Pennsylvania’s Overspending Problem Still Proving Costly

To balance last year’s budget, Gov. Wolf and lawmakers agreed to dedicate a portion of Tobacco Settlement Fund payments to cover a $1.5 billion bond issuance. This decision to borrow may cost taxpayers more than originally thought.

According to Joseph DiStefano of The Philadelphia Inquirer, taxpayers would be on the hook if tobacco settlement funds dry up:

To make it easier to sell the bonds despite Pennsylvania’s relatively low rating, the state agreed to commit future sales-tax and hotel-tax revenues to pay off the bonds if tobacco-company payments drop, as some analysts have predicted, given the decline in U.S. cigarette use.

Additionally, Pennsylvania’s credit rating—one of the lowest in the country—may lead to even higher costs for taxpayers. DiStefano pegs these annual costs at $15 million above what other triple-A-rated states like Maryland and Virginia would normally pay.

The commonwealth’s subpar credit rating and the decision to borrow are the direct consequences of overspending. Lawmakers must address this persistent problem in the 2018-19 budget and subsequent budgets, because, despite the Wolf Administration's claims, Pennsylvania is still on shaky financial ground.

One way to get a handle on Pennsylvania's spending problem is the Taxpayer Protection Act (TPA). Passed in the state house last year, the TPA would limit spending increases to the combined rate of inflation and population growth over a three year period.

In addition to spending limits, lawmakers should pursue meaningful reforms to address the state’s largest expenses—human services, education, corrections, and debt service. These programs are growing at an unsustainable pace yet often fail the very people they're intended to help. Here are a few solutions to meet the twin goals of improving outcomes and reducing taxpayer burdens:

  1. Enact reasonable work/community service requirements for healthy adults in Medicaid and Food Stamps
  2. Expand school choice
  3. Cut corporate welfare
  4. Implement additional Justice Reinvestment Initiative reforms
  5. Use the shadow budget’s surplus funds

In response to Gov. Wolf’s budget proposal, legislative leaders have emphasized the need to control spending, which is a promising first step. The next step is to ensure lawmakers follow through on their promise and pass a prudent budget.