Budget worse than hoped, better than expected

Have you ever remembered you have company coming over in an hour and your house is a mess? That’s usually how it works for me. Panicking, I fill up a jumbo-size garbage bag with trash, quickly vacuum and mop, then throw a bunch of junk in the closet where I know my guests won’t look.

I admit, that’s not an effective way to maintain a clean home. But it’s a good description of how Pennsylvania lawmakers handled the state budget this year.

After procrastinating all year, the legislature finally delivered a completed budget on the last Friday of the fiscal year. On the plus side, the budget held the line on taxes and socked away money for a rainy day. Lawmakers also stood against several proposals that would harm the state’s economy. But necessary, long-term policy reforms where swept aside to be addressed another day. And hidden spending increases were stuffed into the closet, away from taxpayers’ prying eyes.

General Fund spending for next year is $34 billion, up from last year’s enacted budget of $32.7 billion (before cost overruns). Add in spending and revenue shifted from the General Fund to other state accounts, and the total spending increase comes to a 4.7 percent.

Under the Taxpayer Protection Act, state spending growth would have been capped at 2.12 percent — the rate of inflation and population growth. The budget more than doubles this commonsense spending limit. For families to prosper and businesses to create jobs, we must rein in this out of control spending.

A surprise revenue windfall of nearly $900 million — spurred by a strong economy and federal tax reform — helped make budget negotiations less contentious than in prior years. But it was mostly gobbled up by $673 million in cost overruns, which Gov. Wolf approved primarily for human services programs in 2018-19.

Hoping to avoid a similar outcome next June, lawmakers insisted on a measure requiring cost overruns to be identified and justified by the governor as part of the budget deal.

But overspending isn’t the only indicator that lawmakers approached the budget like I clean my house.

They also shifted $220 million in General Fund revenue to the little-known “Shadow Budget,” which already contains billions of dollars in spending from other state accounts with scant oversight or accountability.

Public school spending is another area where costs grow with little demonstrated connection to performance. This year’s $423 million spending increase comes at a time when school districts already hold $4.6 billion in reserves.

Despite myths to the contrary, Pennsylvania ranks ninth in the nation in per-student spending (over $17,000), according to the National Education Association.

While a spending surge is not what taxpayers were hoping for, the 2019-20 budget still felt like a huge relief because of what it didn’t do. Lawmakers wisely eschewed some of Gov. Wolf’s proposals that would have sunk the state’s economy: new energy tax hikes, a cap and trade scheme known as the Regional Greenhouse Gas Initiative, a job-killing minimum wage hike, and a $4.5 billion tax-and-borrowing scheme known as Restore PA.

And rather than spending every last penny, lawmakers are depositing around $300 million into the state’s “rainy day fund,” intended to provide a reserve during a recession. Prior to this, Pennsylvania only held enough reserves to operate state government for six hours!

Most encouraging was a $30 million increase for Pennsylvania’s tax credit scholarship programs, which provide tens of thousands of low- and middleincome families with access to safe, quality schools. This increase will go a long way to providing education opportunity to the 49,000 scholarship applicants turned away last year.

Like my impromptu cleaning, the latest state budget leaves our fiscal house a bit more presentable than before. Avoiding tax hikes, preparing for a rainy day, fixing the broken budget process, and expanding educational opportunity are all worth celebrating. But policies that will ensure future prosperity — including tax reform, spending limits, and criminal justice reform — will require serious work when lawmakers return.

Nathan Benefield is vice president & COO for the Commonwealth Foundation (CommonwealthFoundation.org), Pennsylvania’s free market think tank.