The governor’s refusal to abandon his fixation on tax increases is curious considering the lack of support for his proposals in the General Assembly. He insists taking more out of the pockets of working people—even as his administration hands out corporate welfare to a favored company—is a necessary part of any plan to fix Pennsylvania’s structural budget deficit.
To understand why, it’s important to identify the driving factor behind the state’s structural deficit: projected spending increases. To be clear, the governor and legislature aren’t debating how to pay for current levels of spending. There’s enough revenue to cover those expenses. As we pointed out back in February, the debate is how to pay for new spending this year and in the future.
In the short-term, balancing the budget is rather straightforward. If lawmakers limited spending increases to $500 million this year, the budget would be balanced for 2015-16. However, slowing spending growth this year doesn’t fix the structural deficit or prevent future credit downgrades.
The governor has rightfully acknowledged our structural deficit, but his solutions don't fix the root cause of our budget woes, namely, the rapid growth in spending fueled by the state's pension obligations, which were cited by credit rating agencies as one of the reasons for the state's bond downgrades.
Acknowledging the pension problem, Republicans sent the governor a reform plan rated favorably by the credit agencies. He vetoed it. This appears to be a real blind spot for the governor. His efforts have been focused almost exclusively on the revenue side of the balance sheet, instead of looking for savings on the expenditure side.