Best Budget Practices For Legislators

Scott Pattison, the executive director of National Association of Budget Officers, in an interview with the Mercatus Center brought to light the most important question he feels legislators need to answer. How do you smooth a volatile revenue stream?

The answer, he says, is to think about the long term. To do that state officials need to curb spending in the boom years and save up for the future when economy might go through a rough period. This can only be possible if there are certain policies in place. However, this is very difficult, politically. In fact, there is not one state that has been good at saving in the past for unforeseen expenditures in the future.

In other rules, lawmakers need a set of guardrails to help them practice fiscal restraint.

Growing Pennsylvania's Economy

A coalition of business groups released their proposals aimed at improving Pennsylvania's economic climate. Among the top of their list were state spending limits, lower business taxes, health care reform, and tort reform.

Click here for the full report.
Growing Pennsylvania's Economy

Publish at Scribd or explore others: Law & Government Business & Law economy policy

Pennsylvania Voters: Taxing, Spending Too High

A poll conducted by the NFIB shows that Pennsylvania voters think that taxes are too high - no surprise there, except to the Pennsylvania Budget and Policy Center, who probably represent the 1% saying taxes are too low - and gives insight into voters attitudes on other fiscal issues.

From the full poll results:

Q8: Tax in Pennsylvania are

• Too High 62%
• Too Low 1%

Q9: Spending by State Government

• Too High: 60%
• Too Low 5%

Q10: To Balance the Budget

• Cut Spending Only: 43%
  
• Raise Taxes Only: 1%
  
• Cut Spending and Raise Taxes: 49%

Q24: 2/3 Majority Requirement for all Tax Increases

• Should be Required: 75%
  

Q25: Voter Referendum on all Tax Increases

• Favor: 75%
  

Q26: State Spending Limits Tied to Inflation Plus Population

• Good Idea: 66%
  

Putting Taxpayers First?

A group of Pennsylvania House Republicans today announced a series of proposals intended to reduce government spending and revitalize the Pennsylvania economy.

Among the proposals:

• Implementing constitutional or statutory Spending Limits.
• Eliminating all state discretionary funding or “Walking Around Money” (WAMs).
• Reducing the state Personal Income Tax to the pre-Rendell level of 2.8 percent.
• Repealing Pennsylvania’s prevailing wage mandate and tolling of Interstate 80 (Act 44 of 2007).
• Reducing the overall economic burden on Pennsylvania’s job creators by completing the phase-out of the Capital Stock and Franchise Tax and making Pennsylvania’s Corporate Net Income Tax (CNI) more competitive with other states.
• Finally, enacting a 2009-2010 state budget that contains no new taxes, no new spending and no new borrowing.
  

Scarnati to Push Spending Limits?

The Patriot News profiles Senate Pro Tem Joe Scarnati and it looks like he will be putting the Taxpayer Protection Act as a top priority, and even suggests expanding it to cover local governments (as is the case with TABOR in Colorado).

Let's start with the Taxpayer Protection Act [that limits spending increases to the rate of inflation]. It's been passed out of the Senate. We'll be more than glad to pass that over to them. Let's amend it. Let's include counties and school districts, and let's put that through the House.

Our Policies & Principles luncheon on Wednesday will focus on why Pennsylvania needs spending limits.

Taxpayer Protection Limit equal to 3.29%

With the latest population estimate from the Census Bureau (which shows continued anemic growth in PA), we can now estimate what the spending limit under the proposed Taxpayer Protection Act (which 58% of the Senate has signed on to as cosponsors) would be.

As the table below illustrates, the TPA Index for 2008-09 budget would be 3.29%. As the TPA applies only to the General Fund (and any "new funds") the limit for the 07-08 budget would be $28.056 billion - an $894 million increase.

Citizen Mike asks Santa for taxpayer protection

Senator Mike Folmer asks Santa for a Taxpayer Protection Act. Santa gives a non-committal answer, sounding like a typical politician.

Celebrate the Good Half

Lowman Henry's Commentary gets me thinking how much we really need to enact a Taxpayer Protection Act.

As much as we have criticized the budget deal, it took a government shutdown just to limit spending to a 5.3% increase (more on that here).

