Taxpayer Debt for Political Favoritism Needs Reform

It is evident that state politicians out of Harrisburg face many of the same challenges of their Washington counterparts. Lawmakers in both capitals are overseeing immense budgetary challenges, ballooning debt to GDP ratios and an ever-increasing amount of unfunded entitlements and liabilities. These problems are readily traced to generations of dramatic spending increases that perpetuated the size of government to unsustainable levels. Despite the fiscal circumstances, legislators continue to appropriate funds and take on more debt for pork barrel projects and earmarks. Whether it be the infamous “Bridge to Nowhere” or the Arlen Specter Library, lawmakers turn to taxpayer dollars for pet projects. The General Assembly is now looking at new legislation aimed at reforming private development projects.

State officials are currently evaluating the Redevelopment Assistance Capital Projects (RACP) program. Established in 1986, the capital projects fund received $400 million in exchange for a promise to bring jobs and make substantive investments for economic growth in Pennsylvania. When passed by the General Assembly and signed by the Governor, the RACP allocates debt-funded grants to private developers. Like most government programs, the debt-ceiling of the program increased eight times between the funds inception and 2010. In just 24 years, RACP demonstrated a borrowing capacity of $4 billion, which represents an outlandish 1,000% increase.

Gary Smith, of the Chester County Economic Development Council, served as the administrator of many projects, which were funded by the RACP. When questioned about the program, Smith readily refers to the RACP as a “political process, first and foremost.” He further acknowledges that the RACP has been both abused and manipulated by legislators. Frequently, firms petitioning for grants hired lobbyists to appeal to legislators for taxpayer funding for their private development projects.

Leading the dialogue for reform is House Leader Mike Turzai. Rep. Turzai shares Mr. Smith’s view regarding the program’s maligned history. The current proposal consists of gradually reducing the programs debt ceiling from $4 billion to $1.5 billion over a period of 20 years. In addition, there is a motion which would require public hearings before the approval of RACP grants. Senate Majority Leader Dominic Pileggi supports more rigorous reductions than the proposed timetable. Governor Corbett also campaigned against these corporate welfare programs. While these reforms are promising, they are gradual and still leave ample leeway for political favoritism and government handouts to private development at the taxpayer’s expense. A serious commitment to reining in spending and debt must be accompanied by the elimination of pork barrel spending.

Similar to elected officials in Congress, the General Assembly is reluctant to eliminate spending on pet projects. As Senator Pileggi explains, fiscal responsibility includes the close re-examination of every government program. Now more than ever, it is imperative to prioritize the way government spends citizen’s tax dollars. Pennsylvanian’s are being forced to make ends meet with less. Legislators must act responsibly and follow suit by sacrificing their politicized spending grants. Citizens contribute enough in taxes and deserve to have their money spent with prudence. The path to a government that lives within its means requires changing business as usual in Harrisburg.

Unemployment Fraud Crackdown

For years, budget negotiations have been burdened with unyielding challenges designed at reversing the Commonwealth’s financial footing. Lawmakers are now facing the consequences of decades of unsustainable government spending. The Great Recession met with a harsh reality as tax revenues dropped substantially. With sluggish growth, Pennsylvania’s families are faced with the constant struggle to make ends meet. In a step in the right direction, the Corbett administration ruled out tax hikes as a means of balancing the public ledger. Fiscal responsibility is clearly associated with tough decisions as significant spending cuts continue to be made. In difficult fiscal times, there is no room for fraudulent entitlement claims. To this end, House Republicans have introduced legislation designed at cracking down on the abuse of unemployment benefits.

According to PA Independent, taxpayers funded more than $367 million in overpayments and fraudulent claims last year alone. This equates to a 10 percent payment error. Unfortunately, this mismanagement of taxpayer money has totaled more than a billion dollars since 2008. There have even been reports of prison inmates collecting benefits. It is an injustice that valuable programs and services are facing substantial cuts when the state government is wasting tremendous sums of money on fraudulent entitlement claims.

