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“It was the best of times, it was the worst of times, it was the age of wisdom, it was the age of foolishness . . . ” So begins Charles Dickens’s novel A Tale of Two Cities. It is set in in the years prior to the French revolution, but actually applies to the recent performance of Republicans in the Pennsylvania legislature.
As official Harrisburg prepares for what is shaping up to be another epic budget battle, the big question is: which GOP will show up in 2017? Will it be the Republican-controlled legislature that last year stood its ground and fought Governor Tom Wolf’s historic tax and spending proposals, or will it be the GOP that this year folded like a cheap suit and approved $1.4 billion in new spending?
The $1.4 billion spending hike might not qualify as the worst of times, but coming on the heels of a successful struggle against the Wolf Administration’s spending demands it did leave a lot of folks puzzled. After winning the longest budget fight in state history, why turn around and cave in months later? This leaves most observers – and quite a few participants – at a loss when it comes to predicting how the 2017 budget war will unfold.
We are certain of a few things.
The toxic stew of tax increases and new taxes cooked up to pay for this year’s massive spending increase has failed to live up to expectations. To date, revenue collections for the 2017-2018 fiscal year are running $261.8 million below estimates. This, coupled with a “structural budget deficit” pegged at over a billion dollars means the new budget will begin with a significant gap between spending and revenue.
We also can be sure that Governor Wolf will again demand massive spending increases and the taxes to pay for that spending. He used his budget address this year to lecture the General Assembly for its refusal to accede to his spending demands. Since most of his priorities have not been funded chances are they will be dusted off and included in his new budget proposal.
But should Republicans sit back and wait for the governor to set the agenda? Leo Knepper of the Citizens Alliance of Pennsylvania, a pro-growth PAC, suggests a different course of action. “If Republicans in the General Assembly were smart, they would upend a long-standing budget tradition and go on offense,” Knepper wrote in a recent policy brief. “(They) should ignore tradition and pre-empt the Governor’s budget address with a plan of their own.” Knepper observed this would “force the governor to play defense rather than the usual offensive position granted to governors.”
The question remains, however, whether or not legislative Republicans – or at least the leaders who actually sit at the negotiating table – want to go on offense. Will the resolute leaders who fought and won the first budget battle show up to play, or the ones who forfeited this year’s game?
The final certainty is that all this will play out against the backdrop of the rapidly approaching 2018 election for Governor. For his part, Governor Wolf will want to deliver the goods of higher spending to his largely urban constituency.
It won’t be so simple for Republicans.
With a number of legislators, including leaders who will negotiate the new budget, eyeing a race for the Republican gubernatorial nomination, the upcoming budget battle is fraught with peril. There are pressures for leaders to “be responsible” and give into spending demands. But with a veto proof Senate majority and a historically large majority in the House, voters are not likely to be either understanding or forgiving if the GOP doesn’t stand firm.
Will it be the “best of times” with legislative Republicans going on offense and standing up to a tax and spend governor, or will it be the “worst of times” with the taxpayers of Penn’s Woods getting stuck with yet another round of tax hikes? As the budget process begins a new cycle it is impossible to tell which of the GOP’s split personalities will emerge dominant in 2017, but both the pocketbooks of taxpayers and the political fortunes of many politicians will be affected by the outcome.
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Pennsylvania’s business climate remains sluggish as the commonwealth continues to struggle in the aftermath of the Great Recession. Business conditions, employment levels and sales have all backslid over the past six months with owners blaming high taxes, government regulation and a lack of skilled workers for the malaise.
The Fall 2016 Keystone Business Climate Survey conducted by the Lincoln Institute of Public Opinion Research found half of the business owners and chief executive officers survey saying the state’s economy has gotten worse over the past six months, only five percent felt Pennsylvania’s business climate had improved during that time frame.
Comparatively, one year ago 42% felt the business climate had gotten worse, while six percent at that time said it had improved. There is little optimism that business conditions will improve soon. Forty-four percent say they expect the state’s economy to continue getting worse over the upcoming six months, five percent expect to see an improvement in the business climate.
Along with that pessimistic overall prognosis twice as many businesses report having reduced their workforce as say they have added jobs. The majority of businesses – 66% – reported that employment levels remained about the same over the past six months. But, 21% said they have reduced their employee compliment while 11% added employees. The picture improves slightly as the owners/CEOs look ahead to the coming six months. Sixteen percent say they plan to add employees, 12% expect to reduce their workforce.
