Lowman S. Henry
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
educational foundation, and host of the Lincoln Radio Journal.