Posts Tagged legislator

Eye of the Storm


By Lowman S. Henry

As August melts into September the halls of the state capitol building are relatively quiet. This is a marked contrast to a year ago when state government was in what turned out to be the early phases of the longest budget stalemate in state history.  This year the budget, or at least the spending part of it, was done reasonably close to the constitutionally-mandated June 30th deadline, the revenue component followed several weeks later.

But is this just the eye of the storm?

In capitulating to too many of Governor Tom Wolf’s spending demands the state legislature larded up the budget with nearly $1.4 billion in new expenditures.  This despite claims of a $1.5 billion dollar “structural deficit” the governor claimed needed to be addressed.  Even those using Common Core math can calculate that left the state nearly $3 billion in the hole.

To pay for this spending orgy some $650 million in new taxes were cobbled together, and accounting gimmicks employed, to produce a “balanced” budget.  But the budget isn’t really balanced and even that $650 million contains projected revenue that will never actually materialize.  For example, lawmakers planned to charge the state’s casinos $1 million each to purchase 24-hour liquor licenses.  Apparently nobody thought to ask if the casinos wanted such licenses, as there now appears to be no takers.

The budget also includes revenue from on-line gambling.  The problem is legislation has yet to be passed authorizing on-line gambling.  After adopting the budget, the General Assembly adjourned for a two month recess delaying any possible revenue from that source deep into the fiscal year.

And, predictably, the taxes that were hiked on existing businesses are having a dramatic negative impact.  A 40% tax imposed on vaping supplies is driving many vaping stores – almost all of which are small businesses – out of business.  That means not only will projected revenue from the tax fall short, but the state will also lose out on sales tax revenue as the stores shutter their doors.

That Republicans in the legislature caved into $1.4 billion in new spending defied logic.  The GOP had fought an epic budget battle with the governor the previous fiscal year and won. Not only did they win, but not a single lawmaker seeking re-election was denied by voters due to the budget fight.  After posting a historic win, Republicans essentially forfeited the next game.

All of these elements are coming together to produce the perfect fiscal storm as budget talks begin for next year.  Don’t forget that “structural deficit” of $1.4 billion hasn’t been addressed.  A significant portion of the new taxes enacted this year will fail to materialize.  And, Governor Wolf continues to demand a lengthy menu of spending hikes – and the taxes to pay for them.

Making matters worse the governor and the legislature have not been able to agree on how to deal with cost drivers, particularly the skyrocketing cost of public employee pensions.  Pension costs are gobbling up the lion’s share of any new revenue produced by a still slow-growing state economy.  Republicans have passed pension reform only to see it vetoed by Governor Wolf. There are new legislative proposals on the drawing board, but they fall woefully short of resolving the problem.  Even if some reform is enacted it will likely have minimal impact on the upcoming 2017-18 state budget.

Given all of this, will Republicans stick to their pledge that without addressing cost drivers they will not enact broad-based tax hikes – such as raising the personal income tax, expanding and/or raising sales taxes – or  will they again cave into the governor’s tax and spending demands?  Much rides on the outcome of this looming budget fight, primarily the fiscal health of the commonwealth.

But, 2018 is a gubernatorial election year and this budget will be enacted as the campaign heats up.  Governor Wolf, if he seeks re-election, will want to show his base voters that he delivered the goods of higher spending.  Republican voters will judge the GOP-controlled legislature by their ability to resist higher spending and more taxes.  Add these competing political imperatives to the state’s perilous fiscal circumstances and we should brace ourselves for the second wave of the hurricane.

(Lowman S. Henry is Chairman & CEO of the Lincoln Institute and host of the weekly Lincoln Radio Journal.  His e-mail address is lhenry@lincolninstitue.org.)

Permission to reprint is granted provided author and affiliation are cited.

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Get a Grip: Congress must return to an orderly budget process


Millions of Americans, likely you are one of them, have sent a tax return off to the Internal Revenue Service over the past couple of weeks having been given little choice but to follow the Biblical admonition to “render under Caesar” a significant portion of your earnings.  Neither religious fervor, nor patriotic sentiment prompted the paying of our taxes – financial penalties and even a jail cell await those who fail to comply.

It is interesting then that while we the taxpayers ponied up, Congress – the body that established the income tax – failed to meet its own first fiscal deadline of this year.  This, of course, is nothing unusual as Congress has missed virtually every deadline in the budgetary process for well over a decade.  It should be noted that not a single member of Congress has paid a penalty – financially or electorally – for their inability to execute the most basic of legislative duties.

By April 15th of each year Congress is required to establish the parameters of the federal budget.  This budget blueprint allows the various committees of the House and Senate to then debate and pass spending bills.  The impact of congressional failure to pass the budget blueprint by April 15th is that the committees will automatically assume a higher level of spending for the upcoming fiscal year.