Sales have also taken a hit over the past six months. Thirty-nine percent said their sales remained about the same from March thru September. But, 39% reported decreased sales and were off-set by only 21% having reported sales increases. Looking forward, 51% expect sales to remain stable. Twenty-Four percent forecast an increase in sales, 23% are braced for a sales decrease.
Factors Impacting Business Growth
Among the factors cited by businesses for why they considered expanding their businesses over the past two years, but decided against expansion taxes and regulation topped the list of barriers. Onerous federal regulations were cited by 41% of the businesses that considered, but rejected, expansion plans. Coming in a close second was Governor Tom Wolf’s proposed tax increases cited by 40% as a reason why they did not expand. Pennsylvania’s tax structure was listed by 29% as having frustrated expansion plans.
Thirty-six percent cited onerous state regulations as a barrier to expansion, while another 35% cited the lack of a skilled work force. Nearly half of the businesses surveyed said they currently have open positions for which they have been unable to find qualified applicants. Forty-two percent say they have been unable to fill one to five jobs; 2% have six to ten open positions; one percent has more than ten jobs unfilled due to lack of qualified applicants.
Pennsylvania fiscal condition continues to be of concern to the business owners and CEOs participating in the Fall 2016 Keystone Business Climate Survey. Eighty-five percent disagreed – 70% strongly so – with Republicans in the General Assembly having agreed to a $1.4 billion spending increase and then raising taxes to enact the current year’s state budget.
Looking ahead to what will likely be another epic budget battle next summer, 92% say the General Assembly must address cost drivers such as pension reform before considering an increase in taxes. In fact, 34% said the state’s massive unfunded pension liability has caused them to not consider expanding in Pennsylvania.
Among pension reforms being considered is moving state employees from the current defined benefit pension system to a defined contribution plan. Thirty-nine percent of the businesses surveyed said they offer employees a company administered defined contribution plan to which the company contributes. Only 3% of the private businesses surveyed continue to offer a defined pension plan. Another 40% offer employees no retirement plans at all.
Earlier this year the General Assembly did pass, and Governor Tom Wolf signed into law, some modest changes to the state’s century-old liquor laws. Business owners/CEOs said those reforms did not go far enough. Fifty-two percent would like for the state to completely privatize both retail sales and wholesale distribution of alcoholic products. Another 26% would like to see just retail sales privatized. Twelve percent said the recent changes were sufficient.
Pennsylvania has an abundant supply of natural gas, but additional pipelines are needed to get that gas to market. Eight-nine percent agree – 60% strongly agree – that this resource should be developed and more pipelines built. Nine percent disagree. Twenty-five percent said easier access to natural gas would be a benefit to their business with an additional 14% saying it would be a major benefit. Thirty percent said they do not utilize natural gas in their business.
Over the past nine years since the passage of Act 44 the Pennsylvania Turnpike Commission has diverted $5.2 billion to PennDOT to help pay for state highways and public transit. This has resulted in annual fare increases for turnpike travelers. Sixty-three percent of those participating in the Fall 2016 Keystone Business Climate Survey said this should end and fare revenue be used only to maintain and improve the turnpike. Twenty-nine percent felt the sharing of revenue should continue.
Job Approval Ratings
President Barack Obama and Governor Tom Wolf continue to suffer from significantly low job approval ratings among the business community. Eighty-four percent have a negative view of the President’s job performance; 86% disapprove of the job being done by Governor Wolf.
U.S. Senator Pat Toomey, who faces re-election in November, received a 50% job approval rating against 23% with a negative view of his job performance. The job being done by U.S. Senator Robert P. Casey, Jr. is viewed negatively by 56% of the business owners/CEOs, 18% give him positive marks. Likewise, 54% say Federal Reserve Chair Janet Yellen is doing a poor job, 15% approve.
Pennsylvania has three statewide constitutional or “row” offices. Two are serving by appointment, their elected predecessors having resigned after being convicted of crimes. Auditor General Eugene DePasquale is the surviving official elected in 2012 still in office. Seventy-three percent have no opinion of his job performance, with 14% saying he is doing a good job and 14% having a negative opinion of his job performance. Likewise about two-thirds offered no opinions on state Treasurer Tim Reese or Attorney General Bruce Beemer. Of those who did, 18% give Beemer a negative rating, 6% a positive one while 15% hold a negative view of Reese, 5% a positive view.
