No Shortage Of Ideas To Deal With State’s Budget Deficit From Left Or Right

We are now 26 days away from Gov. Tom Wolf’s February 7 budget address where he will tell us how he plans to deal with an estimated $2.2 billion structural deficit in the current and next fiscal year.

But the Senate and House have a vote too and you can bet it will still be some combination of budget cuts, government restructuring and new or expanded sources of revenue of some type.  And perhaps some smoke and mirrors too.

Each of the major budget players have already laid out some very broad directions they want to go in with the budget over the last few weeks.

Lists Of Ideas

Beyond that, there are also lists of ideas suggested by left- and right-leaning Harrisburg think tanks that one player or another will pull from.

The Senate/House Taxpayers’ Caucus outlined its money-saving ideas last May in a report issued by Senator (and now gubernatorial candidate) Scott Wagner (R-York)  and Rep. Seth Grove (R-York).

The Commonwealth Foundation (for the right) and the PA Budget and Policy Center (for the left) outlined their ideas for the budget in December.

Use this for scoring budget proposals in the next few months.

Senate/House Taxpayer Caucus

Last May, the Senate/House Taxpayer Caucus issued a report on the state budget making over $3 billion worth of recommendations to save money.

The report identifies debt payments, the departments of Corrections and Humans Services and pension costs as the main drivers of increasing state spending. Among the specific recommendations-- big and small-- were these (some of which were used to balance the FY 2016-17 budget)--

-- $150 million - Tax Amnesty Program

-- $75 million - Improved Collection of Delinquent Taxes

-- $12.4 million - Social Security Payment Collection

-- $153 million - Reforming State Healthcare Costs

-- $600 million - Pension Reform

-- $43,384 - Pennsylvania State Police (printing tickets on 1 sheet of paper)

-- $220 million - Liquor Privatization:

-- $26.1 million - PennDOT Selling Driver Information

-- $167 million - Auditor General (through numerous audits)

-- $10.6 million - Debt Reduction

-- $200 million - Budget Reconciliation

-- $922 million - Department of Human Services

--  $3 million - Energy Savings

-- Addressing Corporate Welfare

A copy of Taxpayers’ Framework for Pennsylvania is available online.

Commonwealth Foundation

The Commonwealth Foundation believes state government has a spending problem not a revenue problem.  They say state spending has increased by more than $4,000 per person over the last five decades from $2,122 in 1970 to $6,132 in 2016.

As a first step, they have proposed specific cuts of $2.6 billion in spending and other reforms they say are needed to get the state budget under control.  Among the suggestions--

-- Eliminate $804 million in corporate welfare, special subsidies and tax credits: $95.3 million to Commonwealth Financing Authority, $14.5 million to Ben Franklin Tech Development Authority, $60 million Film Tax Credit, $78 million Keystone Opportunity Zone, $55 million Research and Development Tax Credit for a total of 36 different line items.

-- Eliminate Non-General Fund Spending: $93 million in Keystone Recreation, Park and Conservation Fund, $60 million Agricultural Conservation Easement Purchase Fund, $50 million Agricultural College Land Scrip (Penn State Extension) Fund, House Affording and Rehabilitation Enhancement Fund, Conservation District Fund, Reprioritize Transportation Funds totaling $2.6 billion.

-- Privatize The Liquor System

-- Expand Education Choice/Education Improvement/Opportunity Tax Credit

-- Repeal Prevailing Wage

-- Structure Welfare To Encourage Self-Sufficiency

-- Make Additional Prison Reforms To Reduce Inmate Population

-- Utilize Public-Private Partnerships For State Parks Management

-- Adopt A Sustainable Model For Public Employee Health Care

Click Here to read a background paper on these suggestions.

PA Budget and Policy Center

The PA Budget and Policy Center believes Pennsylvania “desperately needs new, recurring revenues” to avoid devastating budget cuts and to restore and enhance public education, human services and environmental protection.

They point out state spending as a share of GDP has fallen from 4.88 percent in 1994 to 4.33 percent in 2015 and state government employs 4,400 fewer workers today than it did in 2010.

Their “Fair Share Tax Plan For Pennsylvania” would raise $2.56 billion and would close the state’s structural deficit and provide a margin for the future.  The Center’s suggestions include--

-- Bifurcate Income Tax: Bifurcate the personal income tax into two parts and raise the tax rate on what we call income from wealth—dividends; net income from a business, profession, or farm; capital gains; net income from rents, royalties, patents, and copyrights; gambling and lottery winnings; and income from estates or trusts.

Raising the tax on income from wealth from the current 3.07 percent to 4.0 percent would bring in an estimated $788 million in new revenue. At a rate of 4.5 percent, the tax would bring in $1.2 billion. Over two-thirds of the new revenue would come from families in the top 5 percent of income; 82 percent would come from families with incomes of $101,000 or more.

-- Increase Income Tax: Raise the tax rate on wage and interest income from the current 3.07 percent to 3.25 percent, while expanding the tax forgiveness program to reduce taxes on those with the lowest incomes. This would raise revenues by a net of $375 million.

-- Expand Sales Tax: Expand the sales tax base to include goods and services that are more likely to be purchased by those with high, rather than low, incomes. Combined with a credit to low-income families for the sales tax they pay, this would net $338 million in new revenue.

-- Eliminate Corporate Tax Loopholes: Eliminate corporate tax loopholes by instituting combined reporting of corporate taxes while lowering the tax rate. This would net $200 million in new revenue.

-- Natural Gas Severance Tax: Institute a modest severance tax of 6.5 percent on natural gas drilling with an impact fee credit. This would raise $218 million.

-- Increase Minimum Wage: Raise the minimum wage to at least $10.10 per hour, which would increase income and sales tax revenues while reducing state expenditures for Medical Assistance. The net contribution to deficit reduction would be $225 million.

Click Here to read the Center’s Fair Share Tax Proposal For Pennsylvania.

We’ll see who the winners and losers are in the budget battles to come as the Senate, House and Gov. Wolf “reimagine” how they’re going to deal with a $2.2 billion deficit and still give some goodies away.