That was precisely the goal of Democrats and Republican moderates. The budget blueprint did not happen because conservatives pushed for adoption of a more fiscally austere budget blueprint and could not come to agreement with their more moderate colleagues.  This failure is widely viewed as a serious setback for new House Speaker Paul Ryan who has made a return to the regular order of the budget process a top priority.

What will happen over the coming months is that the various committees will debate and pass spending bills the total of which will exceed both the nation’s ability to pay and congressional will to approve.  As has happened regularly over the past decade the September 31st deadline for passing a new federal budget will arrive without congressional consensus.

This is why we typically hear late summer rumblings over a pending budget crisis and threats of a government shut-down in October.  To prevent such a shut-down Congress will then pass a continuing resolution.  The continuing resolution – or CR in government parlance – will allow spending to continue for a set period of time at the previous year’s spending level.

All of this is bad news for fiscal conservatives in that the end result is that instead of an orderly passing of each component of the budget by category one gigantic spending bill – known as an omnibus – ends up being passed, usually sometime in December, that allows federal government spending to continue growing virtually unchecked.  To make matters worse usually unrelated, must pass items are tossed into the omnibus making it politically difficult for any member to vote against the package.

The ultimate impact of this is that the tax burden on the average American continues to grow. According to the non-partisan Tax Foundation, Tax Freedom Day – the day we stop working to pay federal taxes – will fall on April 24th.  That is 114 days into the year (excluding Leap Day).  But, wait – it’s worse: “If you include annual federal borrowing, which represents future taxes owed, Tax Freedom Day would occur 16 days later, on May 10.”

As if that isn’t bad enough, it doesn’t include your state, county, school district and local taxes which push your personal Tax Freedom Day into June.  Overall, according to the Tax Foundation, we Americans will pay $3.3 trillion in federal taxes, another $1.6 trillion in state and local taxes all adding up to about 31% of your income.

This growing tax burden is the reason why it is so important that Congress re-establish an orderly budget process.  The current method of governing by crisis only leads to bigger government.  Without an agreed to blueprint that establishes spending limits, hearings and debate that set clear priorities, and passage of a budget in a non-crisis atmosphere, it is next to impossible to get a grip on out-of-control government spending.  Congress’ failure to do so means we will continue working deeper and deeper into the year to pay the tab.

(Lowman S. Henry is Chairman & CEO of the Lincoln Institute and host of the weekly Lincoln Radio Journal.  His e-mail address is lhenry@lincolninstitute.org)

Permission to reprint is granted provided author and affiliation are cited.

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The Truth About the Latest Medi-SCARE


Here’s how you know you have a product or an idea that just won’t sell: you have to bully or coerce people to get their buy-in.

We see it all the time with the union bosses. They’re always extolling the virtues of unions, but fundamentally fail to answer this question: if your union is so great why do you need laws forcing people to join it?

The same goes for Medicaid. When the Supreme Court of the United States ruled the federal government had no right to force states to expand the government run health insurance program for low income individuals some states, like ours, decided they wouldn’t bother.

Governor Corbett is exhibiting exemplary leadership in refusing to expand the program (and I do hope Corbett continues to stand strong and I will not be forced to eat those words), but the hysterical and special-interest-funded advocates of Medicaid expansion are pushing a new argument to coerce states into the scheme. They claim that unless a state expands, its employers will be subjected to increased tax penalties.

Like all things regarding Obamacare and particularly Medicaid, the pro-Obamacare, pro-Medicaid advocates are misunderstanding the complicated and complex health care law when they use this new Medi-SCARE tactic.

This argument is obviously flawed for several reasons.

First, as healthcare policy experts have argued, employer penalty tax will only hit businesses in states that have state-based exchanges. And guess what Governor Corbett did to protect us? He blocked the creation of a state based exchange. Arguing that a state like Pennsylvania, which refused a state exchange and is rejecting Medicaid expansion, will now see employer mandate taxes levied is outright false.

Let’s say, for the hysterical Left winger’s sake, that the tax does end up applying to businesses in states with federal and partnership exchanges, well, then the tax would only apply to businesses when their employees purchase insurance through the exchange and only if the employer-sponsored insurance is unaffordable.

Even some supporters of the President’s law admit that many people will instead opt to pay the individual mandate penalty, only $95 in 2014, instead of spending the time, effort and money to purchase insurance on a health insurance exchangeeven with the federal tax subsidy. Additionally, individuals could have employer-sponsored insurance options available to them as well. So even if the tax does apply, it will be insignificant, not the $1.3 billion floating through the media.

Supporters of the President’s health care law are worried that states won’t be willing participants in the flawed expansion of the broken and costly Medicaid expansion. So now they are resorting to false statements and arguments to scare states into acting. Perhaps they aren’t being disingenuous and just don’t understand their beloved, complicated regulatory nightmare. Regardless of the reasons for false statements, states should ignore the arguments and instead look at the facts.

(Jennifer Stefano is Pennsylvania Director of Americans for Prosperity and a

commentator on Lincoln Radio Journal.)

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