Pennsylvania’s Spending Limitation Bills

An Opportunity for Economic Growth in the Commonwealth

Introduction

Pennsylvania is Exhibit #1 proving the axiom: “You can have government growth, or you can have economic growth, but you can’t have both!” For years, Pennsylvania public policy has increased government spending dramatically to the detriment of the economy.

Between 1991 and 2004, total state government spending grew as a share of Gross State Product increased nearly 17%, from 9.07% to 10.61%. As a share of Personal Income, total state government spending increased by more than 19%, from 10.0% to 11.93%. Compared to every other state in the nation, only Mississippi outpaced Pennsylvania in real per capita increases in state government spending during the 1990s.

Yet despite the dramatic growth in state government during the 1990s, Pennsylvania ranks among the worst states in the nation in key economic performance indicators. Pennsylvania’s job growth ranked 45th, personal income growth ranked 47th, and population growth ranked 48th in the country between 1991 and 2004.

Fortunately, policymakers can put Pennsylvania back on the road to economic prosperity if they are willing to limit the future growth of state government and leave more money in the hands of families and job creators. The General Assembly’s current opportunities to choose economic growth instead of government growth are Senate Bills 4 and 884 and House Bills 2082 and 2067. These bills would statutorily and/or constitutionally limit annual increases in General Fund spending.

This policy brief is an analysis of the statutory proposals (Senate Bill 4 and House Bill 2082) which would impact the FY 2006-07 General Fund Budget if passed by both houses of the General Assembly and signed by Gov. Ed Rendell. The discussion of the strengths and weaknesses of the competing bills is followed by recommendations for improvement.

The Constitutional Amendments (Senate Bill 884 and House Bill 2067) are similar in nature to the statutory proposals. However, the amendment process would require General Assembly approval in the current 2005-06 legislative session and again in the 2007-08 legislative session before going to the ballot for approval by the people of Pennsylvania. Therefore, the focus of this analysis is on the separate statutes passed by the Senate and House that could immediately impact the budgeting process in Pennsylvania if enacted by Gov. Rendell.