Fiscal Forgetfulness

Next year the governor wants to spend $1.4 billion more than he requested for this year, according to his recent budget proposal. Separately he’ll need as much as $750 million in extra money because he overspent this year's budget. The massive overrun resulted from poor management decisions including the governor’s unilateral reinstatement of a welfare program that the legislature had explicitly repealed. The action violated the legislator approved budget and may even be unlawful under the Pennsylvania constitution’s balanced budget amendment.


Governor Wolf overspent by hundreds of millions this year, possibly violating the state constitution.

Given such a state of affairs there is plenty for legislators to be concerned about. But when a handful of legislators decided to speak up on a spending matter, they chose a strange way to do it. They didn’t call out the governor on his budget overruns or even take shots at handouts like horse racing subsidies. Instead, union-backed legislators spoke up against private donations that help poor kids to attend better schools.

Union-backed lawmakers didn’t call the governor out.  They would rather speak up against a tax incentive that helps poor kids attend better schools.

At yesterday’s Senate Appropriations Committee hearing various legislators repeated the mistaken claim that a proposed expansion of the Educational Income Tax Credit Program (EITC) would be expensive and deprive the commonwealth of resources. EITC expansion (HB 800) has since passed both chambers and is headed to the governor’s desk. Nonetheless, these misguided objections need to be addressed and put away.  

Tax credits are not spending. The EITC encourages businesses to fund scholarships for low- and middle-income children in grades K through 12 by giving them tax breaks in an amount slightly less than their donation. Businesses want to donate and students need the support: there are waiting lists for the program on both sides. No public money changes hands at all. The program even saves the commonwealth money on net, according a recent impact study by EdChoice.


If lawmakers were serious about fiscal problems they would question public spending, not a small private scholarship program.

If the legislators who oppose EITC expansion were genuinely concerned about spending they would have to look at the public school budget, not a scholarship program that affects a small minority of students. The public schools have $4.6 billion of reserves in the bank: they could fund the EITC program at its current level more than forty times over. Legislators are likely to vote the public schools a funding increase of $400 million this year on top of a record-high $30.2 billion in 2017-18.  EITC is barely a rounding error in the public school budget despite demonstrating a return on investment that public school spending does not

If legislators don’t want to touch education they can look for savings in the shadow budget, a maze of over 150 public entities that lie outside the general fund and away from public scrutiny. If they think it would be nice to get a big pile of cash up front (and who doesn’t?) they could sell off pieces of the state’s antiquated liquor monopoly. They might even go further and consider the tremendous revenue gains that could come from state tax reform, the taxpayer protection act (TPA) and improving the regulatory environment, thus pulling high income earners from other states, or at least staunching Pennsylvania’s well-documented brain drain

Given all the fiscal and economic improvements on which the legislature takes a pass every year and the silence that greeted Governor Wolf’s overspending, opposition to school choice on fiscal grounds hardly looks like a serious position. With HB 800 on the way to the governor, legislators can now stop posturing and do some real fiscal reform.