All families must learn to live within a budget. They understand that they can’t spend more than what they earn—at least not for very long. Frequently this means saying “No” to things they may want, but can’t afford. Other times it means buying something used rather than brand new. In essence, families must learn to prioritize their spending.State government doesn’t operate in the same manner. Indeed, Harrisburg has long operated as though its bank account was as deep as Paris Hilton’s. The problem, however, is that it is the bank accounts of individual Pennsylvanians that are being tapped.
Spending by Pennsylvania’s government has grown at a substantially higher rate than personal income. From 1990 to 2006, the state’s General Fund budget increased from $12.4 billion to $26.1 billion—an increase of 40% in inflation-adjusted dollars. Meanwhile, personal income increased by only 25%, in inflation-adjusted dollars, during the same time.As a percentage of personal income, the state’s total operating budget has grown by 39% since 1970. In other words, state government’s “take” from Pennsylvania family budgets is leaving a smaller share for food, housing, and clothing today than it did less than 40 years ago. It also means that government spending is outpacing Pennsylvanians’ ability to pay.
To curb this spending trend and leave more money in the budgets of hard-working Pennsylvanians, lawmakers have introduced legislation to limit the annual growth of state spending. The Taxpayer Protection Act and Amendment (TPA) are examples of such legislation. Senator Bob Regola introduced a state constitutional amendment (SB 7), and Senator Mike Folmer is the prime sponsor of the statutory version (SB 707). The TPA proposes to restrain the growth of the General Fund and any future funds created by the legislature.
The TPA would limit the annual increase in appropriations to the lesser of (1) the average percent change in personal income for the three preceding years or (2) the average percent change in inflation plus the average percentage change in state population for the three preceding years.The TPA would require 25% of all excess tax revenue collected at the end of a fiscal year to be placed into the “Rainy Day Fund,” for use during economic downturns. The remaining 75% of any surplus would be placed in a Taxpayer Protection Fund to be returned to taxpayers via personal income tax reductions.
Already, the beneficiaries of unlimited government spending have gone on the attack against the TPA. Critics claim that the TPA would require spending cuts for crucial programs such as education, health care, and public safety. Under the proposal, however, the FY 2007-08 General Fund could increase by 3.15%, or $823 million. The reality that the spendthrift opponents refuse to recognize is that the TPA merely limits the growth of state spending, it does not cut it.
Critics also claim that the TPA imposes “hard caps” that cannot be exceeded. Contrary to this assertion, the TPA would allow the spending limit to be exceeded by a two-thirds vote of each house of the General Assembly. Thus, the TPA merely requires a higher threshold of support for new and expanded spending of taxpayers’ money.
Even the most virulent critics of the TPA would not claim there is no waste in current state spending. For instance, in FY 2006-07, Pennsylvania taxpayers spent over $567 million for “corporate welfare” from the state’s General Fund budget alone. Other areas in need of prioritized spending include the spending of more than $16.5 million on the “arts”—a reverse Robin Hood scheme where the poor and middle class subsidize the entertainment choices of the wealthy. And how about the $6.2 million film grant for the production of “Lady in the Water”—a movie panned by most critics? And should state taxpayers really be left holding the bill for a $33.75 million grant for PNC Bank to build a luxury hotel, condominiums, and a parking garage for residents?
By placing reasonable limits on the annual growth in spending, lawmakers will finally be required to evaluate which programs are important and which programs can be reduced or eliminated. Only through the TPA will we be able to force state government to prioritize its spending, just like Pennsylvania families must do every day.
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Jessica Runk is a research intern with the Commonwealth Foundation (www.CommonwealthFoundation.org), an independent, nonprofit public policy research and educational institute based in Harrisburg.