Gov. Wolf has been pretty optimistic about Pennsylvania’s finances going into budget negotiations for fiscal year 2018-19. Although it’s true the state is not staring down a $2 billion deficit like last year, that’s no reason to celebrate.
Massive bills for past policy decisions are coming due soon.
Spending restraint—via reforms like the Taxpayer Protection Act—is critical if elected leaders want to avoid new tax hikes. Below are five budget busters we will face in the next few years.
- Tobacco Settlement Fund bonds: Last year the legislature balanced the budget by borrowing, with the promise of covering payments with money from the Tobacco Settlement Fund. The payments to service these bonds begin in April of 2019. However, as OppenheimerFunds notes, payments from the Tobacco Settlement Fund may not fully cover debt service on the bonds. If payments don’t cover the debt service, taxpayers will have to pick up the tab.
- PlanCon: In 2016, the legislature removed PlanCon—a program that reimburses school districts for constructions costs—from the General Fund budget. The legislature replaced this funding with more borrowing, authorizing the Commonwealth Financing Authority to issue bonds. This offered a short reprieve from paying for the program, but now the bill is due. The Independent Fiscal Office estimates payments on PlanCon bonds will cost taxpayers an additional $111 million for the 2018-19 fiscal year.
- Motor License Fund transfer: To provide more funding for infrastructure, the legislature included a provision in the 2016-17 Fiscal Code that begins reducing the amount of money transferred from the Motor License Fund to the Pennsylvania State Police. The reduction would take place over a ten-year period. By the fifth year, lawmakers could be looking at a $150 million hole in the budget, about a 20 percent reduction of the money currently transferred to the state police from the Motor License Fund. Governor Wolf proposed offsetting these costs with a fee on municipalities that utilize state police, but the idea lacks legislative support.
- Sales tax transfer to finance mass transit: Under Act 89 of 2013, the Pennsylvania Turnpike will reduce its payments to the Public Transportation Trust Fund starting in 2022. Sales tax revenue will be redirected to replace the Turnpike’s payments at an annual cost of at least $450 million. This policy change will create another huge hole in the budget in just four years.
- Farm Show Complex lease: Earlier this year, the Wolf Administration signed an agreement leveraging the Farm Show Complex to borrow even more money to balance the budget. The administration did this despite the legislature authorizing the use of $300 million in shadow budget funds to avoid additional borrowing. The total costs of the agreement won’t be known for some time, but taxpayers will be forced to pay for this decision—a regrettable outcome considering the fiscally responsible options available.
These large and looming expenses—along with relentless growth in welfare and pension costs—should convince lawmakers to embrace TPA and other meaningful reforms to control spending and shield working people from higher taxes.