Thursday, November 27, 2014
Inquirer Daily News

The very bad budget deal

After going back and forth for nearly 100 days about whether the state budget should reflect Democratic or Republican priorities, legislators in Harrisburg seem to have agreed on one thing: They are going to make the budget really bad. That's my response to the latest budget proposal passed by the State Senate yesterday. House Democrats basically agree with the plan but want to redirect about $12 million in discretionary spending. That's chump change in a budget of more $27.8 billion, so we can be pretty sure that the bill passed by the Senate will essentially stay intact. Here is the problem: the latest budget is awful. It balances the budget on the backs of Pennsylvania's poorest residents, permanently changes the tax code to help big corporations, and relies too much on one-time sources of revenue. Pennsylvania needs this crisis to end, but I'm stuck wondering if a bad budget is really better than no budget at all. The biggest problem is what isn't in the budget. Despite the need for new revenue, the state will not tax smokeless tobacco or natural gas extraction. That means Pennsylvania will remain one of the few states that allows both of these industries to remain tax free. As a result, the state will have to cut more than $1 billion from various programs-- many of which serve our neediest residents. That's bad enough, but it's truly reprehensible when you consider the tax break given to big corporations. Lawmakers inserted a change to the tax code that will save companies that do a lot of business out of state (like Hershey Foods and US Steel) millions of dollars every year. Meanwhile, smaller businesses will suffer. This budget also counts on unreliable sources of revenue. No one really knows how much money will be generated by expanding tabling games in Pennsylvania casinos. The recession has hurt the industry and surrounding states are looking at expanding gambling, which will increase competition. Still, the legislature is assuming that hundreds of millions of dollars will be generated by poker, craps, and blackjack. The bill passed by the Senate would almost completely drain the rainy day fund and the medical malpractice insurance fund. It's fine to draw down these funds during a budget crisis, but leaving no reserve is just fiscally irresponsible. Most observers agree that Pennsylvania faces a multiyear deficit and relying on one-time revenue sources just puts off the hard choices. I understand that Pennsylvania needs a budget. Agencies that deliver social services, particularly childcare providers, are hurting bad. But, in the long-term, this budget may only make our problems worse.

The very bad budget deal

After going back and forth for nearly 100 days about whether the state budget should reflect Democratic or Republican priorities, legislators in Harrisburg seem to have agreed on one thing: They are going to make the budget really bad.

That's my response to the latest budget proposal passed by the State Senate yesterday. House Democrats  basically agree with the plan but want to redirect about $12 million in discretionary spending.  That's chump change in a budget of more $27.8 billion, so we can be pretty sure that the bill passed by the Senate will essentially stay intact.

Here is the problem: the latest budget is awful. It balances the budget on the backs of Pennsylvania's poorest residents, permanently changes the tax code to help big corporations, and relies too much on one-time sources of revenue. Pennsylvania needs this crisis to end, but I'm stuck wondering if a bad budget is really better than no budget at all.

The biggest problem is what isn't in the budget. Despite the need for new revenue, the state will not tax smokeless tobacco or natural gas extraction. That means Pennsylvania will remain one of the few states that allows both of these industries to remain tax free. As a result, the state will have to cut more than $1 billion from various programs-- many of which serve our neediest residents.

That's bad enough, but it's truly reprehensible when you consider the tax break given to big corporations. Lawmakers inserted a change to the tax code that will save companies that do a lot of business out of state (like Hershey Foods and US Steel) millions of dollars every year. Meanwhile, smaller businesses will suffer.

This budget also counts on unreliable sources of revenue. No one really knows how much money will be generated by expanding tabling games in Pennsylvania casinos. The recession has hurt the industry and surrounding states are looking at expanding gambling, which will increase competition. Still, the legislature is assuming that hundreds of millions of dollars will be generated by poker, craps, and blackjack.  

The bill passed by the Senate would almost completely drain the rainy day fund and the medical malpractice insurance fund. It's fine to draw down these funds during a budget crisis, but leaving no reserve is just fiscally irresponsible. Most observers agree that Pennsylvania faces a multiyear deficit and relying on one-time revenue sources just puts off the hard choices.

I understand that Pennsylvania needs a budget. Agencies that deliver social services, particularly childcare providers, are hurting bad. But, in the long-term, this budget may only make our problems worse. 

Update: Pa. House votes to approve Senate tax bill. Harrisburg-Patriot News has more.

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