The budget passed by the Senate in June deserved high praise, both for limiting spending, for cutting out WAMs and other waste, and for being a realistic spending plan. We should also give kudos to lawmakers who didn't give in to Governor Rendell's ponzi scheme of an electricty tax for more corporate welfare, and (for probably the first time in history), letting advocates of limited spending (rather than just tax-eaters) testify on the budget, including yours truly.

But despite the efforts of Senate Republican leaders, the overall growth of spending is still too high, and it appears there will be a vote on a poorly vetted trasnportation plan.

Thus, we need to enact a constitutional spending limit, in order to control the excessive growth of state goverment spending - and so that next time Governor Rendell holds state government hostage and House Democrats storm out of a budget negotiation because the meeting was only about the budget, taxpayer can have some protection against their ransom demands.

Lame Duck, or Big Winner?

Tony Phyrillas celebrates Rendell's losses in the budget deal - too bad that doesn't do taxpayers any good.

• Phyrillas likes the "no new taxes" - but new taxes became irrelevant once we realized there was a $650 million surplus; a surplus which should have been returned to taxpayers through tax cuts, but was not.
  
  
• Phyrillas states "Senate Republicans promised to hold the line on spending at the rate of inflation, and almost kept that promise" - not even close. The Taxpayer Protection Act that 30 Senators endorsed (and Senate leaders "promised to hold the line" at) would limit spending to a 3.15% increase, or an $823 million increase. Instead, the agreement will increase spending by 5.3% (Tony's numbers are wrong), or 4.4% even if you include the "end-of-the-year" supplementals as part of last year's budget. Thus, this budget exceeds the TPA by $558 million. When they said "hold the line", I thought they mean the other side of the line.
  
  
• Furthermore, the budget exceeds Gov. Rendell's proposal by $220 million - meaning that had they passed the Governor's proposal as it was (granted, an unrealistic expectation), they would have spent less; not been held hostage on transit, energy, health care, smoking bans, new debt, etc; and there would have been no furlough.



• And Tony also enjoys that the Governor didn't get his peripheral items (energy bonds for corporate welfare, Cover All Pennsylvanians, and Jonas Salk bonds) - but those issues have merely been put off until later. While Rendell is acting like a kid demanding every toy in the toy store, the Senate GOP is enabling him by, instead of telling him NO!, giving some for his birthday and more for Christmas.
  



• Phyrillas ignores what the Governor did win - including (reportedly) a promise to crease his "Pre-K Counts" program, which will institutionalize government control of preschool, run private providers out of business, and reduce choices for families. This will essentially expand the struggling public school monopoly to younger children, and will become another unfunded mandate, potentially costing billions.



• Probably the worst part of the budget deal is the Transportation plan - which Tony inexplicably praises because it is " a far cry from the billions Rendell wanted for mass transit by leasing the Turnpike". Tony, under a Turnpike Lease the taxpayers pay $0 - tolls could potentially go up, but would be limited by the lease agreement. Under this plan, taxpayers will get soaked by a 25% increase in tolls on the Turnpike in 2 years, new tolls on I-80 (though that part is probably illegal under federal law), and have to pay of $5 billion in bonds (with interest) and fees for bond lawyers. How is less money, higher costs better than more money, less costs?

Masch on "Irreparable Harm" by spending limits

Budget Secretary Michael Masch issued a news release decrying all the "vital services" that would be cut, had the state implement spending limits in past years. Masch's demagoguery obscures the facts that:

• He thinks higher taxes and more people on welfare is the measure of good government- we feel that more money left in the hands of families and fewer people dependant on the state is.
  
• Masch applies spending limits to each line item in the budget - the TPA would apply to the total (General Fund) Budget. Areas where costs are increasing could go up, while other areas could remain consistent or be reduced to keep within the spending limit.
  
• Masch ignores that the TPA would allow the limit to be exceeded - by a 2/3 vote - if there was justification. "Vital services" may be such a need (though Masch's definition of vital is quite broad).
  
• Masch notes that "other areas" of high growth include "economic development" spending and Growing Greener - i.e. corporate welfare. Cutting those areas from the budget and there would be plenty of surplus left for "vital services."
  
• As pointed out in this blog before. unrestrained government spending is driving cost increases - particularly in areas such a health care - not the other way around.
  
