Pennsylvania added nearly two dozen new lawmakers in November, and there’s a new face in the Governor’s Mansion. Indeed, that face will look very new, as Tom Wolf is the first Pennsylvania governor with a beard in more than a century. Unfortunately, the big problems facing taxpayers haven’t changed in years.
But by addressing just three recurring issues—slowing the state’s out-of-control spending, banishing the government liquor monopoly, and disarming the public pension time bomb—lawmakers can transform Pennsylvania’s fiscal trajectory for decades to come. That’s an opportunity taxpayers can’t afford to pass up.
Enacting spending limits would be great start. The Taxpayer Protection Act (TPA) asks politicians to live within a budget, just like Pennsylvania families, by limiting the yearly rise in state spending to inflation and population growth. For example, next year the TPA would allow a 1.71 percent spending increase or a state General Fund budget of $29.6 billion.
The TPA, simply by limiting spending growth, protects families from ever-higher taxes and mounting state debt all without mandating any spending cuts. Today, combined state and local debt is about $10,000 for each man, woman, and child in the commonwealth, while Pennsylvania maintains the 10th highest state and local tax burden in the county. Without the TPA, government can continue a decades-long trend of spending beyond taxpayers’ ability to pay.
Here’s another long term problem, this time 81 years in the making: Pennsylvania remains one of just two states with complete government control over liquor sales and distribution. Given their monopoly power, it’s no wonder the Pennsylvania Liquor Control Board (PLCB) is notorious for corruption and waste. A recent federal grand jury investigation of PLCB big-wigs who took all-expense paid trips to Florida and California can attest to that.
Beyond betraying the public trust, the monopoly cripples small business owners, like former beer distributor Cheryl Umberger who writes, “Ending this Prohibition-era alcohol monopoly is a win-win situation for citizens, taxpayers, businesses and responsible politicians . . . As a beer distributor, I think that’s something worth toasting to.”
Government controlled liquor is no cash cow for the state. The PLCB generates revenue by marking up prices on the alcohol it sells and by collecting taxes. Of the $534 million transferred to the state Treasury in 2014, a whopping 85 percent was simply tax revenue. In other words, the vast majority of the “profit” from state liquor stores would continue uninterrupted with private operators and would even grow as entrepreneurs open new, tax-paying businesses.
While the PLCB’s revenue is at an all-time high, no surprise given it has no competitors, its fiscal future looks bleak. In 2014, operating costs jumped by more than $20 million, or 5.24 percent. It’s no wonder that the PLCB floated the idea of increasing the mark-up price for its products last August.
Finally, our $50 billion public pension time-bomb has been counting down for decades and is now exploding all around us—causing teacher layoffs and skyrocketing property taxes that threaten our seniors’ livelihoods.
School districts’ pension contributions rose from $515 million in 2008-09 to an estimated $2.4 billion this school year. That roughly 400 percent increase is equivalent to the salary of more than 30,000 teachers. Put another way, the average homeowner pays an additional $600 in taxes thanks to the pension crisis. How can a senior on a fixed budget continue to make ends meet when her taxes rise by $600 in six years?
To be sure, reforming pensions won’t single-handedly avert the budget pain this year, but it would shine a light at the end of a very dark tunnel. Instead of scrambling for billions to cover legacy pension costs, these funds could be allocated to safety net programs for the truly needy, to balancing the budget, or to cutting property taxes.
Solving these persistent pocketbook issues will face heated opposition—mainly from government sector unions benefiting at taxpayers’ expense as government grows. But transformative opportunities are never without implacable obstacles. Frequent credit rating downgrades are already adding borrowing costs to our bloated budget and put Pennsylvania in the same league as fiscal basket cases California and Illinois.
With commonsense solutions like the Taxpayer Protection Act, liquor privatization, and pension reform, lawmakers can fuel job growth and put Pennsylvania back on the path to prosperity.
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