Posts Tagged spending

Best of Times, Worst of Times


“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.

(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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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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Uncharted Waters


On one point there is unanimous agreement under the capitol dome in Harrisburg: Pennsylvania is in uncharted fiscal waters.  Never before in the history of the commonwealth has a state budget impasse lasted this far into the fiscal year.  There are no signs of agreement on a pathway forward.  And the deadline for next year’s budget is now on the horizon.

Despite all of this there has been little public outcry.  Recent polling suggests Governor Tom Wolf’s approval ratings have taken a hit, but the filing deadline for candidates to run for state House and Senate seats came and went in mid-February leaving most lawmakers with no or token challengers.  And, for the most part, the machinery of state government chugs onward.

Unlike past periods of budgetary disagreement state workers have continued to be paid throughout this impasse.  This as a result of past court rulings that held employees who in fact show up for work and perform their jobs must be paid.  As a result, essential – and many non-essential – state services have continued unabated.

Since the state constitution requires passage of a budget before spending can take place you might think state coffers would be overflowing with unspent tax money.  You likely have noticed that despite the lack of a budget, state income taxes are being deducted from your paycheck and you continue to pay sales tax on purchases.  The state, however, is broke.

The state treasury a couple of months back took out a $2 billion loan supposedly to keep the cash flowing.  But, without a budget how can the state spend so much money it actually had to take out a loan to stay in business?  The answer is over $37.5 billion has been expended, much of it prior to the partial budget resolution that occurred in January.

This has caught the attention of Republican legislators who point out Governor Wolf does not have the authority for such spending.  Worse, what gets paid and what does not get paid is basically happening at the discretion of the Governor.  Senate Republican spokeswoman Jennifer Kocher told the Pittsburgh Tribune-Review that Wolf is spending as if he has “an open checkbook.” She pointed out, for example, the governor continues to fund the state corrections system even though he line-item vetoed that portion of the state budget.

The governor’s spending priorities have been controversial.  Last Fall the state treasury floated a “loan” to the House Democratic Caucus because they had run out of money to pay staff due to the budget impasse.  A couple of months later that same treasury denied the City of Erie School District a loan to keep schools open.

Worse, the Wolf Administration has been less than transparent in making public details of its unauthorized spending.  State Representatives Chris Dush (R-Jefferson) and Seth Grove (R-York) have had to file Right to Know requests to obtain information.

All of this has prompted calls for Auditor General Eugene DePasquale to conduct an audit of the state spending that is occurring during the budget impasse.  The GOP brought out the heavy artillery to make the request which came from House Appropriations Chairman Bill Adolph (R-Delaware) and Senate Appropriations Chairman Patrick Browne (R-Lehigh).  They head the legislative committees vested with budgetary power.

Governor Wolf triggered the ongoing budget battle by requesting, actually demanding, a massive increase in state taxes and spending.  Interestingly, the amount of money spent by his administration over the past seven months surpasses the total annual budget passed by the legislature and partially vetoed by the governor.  This has given rise to concerns that the governor plans to spend to his preferred level regardless as to whether or not he ever receives legislative approval.  That could turn the current fiscal and political crisis into a constitutional crisis.

Much like President Obama at the national level Governor Wolf has made it plain he plans to implement his agenda by whatever means necessary even if it means trampling the constitution.  His unchecked and unauthorized spending spree is proof positive he is doing just that.

(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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This Week on Lincoln Radio Journal: Sen. Scott Wagner Talks State Spending Cuts


Radio Program Schedule for the week of January 23, 2016 – January 29, 2016

This week on Lincoln Radio Journal:

  • Eric Boehm has news headlines from PAIndependent.com
  • Lowman Henry has a Newsmaker interview with State Senator Scott Wagner (R-York County) about ways to cut state spending
  • Joe Geiger of the First Nonprofit Foundation has Emily Skopov of No Crayon Left Behind in the Community Benefit Spotlight
  • Beth Anne Mumford of Americans for Prosperity-PA has a Lincoln Radio Journal commentary on National School Choice Week