As has been the case throughout the Keystone Business Climate Survey’s 22-year history the owners and chief executive officers hold the federal congress and the state legislature in very low regard. Just 8% approve of the job being done by the United States Senate, 11% approve of the job being done by the U.S. House of Representatives. Seventeen percent approve of the job performance of the Pennsylvania Senate; 19% approve of the job being done by the Pennsylvania House of Representatives.
Finally, the Lincoln Institute asked participants in the survey who they support for President of the United States and United State Senator from Pennsylvania in the upcoming November General Election. Seventy-three percent said they will vote for the Republican nominee Donald Trump, 12% support the Democratic nominee Hillary Clinton and 6% say they will vote for Libertarian Gary Johnson. Republican incumbent U.S. Senator Pat Toomey has the support of 81% of the owners/CEOs, Democratic challenger Katie McGinty has 12% support.
The Fall 2016 Keystone Business Climate Survey was conducted electronically by the Lincoln Institute of Public Opinion Research, Inc. from September 13 through October 5, 2016. A total of 370 businesses responded to the survey invitation. Of those 81% are the owner of the business, 14% are the CEO/COO/CFO and one percent a business manager.
Twenty-five percent of the responses came from the Philadelphia/southeastern part of the state; 18% from Pittsburgh/southwestern Pennsylvania; 16% from south/central Pennsylvania; 13% from northwestern Pennsylvania; 11% from northeastern Pennsylvania; 10% from north-central Pennsylvania; 4% from the Lehigh Valley and 3% from the Altoona/Johnstown area.
Complete numeric results are posted on-line at http://www.lincolninstitute.org
2016 Republican Delegate/Alternate Delegate Survey: Supreme Court, Terrorist, Constitutional Rights Top Delegate Concerns
Pennsylvania’s delegation to the 2016 Republican National Convention rated U.S. Supreme Court nominations, terrorism and protecting constitutional rights as the most important issues facing the nation while viewing the GOP-controlled congress as having failed to effectively counter the policies of President Barack Obama.
The Lincoln Institute’s quadrennial survey of delegates and alternate delegates found economic issues outweighed social issues and foreign affairs in their selection of a presidential candidate, but 60% said a combination of all three issue sets factored into their decision.
That was reflected in the importance given to the various issues facing the nation. No social issues topped the delegation’s list of important issues. A clear concern over fundamental rights emerged from the survey data as the selection of nominees to the U.S. Supreme Court topped the importance scale with 90% saying the seating of justices was a very important issue. Concerns over ISIS/terrorism rated as second most important, but protecting constitutional rights followed closely as the delegation’s third most important area of concern. Jobs and the economy, the budget deficit/government spending and illegal immigration rounded out the top concerns.
Pennsylvania’s delegation hues to traditional Republican positions on President Obama’s job performance. Eighty-seven percent say his administration’s foreign policies have made the United States much less secure; only one delegate thought those policies have made the nation more secure. When asked if President Obama was on the right track or wrong track in responding to the threat of ISIS and international terrorism there was unanimity – 100% said wrong track. Until the threat of ISIS/terrorism has ended, 64% of the delegation thinks the U.S. should ban entry of citizens from countries that are hotbeds of terrorist activity; 26% want to ban all Muslims from entering the country; 13% say current laws are sufficient. Eighty-nine percent of the delegates/alternate delegates strongly disapprove of the Obama Administration’s nuclear deal with Iran, another 8% somewhat disapprove. Only 3% expressed approval.
When asked if the U.S. economy is on the right track or off in the wrong direction 97% said wrong direction. Ninety-two percent of the Pennsylvania delegation to the Republican National Convention places the blame for the nation’s economic ills on President Obama, but majorities also fault labor unions and congress. There is strong support, 72% with another 26% somewhat supporting lowering tax rates as a means of stimulating economic growth.
The delegation, reflecting the views of its presumptive presidential nominee, opposes free trade agreements such as the Trans Pacific Partnership (TPP). Sixty-nine percent oppose TPP with 31% expressing strong opposition. In terms of balancing the federal budget, 79% would do so only by cutting spending; 21% would employ a combination of tax hikes and spending cuts. Concern was voiced over the viability of the Social Security system: 57% think the system will be around for future generations – but only with substantial changes. Forty percent think Social Security is headed to bankruptcy; only 4% think it will survive without changes. To provide for the nation’s energy needs, 93% favor more domestic drilling as a solution; 50% support development of alternative fuels and 30% urge conservation.
