PA Senate Commission IDs Spending Cuts

In February, the Senate established a bipartisan commission to identify cost-savings measure for the Pennsylvania state budget could save money. David Argall, the chairman of this commission, recently presented their cost savings recommendations earlier today. While the recommendations that the commission unanimously agreed to aren’t nearly as comprehensive as our ideas, the report identifies nearly $500 million in savings – an indication that there is room to be cut in the state budget.

Transparency

The Senate Government Management and Cost Study Commission identified several key areas in which the state could improve. First, the commission identified the need for increased transparency and accountability in state spending. Transparency and accountability can be greatly improved through a publicly accessible online spending database, as CF has championed. This database would allow both citizens and legislators to identify-and consequently stop-wasteful spending. Additionally, centralizing spending information will greatly decrease paperwork for state employees. Further, an online spending database would make other budgetary reforms possible.

Thirty states have already passed bills that would create spending databases. When Texas adopted a similar measure, the state saved $4.8 million. Currently, HB 1880 and SB 105 aim to adopt this reform in Pennsylvania – measure each chamber has passed. An online spending database will greatly help to decrease spending by helping citizens to hold their government accountable for wasteful spending.

Education

The commission identified the need to improve how we spend money on education. Education spending is one of the largest sections in the General Fund budget. Over the past 25 years, per-pupil spending has increased by 364%.Total K-12 education costs for Governor Rendell’s proposed budget would total over $10 billion.

One area the commission identified for improvement was school employee health insurance. From 1995-2005, health insurance costs increased an astounding 132%. The commission observes that HB 1881 seeks to solve this problem by consolidating healthcare for school employees. Additionally, the commission has supported the consolidation of certain administrative functions on the county level, similar to SB 1321. The commission also strongly recommends that all schools study the Pennsylvania Association of School Business Officials’ (PASBO) report “500 Cost Reduction Strategies for Local Education Agencies.” Further, the commission supports the adoption of HB 1889, which would establish uniform school construction costs. If schools adopt some of these measures they may be able to cut some of their costs.

The commission, however, fails to promote school choice. School choice would greatly help to reduce education costs. In the 2007-2008 school year, the Educational Improvement Tax Credit (EITC) saved taxpayers over $500 million. Additional school choice programs combined to save taxpayers another $3.6 billion the same year. A recent study led by University of Arkansas professor Patrick Wolf concluded that the D.C. voucher program increased graduation rates by 21% while at the same time spending only one-fourth of the amount that the public schools in the area spent on each child.

Despite the success of school choice programs, lawmakers managed to cut funding for the EITC program. Why? It’s because PSEA bosses oppose anything that could reduce their power and lobby for reduced funding for school choice programs. Pennsylvania’s families need the expansion of school choice not only to save costs, but also to improve performance. Any true attempt to reform the education program in Pennsylvania needs to include the expansion of school choice.

Pensions

Argall’s commission also identifies the pension system as an area to reduce spending. To help alleviate the pension crisis, the commission supports further study of SB 1228 to provide for an expanding reporting of the status of municipal pension plans.

Unfortunately, the commission also recommends considering HB 2497, which will seek to alleviate the crisis by deferring payments, reducing the multiplier for new employees, and increasing the vesting period from 5 to 10 years for new state employees. This so-called “reform” represent in HB 2497 will not actually fix anything. It will actually end up costing taxpayers an estimated $27 billion over 30 years.

A better plan that will actually work towards solving the crisis would be to place all new employees on a deferred contribution plan, like a 401(k). In fact, a 401(k)-style plan may actually even benefit employees. Deferring payments will only serve to harm our children. Moving new employees over to a 401(k)-style plan is the most effective way to providing a true solution to the problem, not a temporary budget fix.

Corrections

The study was very strong in its evaluation of the Department of Corrections. Many of the recommendations made by Senate Government Management and Cost Study Commission mirror those made by the Commonwealth Foundation.

The study noted that the state inmate population has skyrocketed in the past thirty years, with 43,000 more inmates since 1980 (from 8,243 to 51,326 as of November 2009). The committee estimated the operating cost of the prisons system to be $1.9 billion for the 10-11 fiscal year.

The Commission recommended adopting Senate Bill 1145 and Senate Bill 1198, which include, respectively, implementing a risk and needs assessment instrument for judges sentencing offenders, and establishing a comprehensive program to reduce recidivism and ensure successful reentry. The first would identify who should be placed in a secure prison setting, and who would be well suited for alternative sentencing. The second includes investment into prisoner re-entry services to reduce costs acquired by re-admittance into the prison system.

Other notable recommendations include:

• Senate Bill 1275 that proposes a graduated sanctioning process for state parole violators. The bill would seek to keep parolees accountable for technical violations while avoiding recommitting them to prison. Within the first year predicted savings are $3,065,000.
• An amendment to the Judicial Code to authorize county courts to impose swift, predictable, and immediate sanctions on offenders who violate probation. A similar program in Hawaii has saved the state between $4,000 and $8,000 per offender.

Public Welfare

The report also included the need to address welfare fraud. The Pennsylvania Department of Public Welfare (DWP) represents over 35% of the General Fund Budget. The Auditor General found, in a report released in August 2009, that millions of dollars each year are wrongly distributed because of improper eligibility determinations made by the DWP.

The commission recommended:

• Reviewing eligibility requirements more frequently, and in a timely fashion.
• Endorsing a receipt-based purchase program for DPW recipients (to ensure monies are used only for approved items).
• Improving the operations of County Assistance Offices, to create interstate agreements for information sharing, to reduce and avoid fraud.

Altogether, the changes advocated by the Senate Government Management and Cost Study Commission total an estimated $458 million in savings. This study shows that Pennsylvania can decrease the budget deficit through cutting wasteful spending alone without even considering raising taxes. However, the cuts identified by the commission are not enough.

A Taxpayer’s Budget 2010, on the other hand, manages to identify $4.13 billion in budget cuts. While the commission’s proposal does make strides in attempting to cut government spending without raising taxes, it fails to see billions in tax dollars that could be effectively cut from the budget.