This week on American Radio Journal:

  • Lowman Henry talks with Jim Phillips of the Heritage Foundation about implications of the Iran nuclear accord
  • Doug Sachtleben of the Club for Growth has the Real Story on the Iowa Caucuses
  • Eric Boehm and Ken Ward have a Watchdog Radio Report on sky high property taxes in Texas
  • Colin Hanna of Let Freedom Ring, USA has an American Radio Journal commentary on the latest developments in the Clinton e-mail server scandal

Visit the program websites for more information about air times. There, you can also stream live or listen to past programs!

http://www.lincolnradiojournal.com

http://www.americanradiojournal.com

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Harrisburg, We Have a Spending Problem


Pennsylvania state government has a structural budget deficit of $1.2 billion dollars.  This somewhat mystical figure is agreed upon by just about everyone.  Given this rare point of agreement, why then is the ongoing budget impasse focused on spending increases rather than spending cuts?

When the working families of Penn’s Woods sit down to pay their monthly bills and income is less than expenses then the family cuts back on spending.  That is because ordinary people can’t just walk into the boss’s office and say “I don’t have enough money to pay my bills so you will pay me more next month.”  And certainly, faced with a deficit, working families – and even most businesses – don’t go out and spend more.

But, that is exactly what Governor Wolf is proposing.  He wants a $4.7 billion increase in state taxes.  If you accept that there is a $1.2 billion structural deficit, then he also wants to increase spending by $3.5 billion.  It is an unrealistic proposal and the reason why the state budget impasse has dragged on for five months.

The governor, however, has won on this front: Republican counter-proposals have focused not on spending cuts, but on increasing spending by less.  Given everyone has bought into the structural deficit number the goal should be to reduce spending to bring actual income and expenditures into balance.  That is what happens in the real world.

Government, however, does not live in the real world.  At no point has a budget been put forward that would even slow the growth of state government let alone cut spending.  The battle has been all about how much bigger state government will become, not about living within our means.

Driving this irrational approach to budgeting is spending on K-12 public education.  The biggest lie since “if you like your health insurance you can keep your health insurance” is that Governor Tom Corbett took a meat axe to education spending.  A cabal of Democratic politicians, labor unions and their media apologists perpetrated that lie during last year’s gubernatorial campaign even though actual spend numbers prove state tax dollars spent on public education increased to record levels under the former governor.

Governor Wolf has never shifted out of campaign mode, and in an effort to repay the unions who financially backed his campaign has made historic increases in education spending a key demand.  Education is a motherhood and apple pie issue.  After all, who doesn’t want our children to have the best education possible?  We all do.  The rub is little of the increases in spending actually benefit children, going instead to pay for bloated administrative bureaucracies and skyrocketing pension expenses.

To their credit, legislative Republicans are insisting on structural reforms to the state’s pension system before agreeing to any spending increase.  But, they have accepted without as much as a whimper the governor’s premise that spending must go up.  Wolf is already crowing that he has gotten Republicans to agree to a “historic” (meaning massively large) increase in state spending on education.

Yet even today, as the budget that should have been done before Independence Day fireworks remains unresolved as we shop for Thanksgiving dinner, not one single party to the budget debate has put on the table any serious menu of potential spending cuts.  Even the GOP’s on-time, no tax hike budget which the governor vetoed included significant spending hikes.  No effort was made to cut spending to match projected income.

There is an old saying in sports that you can’t win by simply playing defense.  That is what has happened as the budget game goes into triple overtime.  At no point has there been an offense designed to cut spending, just defense over spending increases.  So the taxpayers of Pennsylvania have already lost the game, the only hope now is that the final score is not too lopsided.

