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Thursday, July 09, 2009

Balancing the Budget: Another Rendell Lie?

The Rendell administration has been saying for weeks that the budget passed by the Senate in May (SB 850) is "$1.5 billion out of balance".   As John Micek highlights on his blog today, the administration is now saying SB 850 would have to be cut by $1.7 billion.

Now, I don't want to sound arrogant, and I know this really impresses the ladies, but I was exceptional at math in school.  But even though I could solve complex problems in my head, teachers required me to "show my work".  Unfortunately, the Rendell administration is not held to the same standard.  My suspicion of why - his numbers are another distortion of the truth.

In simple terms, Rendell says SB 850 needs to be cut by $1.7 billion, but he proposes spending $1.6 billion more. This would thus create a $3.3 billion hole in Rendell's plan.  The proposal that seems to be sinking him is his PIT increase - which, as harmful as this would be, amounts to only $1.5 billion.  Unless I have grossly overestimated my mathematical ability, he can't fill a $3.3 billion gap with $1.5 billion in new taxes.

In detailed terms, I believe SB 850 to be about $300 million out of balance, and I will show my math here.  This shows SB 850 and the Gov. plan both to be in balance.  I would caution that a few of these numbers are be a bit off, as detailed below, because the administration has not shown their numbers, and I have had to guess. But if I have made any errors, then I'm sure the administration can let me know where.

  • I estimated June tax refunds to be $108 million to compute net 2008-09 General Fund tax revenue (the 0% growth figure).
  • I don't believe SB 850 will be able to draw down all the $2.7 billion in stimulus funds.
  • SB 850 will not get the full $250 million from suspending tax credits, as some of these were not fully used.
  • Gov. Rendell will not get as much from natural gas and cigarette taxes as he would like.
  • This does not explain how either budget will fill the shortfall from last year - i.e. money the state has already spent.


Anonymous said...

NB. Excellent work. Weeds out the useless rhetoric of politics and gets down to the money trail where the truth becomes evident.

Nathan Benefield said...

We have been told, by some reliable sources, that the only thing "out of whack" is how much they overspent last year (2008-09). That is, Gov. Rendell didn't 'freeze' enough spending, and the state's unpaid bills are as high as $1.5 billion.

Of course, this is not a flaw in SB 850, but a sum of cash they need to come up with. Raising the income tax for the next three years doesn't do it.
Neither does spending $1.6 billion more than SB 850, as Rendell has proposed.