FEBRUARY 7, 2012

Stop the Fiscal Inferno!

Burn, baby, burn, it's a fiscal inferno!

Okay, perhaps that's not exactly how the old disco song goes, but that's certainly how some politicians are singing it in Harrisburg. Pennsylvania's fiscal house is about to catch fire and they need to change their tune.

While bell bottoms and leisure suits have long since gone out of style, it has taken Pennsylvania far longer to snap out of the Seventies tax-and-spend mindset. Before Gov. Corbett and the legislature cut spending last year, state spending had grown for decades, far outpacing inflation and population growth. This built a budgetary bonfire that will soon reduce Pennsylvania families to ashes if we don't put it out now.

Yet, too many in Harrisburg continue to cling to a disco-era mentality, failing to create jobs, modernize antiquated "prevailing wage" mandates, privatize liquor stores, or save children from failing and violent schools.

Worse yet, a new, job-killing tax was revealed yesterday that just passed the Senate - a tax that would not put out the fiscal inferno, but instead would feed it. This came suddenly after a handful of legislators and staff struck a deal behind closed doors. As the fiscal inferno grows, we will watch thousands of jobs and affordable home energy go up in flames. Burn, baby, burn.

Don't stand by and watch the fiscal inferno destroy our financial future. Click here to ask your legislator to protect Pennsylvania's economy from the four-alarm inferno and click here to ask them to vote against a tax on Marcellus Shale drilling. It will take just a few short minutes; please take action right now! It's time for Harrisburg to snap out of the Seventies and for overgrown government and tax-and-spend attitudes to go the way of platform shoes and polyester double-knits.

posted by DAWN MELING | 03:31 PM | 0 comment

FEBRUARY 1, 2012

Criminal Justice Reforms to Reduce Spending & Crime

Change is on the horizon for Pennsylvania's Department of Corrections - now the third-largest state agency in the General Fund budget - which along with state debt, pensions and welfare threatens to bankrupt the state if left unchecked.

Last week, Gov. Corbett launched Pennsylvania's Justice Reinvestment Initiative (JRI), a working group tasked with controlling correction costs while maximizing public safety and reducing recidivism. The new panel has support from the Council of State Governments Justice Center and the Pew Center on the States; both experienced at helping states develop meaningful criminal justice reforms.

The JRI is a step in the right direction for the commonwealth, which needs to replace ineffective policies with those that lower crime rates, reduce re-offending, and control spending. To learn more about correction reforms, see our see our criminal justice recommendations.

posted by KATRINA CURRIE | 08:00 AM | 2 comments

JANUARY 20, 2012

Fiscal Outlook for Pennsylvania: Not Too Rosy

This week the new Pennsylvania Independent Fiscal Office held its first annual seminar on the state economy and revenue. After a series of presentations on the state of the economy and state budgeting/revenue from a national perspective—all with the perspective that robust growth is unlikely and risks to the economy persist—the IFO presented on future budget trends and released its five-year fiscal outlook.

Here are some highlights (or lowlights, to be accurate):

• Pennsylvania's population will continue to age, with an estimated 25 percent increase in senior citizens, and a 1.8 percent decline in working-age population.
  
• This translates into slow revenue growth: Estimated annual growth in General Fund Revenue is projected to average 1.6 percent annually for 2011-14, and 4 percent annually from 2015-17.
  
• This is in contrast to General Fund expenditures, which are expected to grow absent significant policy changes. The big categories of growth are Public Welfare (driven by Medicaid), Corrections, Pensions, and Debt.
  
  • General Fund Public Welfare spending is expected to go up by 8 percent per year from 2011-14. As noted, federal policy (stimulus and Affordable Care Act) is driving this growth—increasing Medicaid eligibility and preventing state reform through the "Maintenance of Effort" requirement.
  • Commonwealth debt payments will grow by 7.3 percent per year from 2011-14.
  • Pennsylvania's corrections spending is expected to grow 6.9 percent per year from 2011-14.
  • Commonwealth pension contributions will skyrocket by 40 percent per year over the next three years. As a share of General Fund spending, pension payments will rise from 4.2 percent for FY 2011-12 to 11.6 percent for FY 2016-17.
  • The IFO projects education spending will decline by 1 percent per year from 2011-14—this forecast is based on expected enrollment declines, rather than anticipation of legislative priorities.

