Pennsylvania’s New Punxsutawney Phil
On February 2 of each year, all eyes are on Punxsutawney Phil. The famous groundhog is responsible for predicting the duration of winter-like weather. If Phil sees his shadow, we’re stuck with six more weeks of winter; if he doesn’t, expect an early spring.
While the predictive powers of Punxsutawney Phil are up for debate (I’m not taking a position), there’s no debating the validity of Independent Fiscal Office (IFO) prognostications. In the past few years, the release of the IFO’s annual budget outlook report has made one thing certain: We have seven more months of debating the best ways to close the budget deficit.
This year is no different. The IFO is projecting a combined budget deficit of $1.85 billion for this fiscal year (2014-2015) and next (2015-2016), rising to more than $2.5 billion through 2019-2020. This is simply unsustainable.
As we detailed last year, welfare spending and state pension contributions are the main drivers of the budget deficit. Not much has changed. In fact, pension contributions from the state general fund are scheduled to increase by nearly $1.7 billion over the next five years. This rate of increase in state costs is mirrored by the increase for school district pension costs.
If we’re going to improve our fiscal situation, pension reform must be part of the solution. As the chart above indicates, we can’t just “let Act 120 work” as many have suggested. The crushing burden of pension costs are already being felt right now across the commonwealth.
Pension reform would be a good start, but only scratching the surface of what is needed to control spending and prevent massive tax hikes on already overburdened families and businesses.
In our Blueprint for a Prosperous Pennsylvania, we detailed a number of short-and long-term solutions that will save taxpayers billions of dollars and put Pennsylvania on the fast track to prosperity.
With the IFO’s report providing the extent of our fiscal troubles, now is a great time to adopt these solutions and avoid the fiscal winter the IFO has forecast.