Pennsylvania’s Financial Condition? Critical

Despite what you may have heard, Pennsylvania’s fiscal troubles haven’t disappeared. The recent state budget did not address the commonwealth’s short- or long-term financial challenges. It merely papered over them.

Yes, the budget included a $22 million transfer to the state’s “rainy day fund,” but this represents a drop in the bucket when viewed in the context of a $32.7 billion General Fund budget. In truth, the legislature has opted to delay tough financial decisions, creating a situation where balancing the budget will be much more difficult over the next several years as payments for debt obligations and other policy changes come due.

A new Mercatus Center report captures the problems ahead. While not delving into the specifics mentioned above, the report ranks each state’s overall fiscal condition. Unfortunately, the Keystone State comes in at a disappointing 35th overall. In specific categories, here's how Pennsylvania fares:

  • Cash solvency (47th): measures a state’s ability to cover short-term bills.
  • Budget solvency (31st): measures whether a state can cover fiscal year spending with current revenues.
  • Long-run solvency (37th): assesses whether a state can handle a shock or long-term fiscal risks.
  • Service-level solvency (23rd): measures how high taxes and spending are when compared to state personal income.
  • Trust fund solvency (24th): measures a state's debt (pensions and post-employment benefit liabilities). 

Pennsylvania’s long-term problems are particularly troubling. State debt and unfunded liabilities are both above the national average.

Without substantial reforms, taxes could rise to cover debt payments and pension liabilities. The latter are already putting pressure on homeowners across the state, as pension costs continue to drive property tax hikes.

The commonwealth’s spending and debt trajectory is unsustainable. If left unaddressed, it will cause enormous pain for taxpayers who will be forced to bail out the state for its series of bad decisions.

Lawmakers can reverse our current trajectory by adopting reforms that will spur economic growth and rein in excessive spending. Such ideas include comprehensive tax reform, the elimination of corporate welfarepromotion of work for welfare, and an overhaul of the criminal justice system.

These and other solutions will empower Pennsylvanians, grow the economy, and ensure the state is financially secure.