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    Pennsylvania State Spending: by Nathan Benefield Commonwealth Foundation

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    Commonwealth Foundation
    Pennsylvania faces a budget shortfall as stimulus funds run out and mandatory spending on items like Medicaid increases. The proposed 2012 budget cuts funding to K-12 education and universities to address this. It also aims to reform education, welfare, unions and pensions to control long term spending growth. However, the state continues to face challenges from rising debt levels, a lack of economic competitiveness, and an unfunded pension liability.

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    Pennsylvania State Spending: by Nathan Benefield Commonwealth Foundation

    Uploaded by

    Commonwealth Foundation
    45 views25 pages
    Pennsylvania faces a budget shortfall as stimulus funds run out and mandatory spending on items like Medicaid increases. The proposed 2012 budget cuts funding to K-12 education and universities to address this. It also aims to reform education, welfare, unions and pensions to control long term spending growth. However, the state continues to face challenges from rising debt levels, a lack of economic competitiveness, and an unfunded pension liability.

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    2011 Budget Overview

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    Pennsylvania faces a budget shortfall as stimulus funds run out and mandatory spending on items like Medicaid increases. The proposed 2012 budget cuts funding to K-12 education and universities to address this. It also aims to reform education, welfare, unions and pensions to control long term spending growth. However, the state continues to face challenges from rising debt levels, a lack of economic competitiveness, and an unfunded pension liability.

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    Attribution Non-Commercial (BY-NC)
    Download as PPT, PDF, TXT or read online from Scribd
    Download as ppt, pdf, or txt
    45 views25 pages

    Pennsylvania State Spending: by Nathan Benefield Commonwealth Foundation

    Uploaded by

    Commonwealth Foundation
    Pennsylvania faces a budget shortfall as stimulus funds run out and mandatory spending on items like Medicaid increases. The proposed 2012 budget cuts funding to K-12 education and universities to address this. It also aims to reform education, welfare, unions and pensions to control long term spending growth. However, the state continues to face challenges from rising debt levels, a lack of economic competitiveness, and an unfunded pension liability.

    Copyright:

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    of 25

    Pennsylvania State Spending

    By Nathan Benefield
    Commonwealth Foundation
    PA Budget Overview
    • Proposed: $27.3 billion General Fund Budget ($866
    million less than 2011)
    • Total Operating Budget: $63.6 billion ($3 billion less
    than prior year)
    – Includes Motor License Fund (highways), Lottery Fund,
    Unemployment Compensation Fund, Federal Funds to state
    • Capital Budget (not included in operating budget):
    $1.8 billion in bond issues for projects
    • Independent state agencies (not included in operating
    budget) Turnpike Commission, PHEAA, etc.
    Spending Under Rendell
    • General Fund spending increased by $8.1 billion, or
    40% since 2003
    – Largest growth in Education, Public Welfare,
    Transportation, and Treasury (Debt Payments)
    PA Taxes Add Up
    • Pennsylvania has the 10th highest state and
    local tax burden, up from 24th in 1990
    • Pennsylvania taxpayers pay $4,190 per capita
    in state and local taxes, 10.1% of their income
    • Pennsylvania ranks 20th or higher in state and
    local total taxes, spending, property taxes,
    income taxes, corporate taxes, and debt per
    capita
    PA State Debt
    Pennsylvania State & Local Government Debt
    D ebtor D ebt Outstanding Per C apita
    Total State $ 4 2 ,9 4 7 ,1 4 1 ,0 0 0 $ 3 ,4 5 4
    State $10,451,941,000 $841
    State Agencies & Authorities $32,495,200,000 $2,614
    Total Local $ 8 2 ,6 0 1 ,6 2 6 ,4 5 6 $ 6 ,6 4 4
    School Districts $26,059,284,754 $2,096
    County/Municipal/Twp/other $56,542,341,702 $4,548
    Total $125,548,767,456 $10,098

    Pennsylvania State, State Agencies & Authorities Debt


    D ebtor D ebt Outstanding 2 0 0 2 D ebt Outstanding 2 0 1 0 Increase C hange
    State $6,805,184,000 $10,451,941,000 $3,646,757,000 54%
    State Agencies & Authorities $16,848,800,000 $32,495,200,000 $15,646,400,000 93%
    Total State $ 2 3 ,6 5 3 ,9 8 4 ,0 0 0 $ 4 2 ,9 4 7 ,1 4 1 ,0 0 0 $ 1 9 ,2 9 3 ,1 5 7 ,0 0 0 82%
    State Paying Firms to Come to
    Pennsylvania
    • “Economic Development” Subsidies 2009-10
    – Ohio – $860,594,397
    – Pennsylvania - $754,651,000
    – California - $734,225,000
    • Recent Examples
    – Harley Davidson
    – Sport Stadiums
    – Film Tax Credit
    – “Green” Jobs
    From 1991-2010, PA Ranks
    • 41st in Job Growth
    – 11.8%, vs. 21.7% Nationally

