HB 1638) that would impose stricter requirements for income verification.

The Senate Cost-Savings Commission outlined their own series of reforms in the Department of Public Welfare. Their report - which had the unanimous support of the members, including the self-proclaimed "most progressive member of the Pennsylvania Senate," Daylin Leach - estimated cost savings at robust $380 million per year.

So yes, there are policies to reduce welfare/Medicaid fraud, and there is a lot of support for these reforms.

posted by NATHAN BENEFIELD | 02:39 PM | 0 comment

JULY 28, 2010

What if State Government Hired a Psychic?

The Tribune Review adds on to the continuing Orie sisters saga, that not only did they seek the advice of a clairvoyant, but that clairvoyant asked for a job in state government.

While this represents news of the weird, it also made me think, maybe Pennsylvania needs an official state psychic.

For instance, a psychic might have predicted that:

• The state would not have received $850 million from the federal government in FMAP funds. Gov. Rendell now says that money is unlikely, less than a month after banking on it to balance the budget.
  

• The federal government would reject I-80 tolling. Since Gov. Rendell and lawmakers had banked on this for $415 million, they now are holding a "special session" on transportation funding.
  
  
• State revenues would not "bounce back" as the administration predicted in April. In reality, Pennsylvania collected $400 million less than was expected.
  
  
• The 2008 budget would end in a huge deficit, which ended up being $3.2 billion.
  
  
• Using the MCare fund to balance the state budget would not work. Earlier this year, the Commonwealth Court ruled that this raid of the MCare money was illegal and must be repaid; thus creating another $800 million hole in the Pennsylvania state budget.
  
  
• The federal "stimulus" legislation would do little to spur economic growth. Today, unemployment is substantially higher than proponents predicted it would be without the stimulus.
  
  
• A minimum wage increase would result in lost jobs - which we saw, beginning with younger, low-skilled workers, before spreading to the rest of the economy.
  
  
• The pension crisis would not be solved by endless investment gains. Indeed, the projected increase in taxpayer contributions in scheduled to rise by about $1,300 per household in two years.

Wow, maybe we do need a psychic. But you know who else could have told the our elected officials all this? These guys!

posted by NATHAN BENEFIELD | 08:38 AM | 0 comment

JULY 22, 2010

Check Out State Budget Solutions

State Budget Solutions is a new website put together by a coalition of free-market organizations. They've been up for a while with a "soft launch," but had their "hard launch" last week.

The site includes compile policy reports on best budget practices from the 50 states, resources on state budgets, and a blog rounding up state budget news.

The three principle solutions they advance are to

1. Reduce state spending
2. Reject tax increases
   
3. Adopt fundamental reforms
   

The site also features a snapshot of each state, like a page on the Pennsylvania state budget as well as offering resources for activists in Pennsylvania.

posted by NATHAN BENEFIELD | 08:40 AM | 0 comment