All these forecasts are based on current policy, i.e., no changes to current programs. But it should be blatantly obvious that reform must occur. Lawmakers must tackle the big cost drivers. Pension reform, Medicaid and welfare reform, criminal justice reform, and reducing our debt burden must be budgetary priorities. Moreover, to improve the revenue picture lawmakers must focus on policies that promote prosperity.

posted by NATHAN BENEFIELD | 04:34 PM | 0 comment

JANUARY 5, 2012

Pennsylvania Budget Freezes in Perspective

Yesterday, Gov. Corbett and the Office of the Budget released a list of 2011-12 budgetary freezes—reductions in spending from the enacted General Fund budget—due in part to revenue shortfalls. I fully expect these reductions to be labeled "draconian." Here's some information to put the budgetary freezes in context.

1. General Fund Revenue Collections are $486.8 million behind forecast for the fiscal year, through half the year.
   
2. The enacted budget already spent more than the projected revenue collections: $27.1 billion to $26.6 in net collections, using the prior surplus to make up the gap.
   
3. The proposed freezes of $222 million represent less than 1 percent of the enacted GF budget. The portion the Governor can actually freeze (as the legislative and judicial and other requested freezes may not materialize) represents only a 0.57 percent reduction. And the General Fund represents less than half of total state spending, so it is important to keep these cuts in perspective and to consider the entire budget: i.e., if lawmakers think these programs are critical, perhaps they should reevaluate how other funds are spent.

For more, see our publication Understanding the Pennsylvania State Budget.

posted by NATHAN BENEFIELD | 10:41 AM | 0 comment

JULY 18, 2011

Penn State's Smallest Tuition Hike in Years

The conventional wisdom ever since March 8, when Gov. Tom Corbett made his budget address, has been very simple:  The sky is falling!  How, exactly?  In the form of crippling tuition increases at our public universities.  Why?  Because the governor and his allies in Harrisburg decided it was time to tighten the budgetary belt, not raise taxes.

The cries that the sky is falling have continued to echo through this past Friday, when Penn State University's board voted to raise in-state tuition for the main campus by 4.9 percent.  The Philadelphia Inquirer, for instance, reported that the university did this while "[c]oping with a nearly 20 percent drop in state funding."  But in so doing, the Inquirer and others missed the real story, which is:  This year's tuition increase was the smallest in years.

In fact, according to numbers pulled by my intrepid colleague Nate Benefield, 4.9 percent is a little over half the average Penn State tuition increase since 2001 (8.4 percent) and the lowest during that period.  The sky didn't fall!

Of course, as we noted over and over, there are many actions Penn State and Pennsylvania's other public universities could have taken to keep tuition the same or even lower it.  But the course of action Penn State  did take makes one thing very clear:  Universities will spend exactly as much money as they think they can.  This year, their estimation of that number went down, and it's about time.

posted by CHARLES MITCHELL | 03:39 PM | 0 comment

JULY 1, 2011

Cut Waste at This Temple, and I Will Praise It in Three Days

Temple University just announced that it is raising tuition by ten percent, blaming the new state budget.  Temple is an outstanding example of an institution that should have spent the months since Gov. Tom Corbett's budget address—when it became apparent that its generous subsidy from the taxpayers of Pennsylvania would likely be cut—fixing its biggest problems rather than lobbying for more of your money.  While Temple's statement brags about reducing its budget by $36 million, that's only about half of last year's proposed $69 million increase, and there's no indication it addressed pesky facts such as the following.

• Less than a third of Temple students earn a diploma in the expected four years, and less than two thirds earn one in six.  Of course, Pennsylvania taxpayers don't get their money back when students don't get degrees on time, or don't get them at all.
• Those students who are fortunate enough to graduate from Temple do so with a boulder of debt chained to their ankles—$29,886 on average.
• Temple allows students to meet requirements with lots of courses that would raise taxpayers' eyebrows.  For instance, Temple students can take "Sport & Leisure in American Society" to learn about their country and a course offering "fresh perspectives, questions, and ideas on current issues from Google searches to the randomness of the iPod shuffle" to strengthen their math skills.  Rather than lots of niche courses like this, a few solid, simple sections of plain old American history and calculus save money.
• According to data supplied by the American Council of Trustees and Alumni, Temple increased its administrative spending by 29.1 percent between the 2003-2004 and 2008-2009 school years—to the tune of nearly $18 million.  To quote from that math course, there's a "current issue" about which Temple students might have a few "questions."

