Two ideas — one from the right, one from the left — to fix Pennsylvania’s budget woes just might (if put together) get state finances back on track.
It’d take some doing and compromise. So right away you figure, eh, no chance.
But what passes for fiscal management in Harrisburg is so astoundingly pathetic, it’s time to try something different, even if it takes some time.
We’re entering the third month since a balanced budget was due, and what we’ve got is a $32 billion spending plan with a $2.2 billion hole and no way to fill it.
A Senate-passed measure, supported by Gov. Wolf, has a modest tax on the natural gas industry, $1.3 billion in borrowing, and $400 million in new or increased taxes on consumers’ natural gas, electric and telecommunications bills.
Maybe not entirely horrible, but since Senate and House leaders don’t get along, cynics suggest it passed as a way to stick it to the House (which, of course, hates it), making House leaders look obstructionist.
The House reportedly is working on an alternative. And that’s where we stand.
But what if we married something from the left that the right hates to something from the right that the left hates, even if it’s a shotgun wedding?
For example, House Republicans are looking at raiding off-budget special funds dedicated to the environment, public transportation, horse racing, infrastructure, recycling, acid-mine drainage, parks and much more.
There are more than 100 such funds with billions of dollars, many with surpluses kept in the Treasury Department’s Common Investment Pool, basically a savings account.
A check of the pool shows 42 funds with $2.6 billion plus in reserves.
Nate Benefield of the conservative Commonwealth Foundation says, “We shouldn’t have a budget impasse, and we shouldn’t ask families to pay more in taxes, when the government has these funds sitting there collecting interest.”
Among arguments against using the funds: They’re statutorily committed or the result of voter-approved bond issues; reserves are needed for emergencies; using them amounts to another one-time fix like those that got us where we are.
The liberal Pennsylvania Budget and Policy Center is against it. Director Marc Stier calls co-mingling special funds with the General Fund “a kind of fraud.” Plus, there’d almost certainly be litigation on behalf of interests served by the funds.
But what if we cull the list of funds, argue it’s the funds (not their reserves) that are dedicated, find reserves least legally shackled, and transfer just enough surplus to pay off the $1.6 billion deficit from last fiscal year?
A one-time fix for a one-time woe.
Then we turn to what everyone says we need: recurring revenue.
Legislation in the Senate reshapes the personal income tax (PIT) by creating two classes of income: one from wages (the middle class), one from dividends, capital gains, estates, trusts and such (the rich).
The PIT is 3.07 percent. Under a bill sponsored by Sen. Art Haywood (D., Phila.), the rate on wages drops to 2.8 percent; the rate on wealth income rises to 6.5 percent. The result, says Haywood, is new annual revenue of $2 billion and middle class tax cuts totaling about $500 million statewide.
He says 80 percent of taxpayers get either a tax decrease or no increase.
“It’s tax relief for everyday Pennsylvanians, and it’s tax fairness,” Haywood says.
Our flat-rate PIT draws criticism as unfair since lower- and middle-income earners pay higher percentages of their income than do the rich.
Arguments against different income rates include Article VIII, Section 1, of the state constitution saying taxes “shall be uniform, upon the same class of subjects.”
But Haywood says creating a new class (the wealthy) won’t violate that clause.
Seeking higher taxes on the rich or grabbing reserves from dedicated funds might seem crazy and probably leads to litigation. But what of import doesn’t? A shot at better fiscal management or a more equitable tax system is worth some risk.
Plus, if experience has taught us anything, it’s that the legislature can do whatever it wants — especially when it’s doing for itself.
What if putting wild ideas together, in part or in full, can actually do something for everyone?