Double-Down on Reinventing Government
The following op-ed has appeared in 18 different publications across Pennsylvania.
Imagine if Stephen King had written Green Eggs and Ham. What if Dr. Seuss had penned The Shining?
Gov. Wolf’s third budget address was an equally disorienting shift in tone and substance—almost as if the most liberal governor in the country were polishing his conservative credentials.
Record-setting income and sales tax increases? Gone. Partisan rhetoric? Mollified. Massive spending hikes? Absent.
Instead, Wolf targeted bureaucratic waste to close the ever-widening budget deficit, including consolidating agencies, reforming corrections programs, and streamlining government services. Laudably, he proposed reducing corporate welfare subsidies for politically-connected businesses which have failed to encourage long-term job growth.
But Wolf hasn’t completely broken from the past—he still wants $1 billion in new taxes, amounting to $315 per family of four. But the fact is, there’s no reason to demand more from taxpayers.
Instead, the General Assembly should take this opportunity to double-down on Wolf’s reform mindset—but do it without tax hikes. Here are three ways to help end the cycle of budget deficits for years to come.
State public pensions are more than $60 billion in debt—about $5,000 for every Pennsylvania man, woman, and child.
But for ten years, government union leaders have denied the pension crisis and argued against reform. Meanwhile, state taxes and property taxes have ballooned to fund the ever-growing pension burden. School districts have laid off teachers and cut programs—even as education funding reached record high levels—as more education dollars are consumed by pension costs.
The Senate is considering a bill that will contain a 401(k)-component paired with a smaller defined benefit component for new employees. New employees can also choose a single 401(k)-style plan, which will provide portability and retirement control.
Additionally, this proposal allows current employees to opt-in to the hybrid plan or 401(k)-only plan—a welcome improvement over last year's proposal.
The side-by-side hybrid is not perfect, but it satisfies three important goals. It shifts future financial risk away from taxpayers; it enhances choice and portability for new state and public school employees; and it slows the accumulation of taxpayer-backed pension debt. To be clear, pension reform won’t reduce the existing unfunded liability taxpayers owe or offer immediate savings. But moving to a defined contribution plan—which, by definition, carries no debt—would take politics out of pensions and help prevent a repeat of the current pension crisis.
Pension reform is not just good policy. It’s also popular. A poll conducted last October showed 54 percent of voters support placing new state employees in a 401(k)-style retirement plan, including 67 percent of Republicans, 51 percent of Independents, and a plurality of Democrats.
Lawmakers can’t afford to delay. Pennsylvania’s unfunded pension liability is almost double the General Fund budget. And it keeps growing. In fact, SERS just announced a 6.5% investment return for 2016, a full percentage point short of their assumptions—meaning our pension liability will continue to rise and taxpayers will continue to pay more.
Full Liquor Privatization
On a recent trip to Giant, I witnessed a couple excited to finally buy wine with their groceries—a result of last year’s marginal liquor reform. But excitement turned to frustration as they ping-ponged across the store, barred from buying wine at the regular checkout and unable buy groceries at the wine register. Pennsylvania’s government liquor monopoly and archaic alcohol laws still make no sense.
Indeed, grocery stores can buy wine only from the government wholesale monopoly, in which a handful of bureaucrats determine what can and can’t be sold across the state.
Full liquor privatization, both retail and wholesale, could deliver Pennsylvanians the convenience they want and generate between $1.1 to $1.6 billion in immediate revenue.
Let’s face it: Medicaid doesn’t provide quality health care. Medicaid recipients experience more difficulty finding doctors and longer wait times than those with private insurance, thanks to low provider reimbursement and a maze of red tape.
Yet, more than one-third of Pennsylvania’s total operating budget goes to Medicaid programs, to the tune of $26.9 billion. That’s more than PreK-12 education, higher education, transportation, and debt service combined. These costs are rising faster than the state economy, making the program unsustainable.
With talk in Washington, D.C., of block granting Medicaid to the states, lawmakers have a new opportunity to reinvent Medicaid for truly those who need it.
Florida, for example, improved the quality of Medicaid through a waiver that emphasized choice counseling, saving $161 million annually in the first five years.
Other states have requested more robust Health Savings Accounts to ease the transition from Medicaid to private health insurance. Work requirements—which in other programs have helped individuals transition out of poverty into the workforce—and sliding scale premiums are other worthwhile policy solutions that would concentrate resources on individuals most in need.
A one-year budget absent major reforms will simply kick the budget-deficit can down the road. Lawmakers should view Gov. Wolf’s proposal not as a final product but as a starting point they can improve upon with reforms that will benefit all Pennsylvanians.