Rendell Lured to Stimulus Like a Moth to a Flame

The lure of federal stimulus funds is encouraging Pennsylvania to spend more of state taxpayers’ money as well. Here are three examples:

  • The Commonwealth was awarded $35 million through the federal stimulus program for freight rail development in the western part of the state. Pennsylvania has graciously committed to match the grant to advance the project.
  • Another freight rail venture that extends from the Gulf Coast to Philadelphia has been promised $45 million from the state. The Commonwealth is one of only two states that have already contributed to the project. Unfortunately, federal aid did not materialize and now the state’s ability to finish its section is in question.
  • An opportunity for additional stimulus funds requires increasing the state’s contributions to its unemployment compensations fund by $60 million each year. This would enable the fund to receive one time $270 million in federal aid.

The stimulus creates perverse incentives for states. Getting one-time federal grants encourages additional spending and has delayed needed budgetary reforms (such as pensions and Medicaid), leaving Pennsylvania and other states with a deeper fiscal mess.