Illegal immigration has been a dominate issue in Donald Trump’s presidential campaign. The Pennsylvania delegation to the Republican national convention reflects his stance on the issue. Fifty-six percent of the delegation wants immediate deportation of illegal aliens; 23% would accept granting permanent worker status. Not a single delegate favors granting illegal aliens full citizenship.
Also spurring Donald Trump’s march to the Republican Presidential nomination was grassroots frustration with the ineffectiveness of the party’s elected officials in Washington, D.C. Eighty percent of the Pennsylvania delegation said the Republican-controlled congress has been ineffective at checking President Obama’s executive power.
As a result, over two-thirds hold a negative view of the job being done by the U.S. Senate and the U.S. House of Representatives.
A strong anti-government thread is woven into the state’s delegation as 97% said they view the federal government as an adversarial force when it comes to helping solve problems. Only two delegates view the federal government as a positive force. Likewise, 97% say our basic rights as Americans are God-given; only two delegates view our rights as granted to us by government.
The Lincoln Institute’s survey of delegates/alternate delegates to the 2016 Republican National Convention found 92% want Republicans in the general assembly to continue holding the line on more spending and higher taxes. Ironically, those views were expressed as the GOP-controlled legislature approved a state budget which dramatically increased spending and included a wide array of tax hikes. Ninety-six percent agree with the strategy – now abandoned by Republican legislative leaders – that cost drivers like pension reform should be addressed before the general assembly considers any increase in taxes.
Sixty-five percent of the delegation feels the property tax-based system currently utilized by school districts, local and county governments to fund services is unfair to taxpayers. There is little agreement though on how to otherwise raise revenue. Twenty percent favor a higher state sales tax rate while 16% would support a more broad based state sales tax at the current rate. There was nominal support for local sales taxes, local earned income taxes or a higher state income tax. On a related note, 61% favor allowing vouchers or grants to students who wish to attend a public school in a district other than their own, 32% do not.
Generally speaking, 60% of the delegates/alternate delegates think the state income tax rate is too high, another 41% say it is about right. Eighty-seven percent feel state business taxes are too high, only 13% think taxes on business are about right. When it comes to economic development, 96% favor having the state cut business taxes and regulation. Just 4% favor having the state borrow money to help select business ventures.
There is strong support among Pennsylvania’s delegation for a Right to Work Law, which means that a worker cannot be fired or kept from having a job for either joining or not joining a labor union. Eighty-five percent favor the adoption of a right to work law. On a related issue, 76% support enacting a ban on public school teacher strikes.
Pennsylvania’s delegation to the Republican National Convention is a very conservative one. Forty percent say they are very conservative, another 47% say they are somewhat conservative. Thirteen percent proclaimed themselves to be moderates, and one delegate adopted the very liberal/progressive title.
The delegation is skewed to higher age demographics. About a third are over the age of 65, another third between the ages of 50-65. Twenty-eight percent fall in the 30-50 age group, while only one respondent was under 30. Of the delegates responding to the survey invitation 62% are male, 38% female.
The Lincoln Institute survey of delegates/alternate delegates to the 2016 Republican National Convention was conducted electronically between June 28 and July 14. 2016. A total of 73 delegates/alternate delegates participated in the survey. Complete numeric results are available on-line at www.lincolninstitute.org.
‘Tis budget season again in Harrisburg. Governor Tom Wolf and the state legislature face a June 30th deadline for enacting the 2016-17 spending plan. If it seems like we just finished the budget; that is because it took until April for the longest fiscal stand-off in state history to be resolved. And now, it is time to begin anew.
Hopefully, not the lengthy stand-off part.
June is typically when the heavy lifting on crafting the new budget is done, particularly the last week of the month when legislators act like college students pulling an overnighter to get their assignments finished. In this case though, there is no penalty for tardiness.
The big question under the capitol dome is will there be a summer re-run of the 2015-16 budget drama, or will the state budget actually get done relatively close to the constitutional deadline? So far, the signals are mixed – but ominous.
