The Keystone State for years has been afflicted by government inefficiency and overspending.
Since Gov. Rendell took office in 2003, Pennsylvania’s burden of state and local taxes has increased from the 17th heaviest in the nation to the 11th. State spending has increased by $3,600 per family of four (in inflation-adjusted dollars). State debt has increased by $18 billion to a whopping $41 billion-a 78 percent increase-or $5,600 per family of four.
It’s no coincidence, then, that Pennsylvania’s rate of job growth is among the worst in the nation. Research indicates that high-taxing, high-spending states have weaker economies than their more fiscally prudent counterparts.
In his budget proposal yesterday, Gov. Rendell acknowledged that Pennsylvania is now at the edge of a financial cliff, due in large part to a looming, unavoidable seven-fold increase in taxpayer contributions to the state’s two pension funds. The Commonwealth Foundation warned of this scenario a year ago, and yet Gov. Rendell and the General Assembly failed to make the systemic reforms necessary to avert it.
Unfortunately for Pennsylvania’s hardworking families and seniors on fixed incomes, Gov. Rendell’s newest budget proposal continues to treat the symptoms of a budget deficit while ignoring the disease. Rather than calling for long-overdue reforms of the public pension system, Medicaid, welfare, and corrections, Rendell is content to let these programs continue wasting money and serving as an ever-growing burden on those footing the bill.
In so doing, he seeks to again extract more money from the taxpayers, to the tune of $531 million by eliminating 74 exemptions from the Sales Tax. His plan to tax natural gas extraction will hurt job creation in that growing sector. And he wants $66 million more from Pennsylvania job creators in higher business taxes.
Rather than relying on new and higher taxes, federal bailout money, and deferring pension costs, state government should implement the following reforms to balance its budget:
Public Employee Pensions. All new government hires should be enrolled in a unified, defined-contribution pension plan. The private sector began transitioning employees from defined-benefit plans to 401-k-style (defined-contribution) plans years ago. It’s time for the public sector to follow suit.
Eliminate Welfare Fraud. Recent performance reviews by Auditor General Jack Wagner found that the Department of Public Welfare’s (DPW) programs are wrought with fraud, waste, and mismanagement and outright theft. Wagner found upwards of $1 billion of ineligible payments in Pennsylvania’s Medicaid program. Applicants for welfare should have to establish U.S. citizenship, residency in the Commonwealth for 90 days, and proof of income eligibility to receive benefits.
Medicaid Reform. The growth of Medicaid costs are unsustainable, and absorb an ever-growing portion of the state budget. Pennsylvania needs to adopt market-based reforms states like Florida, South Carolina, and Louisiana have experimented with. Eligible applicants should be given a risk- and income-adjusted voucher to purchase private coverage.
Corrections. Corrections cost continue to skyrocket, and given current trends Pennsylvania will either have to either build more prisons or pay other states to take our inmates. Management of prisons should be privatized, and probation and parole should be increased for non-violent offenders and geriatric inmates.
In addition, policymakers should create an online, itemized database of all state spending, so that taxpayers can see how every nickel of their money is being spent. Twenty-nine states already have such a mechanism.
Corporate welfare-of which Pennsylvania doles out the 2nd highest amount in the nation-should be eliminated. Pennsylvania’s bailout of Hollywood, the Film Tax Credit, should be abolished. School choice-which provides students a quality education at a lower cost to taxpayers-should be expanded through charter schools and the Educational Improvement Tax Credit.
It’s high time to make overdue reforms to weighty state programs and craft a taxpayer’s budget with Pennsylvanians’ prosperity in mind, rather than feeding state government’s insatiable appetite for spending.
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Nathan A. Benefield is Director of Policy Research with the Commonwealth Foundation (www.CommonwealthFoundation.org), an independent, nonprofit public policy research and educational institute based in Harrisburg.