Breaking Pennsylvania’s Budget Tradition

Traditionally in Pennsylvania’s “budget season,” the governor has submitted his spending plan for the coming fiscal year, and the General Assembly has accepted it as the starting point for the deliberations that follow. Even though the last three negotiations between Gov. Ed Rendell and state legislators have been contentious—to the point that each budget was passed after the June 30 deadline—all of them used the governor’s proposal as a baseline.

This year, however, House Republican Majority Leader Sam Smith and Appropriations Committee Chairman Brett Feese announced that they planned to end this tradition. Instead, they reintroduced the current year’s General Fund budget as the starting point for negotiating next year’s spending plan. This is a significant change, given that Gov. Rendell’s proposed 2006-07 General Fund budget would increase spending over the current year’s budget by $1.15 billion, or 4.7%.

In addition, Gov. Rendell’s proposed $25.425 billion General Fund budget actually understates its real cost, in that it excises many politically popular line items that he knows will return in the final budget. The governor engaged in similar budget tomfoolery last year when he proposed a 4.2% increase in General Fund spending, knowing full well that the final spending plan would be higher. Indeed, the budget that he eventually signed increased spending by 6.1%.

By using the current fiscal year budget as the starting point, instead of Gov. Rendell’s faux budget, the House Republicans have revealed the actual cost of his proposed spending plan. Some of the governor’s “robbing-Peter-to-pay-Paul” gimmicks include postponing nearly $300 million in Medical Assistance (Medicaid) payments until 2007-08, using more than $180 million in one-time revenue sources, and tapping hundreds of millions of non-General Fund dollars to pay for General Fund line items.

Altogether, the House Republicans estimate that Gov. Rendell understates the true cost of his 2006-07 General Fund budget proposal by nearly $1 billion—putting it at approximately $26.4 billion, or 8% more than the current fiscal year. Chairman Feese contends that increasing General Fund spending at that rate will necessitate a massive tax increase next year, after the November elections.

This new approach to budget negotiations on the part of the House Republicans should be welcomed by Pennsylvania taxpayers. Traditionally, more often than not, the enacted General Fund spending level has turned out to be even larger than the governor’s original request for any given budget year. This has occurred for nine of the past 11 budgets, including each of the last three. In fact, over those eleven years, actual Pennsylvania General Fund spending (which also included changes made after enactment of a given budget) has cost state taxpayers over $3 billion more than the original proposals of Governors Ridge, Schweiker and Rendell.

In recent months, both the House and the Senate have shown an increased willingness to begin the task of controlling the rampant growth of Pennsylvania state government, as evidenced by their passage (albeit in slightly differing forms) of the Taxpayer Fairness Act (TFA)—a measure designed to limit annual General Fund spending increases, provide for a prudent budget reserve, and return remaining surplus revenues to taxpayers.

Importantly, the TFA, as well as the House’s budget actions to date, can provide policymakers with an opportunity to do more than merely control the growth of spending. These initiatives can—and should—spur them to begin the process of eliminating pork barrel spending and returning state government to its proper, constitutional role.

The House’s new approach is really a modified form of “zero-based budgeting”—a more rigorous practice that requires government programs to justify their existence every year, rather than simply negotiating increases based on the previous year’s spending. If implemented with scrupulous oversight, such an approach can encourage state agencies to better set priorities and reduce or eliminate ineffective and unconstitutional activities. Policymakers can also use a thorough review of state government functions to find alternatives to programs that are not the proper responsibility of state government—alternatives that may utilize the voluntary, collective action of private citizens, businesses, and non-profit organizations to solve common problems.

Using this year’s General Fund budget as the starting point for next year’s spending plan, coupled with a strong spending limit amendment to the state constitution, could initiate a new tradition of “right-sizing” state government in the Commonwealth. Pennsylvania’s beleaguered taxpayers will be watching closely to see whether or not the House’s recent actions represent a sincere conversion to fiscal responsibility—or just empty election-year rhetoric.

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Grant R. Gulibon is a Fellow with the Commonwealth Foundation (, an independent, non-profit public policy research and educational institute located in Harrisburg, PA.