• Masch claims that increases are necessary "in response to federal funding cuts." FALSE! Federal funding to the state budget has increased 21% under Rendell. Masch is outright distorting the truth. While the Governor's budget predicts a 1% decline in federal aid for 2007-08, he also predicted a decline at this point last year. Instead federal funds increase by 5% (or $930 million more than the Governor's "estimate").

Lancaster New Era endorses Taxpayer Protection Act

Lancaster New Era (registration required) editorial supporting the Taxpayer Protection Act, along with the Commonwealth Foundation's Diet Plan.

Somewhat slimmer budget passes Senate Appropriations

Senate Appropriations Committee sent to the floor an amended budget which includes very few of the Governor's new programs, cuts some of the corporate welfare from DCED, and promised no new taxes. Their calculation of the percent increase over 2006-07 includes passing supplemental appropriations of $200 million onto last year's spending. The actual percent increase is 3.19% - by my calculations this budget is a mere $9 million above the limit prescribe by the TPA.

Sen. Armstrong certainly used our proposed cuts (link has updated numbers) from the Piglet Book to guide this budget, hopefully they can include a few more cuts in the final version. Look for additional "Diet Tips" on PADietPlan.com soon

Super-majority on tax increase legislation proposed

Senator Eichelberger (along with co-sponsors) today introduced legislation (SB 975) which would offer a Constitutional Amendment requiring a two-thirds vote in both chambers to pass any tax increase.

This fits very nicely with Step 2 of the Diet Plan for Pennsylvania

When a spending increase is a spending decrease

Watch the video and more at PADietPlan.com

A call to rein in state spending

Tribune-Review article on Thursday's hearing on state spending limits. The Commonwealth Foundation's newest fellow (and former Congresswoman) Melissa Hart testified:

"Often elected officials have been unwilling or simply unable to choose between saving citizens from higher taxes and funding projects or programs which often, in the end, inure only to the political benefit of a particular legislative district or the governor," Hart said.

She estimated that by 2016-17, the state budget will balloon to $42 billion, a 59 percent increase, if spending is not curtailed.

"If the government is forced to limit its growth, it will re-examine the people's priorities," she said. "It will cut out the fat. It will put more of the taxpayers' money back into their own pockets."

Former Colorado Senate President John Andrews was also on hand to speak about Colorado's experience with spending limits. Andrews has previously spoken at Commonwealth Foundation events and has written about the need for "fiscal guardrails" in PA.

Pennsylvania needs a spending limit

Press Enterprise Editorial on the Taxpayer Protection Act.

Taxpayer Protection Act attacked

Following the announcement of legislation to create a Taxpayer Protection Act and the unveiling of a website with information on the legislation, the Allentown Morning Call has already come out attacking the proposal and the integrity of the lawmakers sponsoring.

The Morning Call implies that Sen. Regola (the prime sponsor of the Constitutional Amendment version of the legislation) only supports the legislation to distract from his legal situation (in which a teenage neighbor used Regola's gun in what was ruled a suicide). The Morning Call fails to mention that Sen. Regola has been working to get 27 other legislators to co-sponsor this legislation, that the initial proposal was announced in January, with other legislators and policy groups (including the Commonwealth Foundation).

The Morning Call even tries to contrast Regola's bill with Sen. Folmer's bill for statutory spending limits, though the two bills are essentially identical, and Senators Folmer and Regola worked together (along with consultation from the Commonwealth Foundation) on crafting these bills, agreeing to shift off on the primary sponsorship credit. A Constitutional Amendment is necessary, as statutory spending limits (requiring a 2/3rds majority to exceed the spending cap) is ineffective when a majority can repeal such a law.

The editorial goes on to add such tired rhetoric as claiming spending caps are "lawmaker's excuse for avoiding difficult taxing and spending decisions". In truth, spending limits would finally force lawmakers to set priorities and make decisions about spending, rather than grant every request of the spending lobby.

They even use the inane claim (debunked by the Commonwealth Foundation) used by the spending lobby that "the constitution already requires the governor and Legislature to pass a balanced budget every year". What nonsense. A balanced budget merely implies that they can't spend more than they take in taxes which "limits" state spending to what we could take with a 100% income tax.

It goes to show that the critics of spending limits will stop at nothing to stop at nothing to prevent good public policy.

In his blog earlier this week, John Micek wondered why the Morning Call was called a "liberal newspaper" - this is why, John.