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Lowman S. Henry

Commentary:

Governor Spendell

It is budget season and time for more state spending!

by Lowman S. Henry, CEO
Lincoln Institute of Public Opinion Research


Now that the Primary elections are history, Pennsylvania’s legislature is back in town and ready to get to work on the 2004-2005 state budget.

This is bad news for taxpayers.

You may recall last year’s fiasco. Republican legislative leaders held out against Governor Ed Rendell’s tax and spend budget for months. They caved just days before Christmas. Claims the largest tax hike since 1991 would have been worse without their efforts ring more hollow than the big empty space in taxpayers’ wallets.

Since then, the orgy of state spending has continued unabated. Having milked current taxpayers for all they are worth, Rendell and his legislative accomplices in both parties ensured future generations of taxpayers would help foot the bill by passing a $1.1 billion bond issue to fund so-called economic development projects. Another $800 million is soon to be borrowed to fund environmental clean-up projects. All to be paid for by our children and grandchildren.

Now the cycle begins again with a new fiscal year set to start on July 1st. The good news is that revenue has exceeded projections by nearly $370 million. It would be great if the surplus revenue were returned to taxpayers in the form of a tax cut. It would be alright if that money were stashed away to replenish the almost tapped out “rainy day” fund. But state government’s appetite for spending is still not satisfied. Governor Rendell has proposed increasing state spending by another 4.1 percent – making him one of the few governors in the country to seek higher spending.

Pennsylvania’s profligate spending comes at a time when many other states have been further tightening their belts. Eighteen states have cut their budgets in mid-year adjustments to stay on track.

Still, nationwide state finances are improving. Governors report economic activity has increased and tax revenue is hitting or exceeding projected levels. This good news is off-set by concerns over rapidly escalating health care costs. According to the Associated Press, state spending increased by just 0.6 percent last year, but is expected to pick up the pace to 2.8 percent this year. If Governor Rendell’s 4.1 percent increase is approved, Pennsylvania will once again be a nationwide leader in increasing government spending.

This at a time when the state’s tax burden is clearly hurting our business climate. A recent poll of business executives conducted by the Lincoln Institute found 34 percent felt business conditions in the commonwealth were worse now than they were six months ago. Only 23 percent felt business conditions had improved. High taxes, along with a difficult regulatory climate, were the chief reasons cited for the state’s sluggish participation in the national economic recovery.

If our state leaders really wanted to jump start Pennsylvania’s economy they would not plunge us deeply into debt with a bond issue, nor would they be accelerating the rate of state spending. Rather a $2 billion tax cut would prime the state’s economic pump to an effect far greater than the redistributionist policies currently being pursued in Harrisburg.

Don’t hold your breath though. If the General Assembly couldn’t stand its ground in a non-election year, you can bet the mortgage they won’t make tough spending decisions with legislative elections just months away. In the meantime, Pennsylvania taxpayers will continue to pay the tab, our state’s business climate will continue to lag, and the good times will continue to roll under the Capitol dome.


Lowman Henry is Chairman & CEO of the Lincoln Institute of Public Opinion Research, Inc., a Harrisburg-based non-profit, educational foundation, and host of the Lincoln Radio Journal.