Budget Could Transform Pa., For Good or Ill

About one week remains for lawmakers to finalize a state budget. But along with a spending plan, a number of major policy reforms remain in the mix. The outcomes of these debates won’t just affect the next budget, but the future of Pennsylvania families for years and decades to come.

Lawmakers have a chance to transform Pennsylvania into a state of opportunity, make us more competitive in the global economy, and deliver prosperity to our citizens. But there is also the threat lawmakers will continue the same failed policies that kept Pennsylvania stagnating near the bottom of the nation in economic growth for decades.

Opportunities for Prosperity:

Ending the government liquor monopoly. Pennsylvania remains a laughingstock for being one of only two states with a complete government monopoly over wine and spirits. While the state House passed a liquor privatization plan in March, the Senate is still squabbling over details. A “starting point” proposal floated this week fails to deliver real privatization that will offer Pennsylvania consumers the selection, convenience and prices they demand.
Fixing the state pension system. The state Senate appears ready to act on a proposal to reform the state pension system, putting new employees into a defined contribution plan. This reform would get politics out of pensions and end the manipulation that has created a funding crisis. This would represent a critical first step of plugging the leak on our sinking ship.
Reforming prevailing wage. Prevailing wage mandates drive up construction costs for state government, counties, municipalities and school districts. Many lawmakers are demanding that any transportation funding be accompanied by removing this mandate that increases costs and prevents road work and other construction projects from being completed.

Threats to Prosperity:

Expanding an already unaffordable welfare program. News stories indicate that the state Senate may look to expand Medicaid under Obamacare. This, despite a House hearing yesterday in which lawmakers were warned to be wary of federal promises of “free money,” the future costs to the state, or that Medicaid is already too costly while providing low quality care. Expanding the program now would commit Pennsylvania to long-term costs for short-term “federal” dollars, while the program continues to consume a greater share of taxpayers’ income.
Continuation of a job-killing tax. Rumors are also circulating that lawmakers may scrap the planned elimination of the Capital Stock and Franchise Tax which is imposed on business assets. Businesses are assessed this tax regardless of whether they make a profit or lose money, and Pennsylvania is one of the only states to tax both business profits and business assets. This tax was supposed to be eliminated in 2009, but lawmakers have already broken their word three times and extended this tax. The additional cost paid by businesses exceeds $6.9 billion.
Increasing transportation taxes and fees without reform. Transportation funding legislation continues to move forward, but without reform (such as the aforementioned prevailing wage mandate), which will just increase costs for drivers. Uncapping the Oil Franchise Tax would cost an estimated 28.5 cents per gallon of gasoline. The Senate’s plan also includes increased driver and vehicle fees and significant hikes to fines for basic traffic violations.

There is a lot going on in Harrisburg over the next week. To see what you can do to affect the outcome of these debates, visit our activism page.