Will it be, as Yogi Berra once said, “déjà vu all over again?” Two factors point to another epic battle. First, Governor Wolf’s “budget address” last winter lacked any content actually pertaining to the budget. Instead, he unleashed a tongue lashing at the legislature for failing to approve his historic tax and spending increases. This was as well received as an illegal alien at a Trump rally. Second, not a single legislator lost in April’s primary as a result of the budget battle.
That second factor is significant. With all House members and half of the Senate up for re-election this year pressure is normally on to avoid anything even remotely controversial so as not to upset the electorate. However, Republicans in particular are emboldened because they stood their ground, bested Governor Wolf in round one, and were rewarded by voters. This gives them no incentive to cave to the governor’s tax hike demands. Quite the opposite, voters in their districts clearly don’t want expanded state spending and the taxes needed to pay for it.
Conversely, Democrats – who have become essentially an urban party in Pennsylvania – represent districts that benefit from state taxpayer largesse. Their constituents want more spending because they are on the receiving end, thus those voters returned their representatives to office as well.
Stuck in the middle are the endangered species of suburban Democrats who represent so-called “swing districts.” Largely located in western Pennsylvania, these districts have been flipping from Democrat to Republican in recent cycles. This is where the biggest electoral battles of 2016 will be fought, and those Democrats are on the hot seat.
This brings us to the one factor that could bring about a prompt budget resolution: Democratic desires not to lose even more of their seats. Already Republicans hold legislative majorities not seen in over a half century. The electoral map does not offer Democrats much hope. At least three Senate Democrats are imperiled while the GOP faces no significant opposition to holding their seats. In the House, most battles will again be fought on the little remaining Democrat turf in the western part of the state.
In each of those districts the trend line has been favorable for Republicans, and the Democrat constituencies are far more conservative than those found in urban areas. Thus, Democratic candidates in each of those districts can ill afford to be tagged with supporting Governor Wolf’s tax and spend agenda. This is incentive for Democratic leadership to postpone until next year any epic battle over the budget.
Should that occur Pennsylvania taxpayers will have only a brief respite. Governor Wolf must stand for re-election in 2018 meaning his last shot at enacting his bold plans to expand the size and scope of state government will come next year. Lose, and his image as an isolated and ineffective chief executive will be cemented into place. But for Tom Wolf, even winning comes with some risk: will statewide voters actually reward a governor who just imposed upon them a historically large tax hike?
The only thing we can say for sure is it will be interesting to watch.
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There is an old saying in politics that “perception is reality.” That is how former Governor Tom Corbett got blamed for cuts in funding to public education that never happened. To this day many Pennsylvanians believe he took an axe to education funding when in fact he left office with more state dollars being spent on K-12 education than at any point in the commonwealth’s history.
To drive the point home, Governor Tom Wolf campaigned promising to be the education governor. He has done more to damage public education than any governor in recent history. This reality has been cloaked in the perception that he is pro-education. In fact Wolf is really just pro-union, propping up a system that fails both students and taxpayers.
It is true he has proposed historic increases in education spending – and the higher taxes to fund that spending. But, the proposed increases in both taxing and spending are so large they have proven politically impossible to implement. The untenable nature of these increases are such that even in the hyper-partisan atmosphere of the state capitol some Democrats have refused to go along.
The chances of Governor Wolf getting Republican support for more reasonable increases in k-12 public education spending are high if, as demanded by GOP leadership, reforms to cost drivers are included. But the governor has adopted a “my way or the highway” attitude which gridlocked the process and produced a historic budget stand-off.
In the process of fighting that battle, the so-called education governor pushed school districts across Penn’s Woods to the cusp of closing due to the lack of state dollars flowing into their coffers. Worse, many had to borrow money to keep their doors open, incurring costs that took dollars away from students. His administration, willing to spend money to keep state bureaucracy operating, turned down appeals from school districts for relief.
Even if Governor Wolf were to push his education spending increases through the legislature precious few dollars would ever be spent benefitting students. That is because the state’s pension system has become fiscally unsound. Its investments are under-performing projections and too generous benefits are draining the system faster than current employees add new dollars. At the school district level, property taxes are rising to cover costs and the preponderance of any new state dollars directed to education must go to prop up the system as well.