The bills proposed by the House Labor and Industry Committee would eliminate existing limitations for curtailing fraud and prohibit those individuals who choose to quit their jobs from receiving benefits. It is clearly an oversight that these common sense measures were not incorporated into unemployment benefit practices at its inception. The Democratic chair of the committee seems to be overlooking such common sense practices along with the billion dollars in government mismanagement. The Philadelphia Democrat exclaims that these measures will only make it “harder” for people to collect benefits in times of need. Yes, it would be harder for those individuals who illegitimately receive benefits based on fraudulent claims.

The Democratic chair also claims that these reforms will not address the unemployment fund’s insolvency. If the Representative was truly concerned about solvency, he would have pushed for these bills four years ago and saved more than $1 billion. The Commonwealth now owes more than $3.7 billion to the federal government unemployment fund. This outlandish debt is set to collect interest. If Pennsylvania is unable to pay, the federal government will be forced to impose higher unemployment taxes on working Keystone residents.

The stakes are high in the budget process and Republicans must pass the reform provisions for unemployment compensation. Pennsylvania cannot afford to waste money on overpayments and fraudulent claims. The Commonwealth already owes billions to the federal government. Putting an end to cases of abuse is the first step toward reaching a state of solvency. Lawmakers must meticulously examine areas of waste and abuse in other government agencies and departments before cutting health and educational services.

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Budget Address: A Small Step Forward

On Tuesday, February 7th, Governor Corbett delivered his second budget address before the General Assembly. By reigning in government spending this past year, the Corbett administration successfully closed a multi-billion dollar budget gap. However, difficulties remain as tax revenues and economic growth continues to be lower than anticipated. The proposed budget is set to resemble last year’s funding with a renewed emphasis on the Governor’s commitments for fiscal restraint and taxpayer protection.

The designation of new Keystone Opportunity Zones was the first component on Governor Corbett’s 2012 agenda. Opportunity zones are areas that receive special state privileges in the form of tax incentives to foster economic growth. Governor Corbett asserts that the expansion of this successful program will bring thousands of jobs to Pennsylvania. The GOvernor’s stand is valid that strong incentives and business friendly policies are important for job creation. However, instead of narrowing the focus on job creation to particular areas across the Commonwealth, the Governor should concentrate efforts in making the entire state an opportunity zone. Pennsylvania ranks amongst the worst in the nation in overall business climate and has one of the highest state tax burdens.

The Governor then proceeded to thank the General Assembly for reaching a consensus regarding a Marcellus Shale natural gas impact fee. The impact fee was designed to provide counties compensation for local government services and additional environmental protection. On close examination, the impact fee agreement supports a tax on drillers, as the fee is partly determined by the price of natural gas. More than 40 percent of tax revenues are to be utilized for statewide initiatives with several unrelated to the industry. It is disappointing that the Governor endorses this legislation as he so eloquently proclaimed in his speech, “Every dollar taken in tax is one less dollar in the hands of a job holder or job creator. Every dollar spent by government is one dollar less in the sector that creates real prosperity.” In this instance, the action does not coincide with the principled rhetoric.

The Governor also announced his comprehensive Jobs First PA package, which is dedicated to improving the state labor market. Components of the proposal include creating a single point of access between entrepreneurs and the government to reduce barriers to entry and accelerate the incorporation of new businesses. Jobs First also allows unemployed workers to maintain benefits while being retrained for a new job. Additional components of the package include a statewide jobs matching service and increased grants offered to trade school students preparing for high demand occupations. Securing Pennsylvania as a right-to-work state is another vital labor market initiative that demands the Governor’s focus. Together, these policies will strengthen Pennsylvania’s employment outlook.

In regards to public education, Corbett announced that there will be no budget cuts. Rather than imposing bureaucratic mandates from Harrisburg, Governor Corbett proposes the usage of block grants which give local school districts the autonomy to make necessary adjustments based on their individual and unique needs. The administration’s hold on the four decade long expenditure expansion in education is a vital component in restraining government spending. To safeguard taxpayers against increased property taxes, the Governor signed a property tax reform bill to limit annual increases. In addition to tackling the issue of education spending, the administration has also sparked discussion on the important issue of poor educational performance. The Governor advocates educational competition through the avenue of school choice.