Why does this matter?  Simple.  At Temple and our other public universities, taxpayers are putting up big bucks to pay for many students who don't get the results we expect: a solid education in a reasonable amount of time. Given this, it's not just appropriate that Gov. Corbett and the General Assembly have delivered a wake-up call.  It's their obligation.  I for one salute them for doing so yesterday, and I hope that this time, Temple responds to the wake-up call with dramatic reforms at home, not dramatized lobbying in Harrisburg.

posted by CHARLES MITCHELL | 04:40 PM | 2 comments

JULY 1, 2011

Pennsylvania's $1.9 Billion Budget Shortfall

The Pennsylvania Department of Revenue released preliminary FY 2010-11 revenue collection. Their statement says:

Fiscal year 2010-11 General Fund collections totaled $27.5 billion, which is $785.5 million, or 2.9 percent, above estimate.

The spend-mores are saying this is a surplus. But it is not.

Final spending in 2010-11 was $28.33 billion. That is, the government spent more than it collected in taxes last year. That is a deficit, not a surplus.

Note that the $27.5 billion in collections does not reflect tax refunds, Upon request, the Department of Revenue informed us that tax refunds (for businesses and individuals) are estimated to be $1.125 billion for the last year.

So the state spent $1.95 billion more than we collected, as the table below shows, using temporary stimulus money to fill the gap. Again: There is no surplus.

posted by NATHAN BENEFIELD | 03:00 PM | 0 comment

JUNE 28, 2011

University Subsidy Bills Nixed, What Now?

Last night, Pennsylvania House Democrats voted to defeat legislation on state subsidies for Penn State University, the University of Pittsburgh, and Temple University, as well as for the University of Pennsylvania veterinary programs (while passing legislation for subsidies to Lincoln University).  The Senate followed suit, on a party line vote. Democrats wanted more spending than Republicans, so they killed the legislation entirely.

If you are wondering how Democrats, being in the minority, killed legislation, it is because these are "non-preferred" appropriations, or earmarks to specific institutions.  Since these institutions are not actually part of state government (if you are wondering why institutions that aren't actually part of state government get direct funding at all, it is one of many unanswered questions on college funding), the measures require a two-thirds vote to pass.   See Article III, Section 30 of the Pennsylvania Constitution.

These bills would represent about a 19 percent reduction from this year's state appropriation—cuts of about 1.5 to 3 percent of their total operating budgets.  Both parties have tried to claim they are fighting "for the students," but this debate is not about students.  Higher education subsidies have neither kept tuition low nor increased graduation rates.  Rather, this is about the demands of taxpayer-funded lobbyists for universities whose administrative spending has skyrocketed, while construction projects continue even though new facilities are underutilized.

So what will happen now?  There are five possibilities:

1. The House and/or Senate with "reconsider" the legislation, and this time Democrats with vote yes.
2. This discussion will be postponed until the fall.
3. Legislators will stop giving direct subsidies to these specific universities (perhaps to replacing them with funding directed at the students, as they should).
4. Republicans will capitulate and agree to the higher spend number the Democrats want.
5. The entire state budget process will take a new course, perhaps even emboldening Republicans to push their wish list items like school choice and voter referendum on all school tax hikes.

posted by NATHAN BENEFIELD | 09:10 AM | 0 comment

JUNE 27, 2011

Don't Fall for the False Choice on Tuition and Taxpayers

I see that right now, our legislators are once again debating cuts to the generous subsidies our public universities receive from taxpayers.  Some are claiming that if the cuts pass, students and parents will be soaked with higher tuition.  You'll recognize this argument, as it dominated the headlines after Gov. Tom Corbett's budget address in March and then faded as the facts about our public universities' waste came out.  The best example of this is Penn State, whose president went in less than two months from channeling Abraham Lincoln from beyond the grave to promising to freeze salaries and dip into reserves to keep tuition down.

Legislators, don't be fooled:  The choice isn't between higher subsidies and higher tuition.  These institutions have raised tuition even as you've increased their appropriations, and Penn State's recent actions show that when they want to control tuition, they can and they will.  They've got tons of fat to trim—particularly when it comes to administrative spending and buildings they admit they are utilizing poorly—and now's your chance to help them slim down.  That is the way to help students and parents, not to mention taxpayers.

posted by CHARLES MITCHELL | 05:40 PM | 0 comment