June a year ago the legislature passed significant pension reform. It was immediately vetoed by the governor who parroted the union line that the system is fine, just underfunded. Thus an opportunity to at least partially address a major cost driver was missed. The end result: fewer dollars available to directly benefit students.
Governor Wolf has also been waging a war on charter schools. Even more so than traditional public schools, charters operate with minimal cash flow. The epic budget battle resulted in teacher lay-offs, and even the closing of some charter schools. More will likely close as the governor implements administrative policies aimed at forcing charter schools out of existence. These policies are designed to deny parents and students valuable educational choices in an effort to preserve the union-dominated monopoly of public schools.
The latest example of Governor Wolf placing union interests over student interests involves legislation that would replace the seniority-based system for determining teacher lay-offs with a merit based system. In other words, instead of “last in, first out” the best teachers would be retained. At present, the legislation is on Governor Wolf’s desk – and he has vowed a veto.
Unless you are doing Common Core math, when you add all these factors together what you get is a governor whose every action has harmed students and made the state’s system of public education even more fiscally fragile than it was when he took office. All of this is being done to prop up the very labor unions that financed the governor’s election. For taxpayers, and for students, it is a very large worm in the education apple.
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The final pieces of legislation ending Pennsylvania’s longest budget stalemate fell into place just days before the April primary election. And the story that dominated state news for over nine months had no apparent impact on voters who meted out no electoral punishment for the fiscal fray that had school districts on the cusp of closing, nonprofits cutting services, and politicians at each other’s throats.
This budget stand-off was different from those that took place during the Rendell era notably due to the lack of public pressure placed on Governor Wolf and the legislature. There were no daily protests on the capitol steps. State employees did not go without pay. When the battle commenced last summer Governor Wolf’s first salvo was an attack ad campaign. It fell flat. Outside the halls of state government and the few remaining news media that cover it, the budget battle went largely unnoticed.
Despite Governor Wolf’s threats of electoral retribution, lawmakers did not pay a political price for engaging in the budget battle. The first clue that the fiscal free-for-all was not impacting the electorate came in February when there was no wave of candidates filing to oppose incumbent legislators. Looking at the primary election results it would be difficult if not impossible to point to a single lawmaker who lost his or her seat because of the sustained budget stand-off.
In fact few lawmakers lost for any reason. And those that did lose were a result of local political divisions rather than anything that happened in Harrisburg. In Philadelphia, for example, Democrats engaged in their biannual exercise of primary fratricide. The state’s longest serving House member – State Representative Mark Cohen – was defeated by a challenger who claimed he had been in office too long and was out of touch with his constituents.
Another rare defeat of a House incumbent took place in Lackawanna County where State Representative Frank Farina lost to former legislator Kevin Haggerty. The two former colleagues found their districts merged in redistricting a couple of years ago and have been battling over the seat ever since.
While voters were busy returning incumbents to office some lawmakers even got a promotion. State Representative Mike Regan ran for and won the Republican nomination to replace outgoing state Senator Pat Vance in Cumberland County. In what was a hard fought and nasty campaign the budget crisis did not register as a key issue.
For Republicans looking to hold onto historic majorities in both the Senate and the House the future looks bright. Senate Republicans could actually achieve a veto proof majority as the fall battles will be fought over swing seats currently occupied by Democrats. On the House side, the primary yielded solid GOP nominees for open seats like Dawn Keefer in Cumberland County and Frank Ryan in Lebanon County. Conversely, Democratic retirements in western Pennsylvania provide the opportunity for additional Republican pick-ups in an area already trending toward the GOP.
Further evidence of the impotence of the state budget battle on the electoral process can be found in the race for the Democratic nomination for the U.S. Senate. Governor Wolf’s first chief of staff, Katie McGinty, was one of the prime architects of the budget proposal that triggered the lengthy stand-off. She resigned last summer to run for the U.S. Senate and prevailed against three opponents in the primary.
Why did the epic budget battle fall so flat with voters? Chalk it up to a lack of attention being focused on state government. Or the fact the absence of a state budget had little impact on the daily lives of Pennsylvanians. Timing was also a factor. With the nation transfixed by the presidential race scant coverage has been afforded other matters.
And so we find ourselves back to where we began. Another budget season is underway in Harrisburg. Governor Wolf is pushing for more spending and higher taxes, Republicans are adamant in their refusal. The fight will continue, apparently without consequence for anyone involved.
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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 firstname.lastname@example.org)
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