The Governor’s second proposed budget petitions a degree of fiscal responsibility that has long been forgotten in Harrisburg. For the first time in over a decade, the administration successfully produced and delivered the first budget within the allotted time constraints. They also managed to scale back the size of government for the first time in 40 years. Coupled with taxpayer protection, these accomplishments were made possible through difficult decisions and cuts that are necessary to turn the tide on an unsustainable government binge. While the Corbett administration has succeeded in several arenas, pressing issues such as the state’s deteriorating infrastructure and rapidly increasing unfunded pension liabilities lacked mention. While a promising start, prudent budgeting along is insufficient to address the challenges that lie ahead. It is now time to focus on the many necessary reforms.

Governor Corbett’s Budget Address

Yesterday, Governor Corbett gave his second budget address. If you were unable to watch the speech live, you may view the address below. Keystone Liberty will release an overview and analysis at the beginning of next week.

 

Senator Judy Schwank delivered the Senate Democratic response. To watch Senator Schwank’s response, visit www.pasenate.com.

Constitutional Spending Cap

Upon taking office in 2011, Governor Corbett and his administration were faced with a daunting task. They commenced with a multi-billion dollar state budget gap, no federal stimulus funds and a pledge to avoid tax increases. During his tenure, the Governor was able to balance the budget while maintaining his taxpayer protection pledge. Despite the criticisms posed by the minority party, Governor Corbett’s initial budget was a significant step towards fiscal responsibility for the Commonwealth. In timely fashion, as the Governor prepares to debut his second address relating to the budget on February 7th, Rep. Tim Kreiger unveiled a legislative milestone which would make unsustainable spending sprees a thing of the past. This type of legislation coincides with the founding principles of Keystone Liberty.

Last Wednesday, Rep. Krieger introduced House Bill 116. The proposed legislation calls for a constitutional amendment which would place a cap on state government spending. The established spending limits are based on the previous fiscal year’s levels with annual adjustments made for inflation and population growth. In order for a constitutional amendment to be ratified, the legislation must be passed by a majority vote in two General Assemblies. Before the legislation is adopted as part of the state constitution, it must then pass by a majority of the entire electorate. The amendment process also specifies that no particular legislation may be submitted more than once in five years. While this amendment is promising for Pennsylvania’s future, long-term efforts are crucial for the success and sustenance of this legislation.

To comprehend the dire necessity for a constitutional spending cap, one needs to appreciate the alarming trends in theĀ state operating budget. For more than four decades, the state government has undergone an immense expenditure escalation of more than 164 percent after adjusting for inflation. The spending increases have outpaced Keystone resident’s incomes to the point that the total budget now represents more than 13.1 percent of state income compared to less than the 9 percent in 1970. With such massive spending, it is no surprise that Pennsylvania has the 10th highest state and local tax burden in the nation. Despite the onerous burden, the government’s spending craze has resulted in tremendous debts. Between 2002 and 2009, state debts have increased by more than 82 percent equating to a total of more than $42 billion. Local and school district debt has also increased by more than 25 percent to total more than $82 billion. Additionally, there are more than $50 billion of unfunded state and local pension liabilities. Combined, these debts and unfunded liabilities total approximately $200 billion. This amount represents more than three times the entire state operating budget. The magnitude of this debt poses a tremendous threat to Pennsylvania’s future.

It is of the utmost urgency to concentrate efforts in favor of the state constitutional spending cap of HB 116. Following a successful first year, the Governor must continue to outline budgets that follow the principles of fiscal responsibility and limited government. In addition to maintaining sustainable budgets in the short-term, the Governor and the General Assembly must support the spending cap legislation. This legislation will ensure that the Commonwealth avoids traveling down the previous paths of overspending of year’s past. After constitutionally reigning in the growth of government, Pennsylvania will be in a promising position to move forward to address its debt, while finding solutions to reduce growing unfunded pension liabilities.