Thursday, December 25, 2014

Does Pa. have a spending problem?

Tomorrow, Pennsylvania Gov. Tom Corbett will present his first state budget to the legislature. Very few details have leaked out, but it's almost guaranteed that there will be big cuts in state spending. That's because Pennsylvania has a $4 billion projected shortfall and Corbett has promised to fill the gap without raising taxes.

Does Pa. have a spending problem?

Tomorrow, Pennsylvania Gov. Tom Corbett will present his first state budget to the legislature. Very few details have leaked out, but it's almost guaranteed that there will be big cuts in state spending. That's because Pennsylvania has a $4 billion projected shortfall and Corbett has promised to fill the gap without raising taxes.

While we don't know specifics, there have been some hints about Corbett's overall message. Last week, state budget secretary Charles Zogby told reporters that Pennsylvania has a spending problem. He says the state budget deficit is primarily a result of the previous administration spending too much money without a clear way to pay for everything.

Is that so? In an excellent post on the blog Third and State, Michael Wood of the Pennsylvania Center on Budget and Policy Center argues that revenue problems, not spending problems, are what's causing Pennsylvania's budget deficit.

Most states, like Pennsylvania, rely on sales taxes as a major revenue source. Immediately after the “official” end of the Great Recession in June 2009, sales tax collections continued to dip, but have since began to bounce back ... Since then, income tax collections have made noticeable improvements, although they are still less than they were before the recession...This will make it more difficult for Pennsylvania to generate enough revenue to offset the loss of federal recovery funds in the next budget — funds that helped the states bridge the fiscal abyss from 2008-09 to the current year.

The point here is that Pennsylvania's budget deficit is primarily being driven by weakness in the national economy. That's made tax revenue decline dramatically, depriving the state of resources needed to fund government services.

Check out the entire post, but the most convincing part is where Wood writes about tax revenues in other states. Places like Texas, Mississippi, and Indiana -- which have all been run by fiscal conservatives for a long time -- also have revenue problems similar to Pennsylvania's. That's an inconvenient fact for those who argue that our problems are directly caused by state government spending beyond its means.

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About this blog
Every year, city government spends slightly more than $4 billion. Where does all that money come from? More importantly, where does it go? Are we getting the most bang for our tax buck? “It's Our Money” is a joint project between Philadelphia Daily News and WHYY, funded by the William Penn Foundation, designed to answer these questions.

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