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We’ve passed the fiscal year budget deadline of June 30, the July Fourth holiday, and now Labor Day. So why has no revenue plan been approved for Pennsylvania?
In spite of all that Pennsylvania has going for it, the state is in some dire financial straits. Through a series of bad decisions that have compounded over the years, Pennsylvania has descended from near the top of the heap when compared to other states, to near the bottom when it comes to state finances and our ability to attract outside investment, businesses and jobs. So that begs the question, who is to blame?
Looking back over the last 24 years, we’ve had multiple governors, both Democrats and Republicans — in fact, twelve years for each party. First blush says to blame all politicians regardless of political party.
But a closer look is much more enlightening. Any governor (executive branch), Republican or Democrat, needs to deal with the co-equal branch of government, the Legislature — the House and Senate. On this mark, the culprit is pretty clear.
Republicans have controlled the Senate for the entirety of the past 24 years, including all the way back to 1981. In the House, the Republicans have been in control for 20 of the last 24 years, with the brief exception of 2007-10, when Democrats had a one-vote and then five-vote edge compared to the Republicans’ current 39-vote edge. Ironically, the Republican House and Senate leaders continue to place blame on other factors instead of coming to the realization that their fiscal policies are the problem.
Bad fiscal policies over the past few decades resulted in multiple credit downgrades during the Corbett administration, and just recently Standard and Poor’s warned that if Pennsylvania continues down its current fiscal path, additional downgrades are imminent. The state’s current poor bond rating costs the commonwealth’s taxpayers an additional $142 million in borrowing costs annually.
Years of Republican poor fiscal management of education created the widest gap in spending per student, and Pennsylvania now ranks the 45th-least equitable state in the nation and 46th in state share of basic education funding. Additionally, there are 120,642 children eligible for pre-K who aren’t currently enrolled in a quality program because of a lack of funding. And Pennsylvania’s high local taxes are a direct result of the state’s underfunding of education. Pennsylvania ranks 47th in higher education funding, down $2,000 per student since 2003.
There is currently a five-year wait for services for adults with disabilities. Those waiting include 4,905 individuals with immediate needs, 5,321 with critical needs and 3,287 who will need care within the next five years. The list goes on.
Despite those realities, House Republican leadership is still blocking true progress on this year’s revenue package (the just-released plan devised by 18 House members is a one-time fix — if that — which punts till next year). Pennsylvania needs the House Republicans to work toward a real compromise to pay for the budget that they helped pass through the House, not continue to play fiscal games with the state’s future and pass along a crippling deficit to future generations of Pennsylvanians.
So, what is the solution to funding the approved 2017-18 budget? We have to pay our bills, and not with gimmicks. While the Senate Republican plan isn’t gimmick-free, it did include a very modest 2 percent severance tax on the Marcellus Shale industry. The mere recognition that we need sustainable and predictable revenue sources to close the budget deficit is a major step in moving forward and bringing this budget to a close.
Here are a few more options.
Pennsylvania’s stagnant minimum wage is the lowest of surrounding states at $7.25, and our unemployment rate is the highest at 5 percent. Taking action raising the wage could lift workers off of public assistance and generate millions of additional tax revenue.
A reasonable Marcellus Shale severance tax, which every other state that allows drilling imposes — say 5 percent instead of 2 percent — would generate hundreds of millions of dollars in additional recurring revenue, especially when pipelines to ports for overseas sales are completed.
Gaming legislation that would legalize 40,000 machines currently operating illegally would generate $300 million per year in recurring revenue.
Pennsylvania has the lowest flat-rate personal income tax in the U.S. at 3.07 percent and the second-lowest rate of the 41 states that levy an income tax. Raising our rate to 3.27 percent would generate $818 million (second-lowest personal income tax rate) or $2 billion at 3.57 percent (moving us to the third-lowest rate).
If House Republicans would consider implementing a severance tax, increasing the minimum wage or even implementing gaming oversight of currently illegal video gaming terminals, we could make real progress in closing the budget deficit. They would do their constituency and future Pennsylvanians well to stop the gimmick budgeting and put real revenue generators in place.
We are waiting.