(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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This Week on Lincoln Radio Journal: Tom Wolf…Promise V Performance


Radio Program Schedule for the week of May 23, 2015 – May 29, 2015

This week on Lincoln Radio Journal:

  • David Taylor hosts a Capitol Watch roundtable discussion on Governor Tom Wolf: campaign promise vs. performance in office with Matthew Brouillette of the Commonwealth Foundation and Neal Lesher from the PA Chapter of the National Federation of Independent Business
  • Lowman Henry has a Town Hall Commentary on the state’s business leaders rejecting Governor Wolf’s tax plans

This week on American Radio Journal:

  • Lowman Henry talks with Stanley Renshon of the Center for Immigration Studies about stopping President Obama’s executive orders on illegal immigration
  • Andy Roth of the Club for Growth has the Real Story on key 2016 U.S. Senate races
  • Eric Boehm and Mark Lagerkvist have a Watchdog Radio Report on New Jersey Governor Chris Christie’s lavish spending at NFL football games
  • Dr. Paul Kengor from the Center for Vision & Values at Grove City College has an American Radio Journal Commentary on seven brothers from one family who fought in World War II

Visit the program web sites for more information about air times. There, you can also stream live or listen to past programs!

http://www.lincolnradiojournal.com

http://www.americanradiojournal.com

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Educating to Opportunity


Democrats, legislatively decimated but flush with executive power, have decided to make increased spending on public education the centerpiece of their domestic agenda for 2015.  The issue feeds a key political base – the entrenched education establishment, primarily public sector labor unions – and has a mom and apple pie appeal to voters, especially independent voters.

President Barack Obama recently unveiled a plan to provide every American who wants one a “free” two-year community college degree.  Free, in this instance, comes with a $60 billion price tag for taxpayers.  At the state level, incoming Governor Tom Wolf has pledged to restore non-existent public education spending cuts to sate the financial appetites of the state teachers’ union which backed him in the last election.

The problem is this policy push is focusing on the wrong aspect of public education.  Rather than debating spending increases, we should be asking: what are we getting for the money we already spend?

The answer: not enough.

Despite the fact spending on K-12 public education has increased at more than double the rate of inflation for decades, test scores uniformly reveal no corresponding improvement in student performance.  Here in Penn’s Woods, a failure to address what everybody but the labor unions understand is a public pension crisis has resulted in any new revenue being sucked up to fulfill pension obligations leaving virtually no new money available to actually benefit students.

Taxpayers, still struggling to shake off the effects of the Great Recession, are understandably demanding more accountability for the substantial chunk of their income already forcibly taken from them so they can continue to own their own homes.  There is reluctance, if not an inability, for many working families and senior citizen households to pay more, especially when outcomes are not improving.

Worse, public education today has become so disconnected from the real world it is failing to educate students for the openings that await them in the job market.  This “skills gap” is striking.  According to a 2014 report by Byron Pitts on the CBS program 60 Minutes, more than three million jobs in this nation are unfilled because employers cannot find employees with the needed skills.  Over 500,000 of those jobs are family sustaining, well-paid manufacturing jobs with benefits.  The Federal Reserve Bank of Philadelphia found one in three manufacturers in its region faced a labor shortage because of what it termed a “mismatch of skills.”

Who is to blame for this “mismatch of skills” and public education’s collective failure to educate to opportunity?  The short answer is everyone.  That is because the focus has been almost exclusively on funding rather than on the core reason why we have public education in the first place, which is to equip students to successfully earn a living.

Among those who are focused on the problem is Dr. Vince Bertram. A former teacher, principal and school superintendent he today heads a nonprofit organization called Project Lead the Way.  During a recent interview on American Radio Journal Dr. Bertram advocated for a renewed emphasis in our public schools on the so-called STEM subjects: Science, Technology, Engineering and Math.  These are the skills students lack coming out of both high school – and all too often the nation’s colleges and universities – with the core skills needed to be hired and trained for today’s more highly technical jobs.

Unfortunately, both President Obama and Governor-elect Wolf remain mired in the politics of the past.  Simply advocating more spending will not solve the problem.  Instead of fighting to feed entrenched political interests effective leadership would engage all the stake-holders in the education process, from taxpayers to labor unions to educators, in reinventing public education to meet the needs of both students and employers.

Nothing less than the future health of our nation’s economy and the well-being of the next generation of Americans are at stake.

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

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

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