Spending Limits: If Gov. Rendell Doesnt Like Them, They Must Be a Good Idea

Well, that didn’t take long.

Within a week of Pennsylvania Senate Majority Leader David “Chip” Brightbill’s announcement that he would introduce a bill and/or constitutional amendment to bring state government spending back into line with taxpayers’ ability to pay, Gov. Ed Rendell responded with a list of reasons why he thinks such limits are unnecessary, unworkable and even a tad hypocritical.

Seeking to maintain his easy access to taxpayer money, the governor tried to argue that state spending is already capped, that states with spending limits (many with Republican governors) are trying to lift them, and that his administration is actually doing a fine job already at controlling the growth of state government.

Unfortunately for Gov. Rendell, his assertions don’t square with reality. In fact, rather than illustrating his case that Pennsylvania doesn’t need a constitutional limit on spending growth, they actually speak powerfully to why such a limit is so necessary for Pennsylvania’s fiscal and economic future. Let’s analyze some of the governor’s recent statements:

Gov. Rendell: “There is a cap, and our cap is our constitutional requirement that we balance our budget every year. And I take that seriously, and I think the Legislature does too. So there is a cap.”

The Reality: The idea that the state’s constitutional balanced budget requirement somehow constitutes a “cap” on spending is ludicrous. It simply means that no matter what the level of state spending, revenues have to match it, and that has usually meant raising taxes—rather than cutting spending—when deficits occur. Thus, when Gov. Rendell promised in his Inaugural Address to make state government “live within its means,” it clearly just meant that he planned to go get more “means” from the state’s taxpayers.

Gov. Rendell: “A number of states that instituted caps on taxes and spending are removing them now, and most of them that are being removed are being removed at the wishes of Republican governors who instituted them in the first place. So, it’s not a great idea.”

The Reality: Gubernatorial spendthrifts exist in both parties, as the Cato Institute’s “Fiscal Policy Report Card on America’s Governors” noted that the longer Republican governors remain in office (e.g., Colorado’s Bill Owens), the less tax and spending restraint they show. The problem in states with spending limits has not been a lack of state (or federal) revenue, but a lack of spending discipline that allows government to expand into areas that are not its “core functions.”

It is also important to note that many of the spending increases in those Republican-led states have been driven by a misguided belief (one shared by Gov. Rendell) that increased education spending will produce better educational results. Study after study, as well as Pennsylvania’s own experience, shows that this is not the case, yet many public officials are reluctant to challenge the public school establishment beneficiaries of these generous spending increases—teacher unions, school boards associations, and other groups purporting to represent “the children.”

Gov.r Rendell: “If you take out health care costs – inflation and healthcare costs, which we have no control over, they were about 11.5 percent. If you take those costs out of the budget, our total increase in spending was 1.9 percent, a full point lower than inflation. So we’re doing pretty well.”

The Reality: Take out health care costs? Why not remove salaries and pensions too? While it is true that health care costs are problematic, alternatives that would help to slow that growth by making such costs more explicit to consumers, such as health savings accounts, have not been fully utilized by government—and Gov. Rendell opposes them. In fact, real solutions to the health care cost increases have not been embraced at any level by the governor.

Gov. Rendell: “And you know how well we’re doing on the savings side, on the operational side. We’ve taken almost $400 million a year on an annual basis out of the cost of operating the government—we’re more than 3,000 employees down.”

The Reality: How many times over has the Rendell Administration spent the “savings” from its operational reforms? The total cost of state government has not been reduced under Gov. Rendell. In fact, state government costs more than $1,800 more per family of four than it did when he took office. That said, if the administration would apply the same competitive principles to the services the state provides that it does to those it purchases, many of Pennsylvania’s fiscal problems would go away.

Gov. Rendell: “So, I think these caps are—they sound good to the taxpayers, but you know, they just don’t work. They’re good in good economic times, they’re terrible chokes—albatrosses—in bad economic times.”

The Reality: It is precisely during bad economic times that limits on government growth are desperately needed. Indeed, “choking” tax and spending increases actually prevents “albatrosses” from being hung around the taxpayers’ necks.

Pennsylvania’s profligate fiscal policies did not start with Gov. Rendell—but no matter how he tries to spin their outcomes, the facts make clear that he has done little to arrest state government’s growth during his time in office. Given these realities, it’s time that Pennsylvania taxpayers have the protections afforded their counterparts in other states—strict limits on government growth that politicians should respect.

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Grant R. Gulibon is Senior Policy Analyst with the Commonwealth Foundation, a non-partisan, non-profit research and educational institute located at the foot of the Capitol in Harrisburg.