    • 45th in Population Growth


    – 5.8%, vs. 22.9% Nationally

    • 47th in Personal Income Growth


    – 116%, vs. 151% Nationally
    Residents “Movin’ Out” of PA
     Census Data:
     56,000 net residents lost in inter-state migration
    from 2000-2009
     250,000 lost from 1990-1999
     IRS
     PA lost a net 8,791 taxpayers to other states in 2008
     Net loss of $431 million
     United Van Lines: PA has been in top 5
    “outbound state” for years – over 55% of
    movers leaving
    A Bit of Good News
    • States Bordering PA are in Worse Shape
    – New York, New Jersey, and Ohio – Among Highest
    Tax States, Worst in Economic Growth, and Losing
    Residents to Pennsylvania
    – West Virginia and Maryland – Near PA in Tax and
    Economic Rankings
    – Only Delaware has Significantly Lower Tax Burden,
    Stronger Economic Growth
    Budget Legislation
    • General Fund Budget Bill
    – Includes some other funds—Motor License Fund
    and Lottery Fund—which are appropriated each
    year rather than by formula
    • Nonpreferred appropriation bills
    – Part of General Fund, but not departments of
    state
    – 13 bills in 2010—e.g., Penn State, Pitt, PA Public
    Utilities Commission
    Budget Legislation Continued
    • Fiscal Code
    – Tax credits, transfers between funds, dedicates taxes to
    specific funds
    • Tax Code
    – Any tax increase/cut
    • Capital Budget
    – Two bills—one to authorize borrowing/bond issues, the
    second to itemize capital projects eligible for funding
    • Legislation to change programs done in separate
    bills
    State Budget Shortfall
    • Stimulus money runs out in 2011-12
    − 2010-11 budget relied on $2.7 billion in General Fund
    • Rainy Day fund and other one-time revenue funds
    used up (used $150 million from other funds in 2011)
    • Expected growth in Medicaid, Corrections, Employee
    Compensation
    • MCare Fund Lawsuit
    − Commonwealth Court says state must pay back $800
    million taken to balance budget
    2011 Budget Proposal
    • Reduced spending in K-12 Education—primarily due to
    loss of stimulus funding (spending from state tax dollars
    actually increases)
    • $800 million less in state aid
    • Total public school spending doubled from 1995 to 2008, to
    $26 billion
    • State cuts represents 3% of total school spending
    • Reduction of 50% for universities: Penn State, Pitt,
    Temple, Lincoln, and State System
    • Community Colleges, PHEAA grants to students relatively flat
    2011 Budget Proposal
    • Public Welfare Increased by $600 million,
    primarily in Medical Assistance (Medicaid)
    – Due to loss of federal funds, lack of flexibility
    under federal law to enact changes
    • Corrections budget increased by $13 million
    – Reforms were part of budget address, but not
    result in savings in 2012
    • No New Taxes
    Education Reforms
    • School Choice
    – Expansion of Educational Improvement Tax Credit and
    Opportunity Scholarships (SB 1)
    • Voter Referendum on Tax Hikes above Inflation
    • Mandate relief for school districts
    • Allow furloughs of public school employees
    • Merit Pay for Teachers
    • Encourage school districts to freeze employee pay
    for a year ($400 million savings)
    Higher Education
    • Goal is to move away from funding institutions to
    funding students and results
    • Institutional aid has not kept tuition low (e.g., Penn
    State and Pitt more than double rates over 10 years)
    • Four-year graduation rates at state schools 11% to
    55%
    • Some campuses losing students.
    – Losing in competition to lower-cost alternatives including
    community colleges and online classes
    Union Contracts
    • Seventeen of 19 state union contracts up this year
    • Salaries
    – Corbett has suggested a wage freeze. Most union
    employees have received raises of 3%, 3%, and 4%, plus
    2% longevity increases last three years
    • Health Care
    – State workers pay 3% of salary. Private sector is based on
    percentage of health care costs, averages 6% of pay.
    • Union Dues deductions and PAC contributions
    – State Government collects these
    Left to Do
    • Address Welfare and Medicaid
    • Privatization task force
    • Corrections spending reforms
    • Legislative reform
    • State Pension Crisis
    • Unemployment Compensation Deficit
    State Government Pensions
    • Increase in taxpayer contributions to SERS and
    PSERS
    – HB 2497 delays “spike”—but taxpayer contributions
    to rise from $500 million in 2010 to $6 billion in 2015,
    $10 billion by 2030
    • Causes
    – 2001 pension benefits increase and 2002 COLA
    (passed when Republicans controlled both Houses
    and Governor’s office)
    – 2001-02 and 2008-09 investment losses (currently
    assume 8% annual return)
    – 2003 & 2010 legislation to delay payments on liability
    Unemployment Compensation
    • Pennsylvania’s UC fund owes $3 billion in debt
    to the federal government
    – Pennsylvania ranks among the top 10 states in
    highest unemployment taxes per employee
    – Current proposal to increase unemployment
    compensation eligibility to get a one-time federal
    grant of $270 million. Would cost Pennsylvania
    taxpayers another $60 million each year in
    perpetuity
    CF Policy Reforms
    • Transparency: put spending online (HB 15, SB
    105)
    • Spending caps: limit the growth of spending to
    inflation + population growth
    • Eliminate Corporate Welfare
    • Privatize government-run liquor stores &
    more
    • Initiative and Referendum
    More Spending Reforms
    • School Choice
    – Educational Improvement Tax Credit, charter schools,
    vouchers, and homeschooling cost much less
    • Redefine prevailing wage laws that increase the
    cost of government construction by 30%
    • Corrections reform: costs of prison/prison
    construction is skyrocketing
    • Medicaid reform: eliminate fraud ($1 billion),
    convert to voucher for private insurance
    CF Links
    • CFPolicy.org/Budget
    • CFPolicy.org/HigherEd
    • CFPolicy.org/Pensions
    Nathan Benefield
    Director of Policy Research
    Commonwealth Foundation
    225 State Street, Suite 302
    Harrisburg, PA 17101
    717-671-1901
    nate@CFPolicy.org
    CFPolicy.org

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