Adventures in State Budget Wonderland

In Lewis Carroll’s classic wonderland tale, Alice famously asks the Cheshire Cat, “Would you tell me, please, which way I ought to go from here?” “That depends a good deal on where you want to get to,” the feline answers. The response was meant for Alice, but it could equally apply to those asking what’s next for Pennsylvania.

Fortunately, the state House is more decisive than Alice. House lawmakers opted for the path of fiscal responsibility by passing a budget that confronts state government’s spending habit head-on while rejecting tax hikes. Gov. Wolf’s proposed budget also recognized the need to streamline government but still included large spending increases and $1 billion in higher taxes, averaging $315 per family of four.

While the gap between the two visions is wide, the sides are dramatically closer than prior years, signaling an on-time budget is possible. Gov. Wolf even set a conciliatory tone by dubbing the House’s fiscally conservative budget a “good starting point.”

As the budget heads to the Senate, where should lawmakers go from here? That depends on where they want Pennsylvania to “get to.” To put our state on a trajectory of economic growth and opportunity for all, they should ensure the budget holds to the following principles.

No Tax Hikes  

Were the House budget to become law, Pennsylvanians could breathe a sigh of relief that their state tax bills would not increase. Given state residents already bear the 15th-highest state and local tax burden in the nation—a crushing load that contributed to the commonwealth’s population shrinking last year for the first time in 31 years—“no tax hikes” are three words Pennsylvanians want to hear.

Notably, lawmakers rejected tax increases despite facing a revenue shortfall that has already reached $679 million this fiscal year. To bridge the gap, lawmakers are reportedly considering options including gambling legalization, partial liquor privatization, and one-time revenue shifts.

While long-term reforms are preferable, these options are better than tax hikes. As budget negotiations continue, lawmakers should remain firm in opposing higher taxes on working Pennsylvanians. 

Spending Intervention

In a welcome departure from recent budgets, the House budget keeps spending growth below the rate of inflation plus population changes, as outlined in the Taxpayer Protection Act. For the past 47 years, state spending has tracked consistently upward at an unsustainable pace, increasing by an inflation-adjusted 189 percent or $4,103 per person.

By controlling the rate of spending growth, lawmakers are drawing a line to protect personal and family budgets across the commonwealth.

Corporate Welfare Cuts

Pennsylvanians deserve a budget that works for all, not just the politically connected. Our state leads the nation in corporate welfare spending, yet has little to show for it. While the House budget does not leave wasteful business subsidies entirely by the wayside, it reduces them by more than $56 million, with even more cuts possible.

By recognizing government should not pick winners and losers, the House budget takes an important step toward expanding opportunity for all job creators and workers. Lawmakers should keep steady on this path and work to further reduce corporate welfare handouts—like the $250 million taxpayers send to the horse racing industry every year.

A Reimagined Government

As lawmakers and Gov. Wolf recognize, moving Pennsylvania forward will require reimagining state government. The House budget starts down this road by expanding on last year’s progress toward ending government’s liquor monopoly and beginning to tackle critical human services and corrections reforms.

Any discussion of state spending must also include our public pension system. Both the House and Senate are taking steps toward structural pension reform that will increase options for public workers while respecting taxpayer dollars. Making this reform a reality is critical to our state’s future.

During her adventures in Wonderland, Alice didn’t much care where she ended up, so the Cheshire Cat said it didn’t matter which way she went.

Unlike Alice, Pennsylvanians care about what lies ahead. They want a state where their families and communities are set up for success.

By controlling spending, rejecting tax hikes, and pursuing structural forms, lawmakers can pave the way for opportunity and economic growth and define the next chapter in Pennsylvania’s story.

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Bob Dick is a senior policy analyst with the Commonwealth Foundation,
Pennsylvania’s free-market think tank.