The 2012-2013 Pennsylvania Budget: Areas to Improve

Daylin Leach— by Pennsylvania State Senator Daylin Leach

Since the state’s fiscal year ends at midnight on June 30th of each year, May and June are always a busy time when everyone in Harrisburg is scrambling to put together next year’s budget. We’ve had tough budgets for the past four years because during a recession, demand for government services goes up while revenues coming into the state coffers go down. Unlike the federal government, we are constitutionally required to balance our budget each year, so every dollar we spend must come from a revenue source.

There are really only two ways to eliminate a budget deficit: you can either cut expenditures or raise revenues. Actually, the smartest approach is to use a balanced approach that does both prudently. Unfortunately, for the past several years — due to the political realities of Harrisburg and the fact that Governor Corbett has pledged to Grover Norquist, a lobbyist who lives in Washington, DC, that he won’t increase revenues in any way — the budget has been balanced exclusively through cuts.

It is important to remember that there are many areas of the state budget that can’t be cut, either due to federal or state law or contractual obligations. In some cases, if we tried to cut money from a given program, we could be sued and required by a court to spend the money with interest. In other cases, our laws force additional spending. For example, Pennsylvania’s criminal code creates about 2,000 new net prisoners per year (the second highest number in the nation). This requires us to build a new prison, which costs about $300 million to build and $50 million per year to operate, every single year.

All of the cuts we can make must come from a relatively small sliver of the budget that is discretionary. This includes money for first responders, education, libraries, human services, health care for our citizens, transportation improvements and our safety net for the very poor. We have continued to go back to these same areas of funding when making deeper and deeper cuts each year.

As a result, we have now reached the point at which we are in real danger of abandoning basic government services and the citizens who rely on them. You may have read about how some of our poorer schools literally would have had to close their doors if the federal courts had not intervened and ordered us to provide additional funds. Tens of thousands of people have lost their access to healthcare, childcare facilities have had to close, and libraries are either closing or drastically cutting back their hours and programs. Schools are eliminating art and music programs, guidance counselors and tutoring; and we are opening 30,000 new natural gas rigs across the state while drastically reducing the funding for environmental inspectors charged with making sure the drilling is done safely. In short, the picture is very bleak.

Following the jump below, I am going to try to give you a fuller picture of the cuts we are facing and provide you with the alternatives for which I am fighting. In my view, we could easily raise sufficient revenue to avoid most of the worst cuts without burdening a single Pennsylvania family. We could accomplish this by, among other things, enacting a reasonable tax on the Marcellus Shale extraction that is giving energy companies billions of dollars and closing the “Delaware Loophole,” which allows 70% of Pennsylvania companies to avoid paying their fare share to help our state prosper.

These and other ideas will enable us to continue providing basic services to our citizens and will ensure that Pennsylvania is a state with the educational, economic and environmental quality of life that will attract businesses and families for decades to come. I hope you find this information helpful.

A list of programs funding to be restored and funding mechanisms follow the jump.
As I noted above, I would like to stimulate an open and honest dialogue about the current budget’s shortcomings. There are a number of cuts that I believe will be extremely harmful to our state. I will first enumerate some of the
worst of the many troubling cuts in the budget proposed by Governor Corbett.

If I want to restore the funds for these important programs, I obviously have an obligation to identify where the necessary revenues would come from. So I will provide some suggestions along those lines as well.

Top 5 most destructive cuts in the budget proposal.

  1. Higher Education
    Governor Corbett has proposed cutting higher education by 30 percent this year, on top of the 19 percent cut passed last year. These draconian proposals represent not cuts, but an abandonment of our commitment to make college affordable for all Pennsylvanians. These cuts would result in dramatic tuition increases in state related universities and put college out of reach for many of our citizens.
  2. Basic Education
    Last year, over my “no” vote, the legislature and governor enacted a budget that cut over $850 million from basic education. These cuts came disproportionately from poor school districts, but hurt all public schools. The governor
    has proposed hundreds of millions in dollars of additional cuts, including eliminating the No Child Left Behind Compliance grants and the Charter School Reimbursement grants.

  3. Department of Environmental Protection
    At a time when we are opening over 30,000 new fracking wells in Pennsylvania, the DEP budget is being cut, which will result in many fewer inspectors and enforcement agents ensuring that this new and controversial fracking technology is being used safely and responsibly.
  4. Human Services
    The governor proposes to cut human service funding by 20 percent ($168 million). These services cover needs including Mental Health, Behavioral Health, Drug & Alcohol, Intellectual Disabilities, Child Welfare, Homeless Assistance and what remains of the Human Services Development Fund. These cuts will obviously have a devastating impact on many of the most vulnerable Pennsylvanians.
  5. Child Care Services
    If this budget passes, we will have cut childcare services and assistance by almost $140 million over the past two years. Without these services, parents may be unable to get back on their feet, receive training, or go back to work if they have to turn down a job or opportunity because they can’t afford or find childcare. Also, this lack of funding could mean the elimination of “Keystone Stars”, a nationally-recognized program that provides resources and professional development to the educators who prepare children for school success.

In addition, the governor has rejected the recommendations of his own hand-picked commission to raise money to fund much needed road and bridge repairs.

How to pay for the restoration of these funds:

  1. Levying a Marcellus Shale Impact Fee
    Imposing an impact fee on drillers would go a long way toward helping recoup the loss of natural resources taken from our state, as well as toward helping us balance the budget. Going further, imposing a tax on those drillers would do even more to help us. Consider that a 6% tax on producing wells would generate about $312 million in 2012-13 and $396 million in 2013-14. This rate is consistent with what virtually every other state in the nation charges for the extraction of natural resources from its soil.
  2. Closing the Delaware Loophole
    The Delaware Loophole, a way under the law for corporations to evade paying taxes, is an issue that has needed fixed for years. For some reason, this has yet to happen. If we closed the Delaware Loophole, our state would be able to bring in $550 million in just one fiscal year.
  3. Ending the Vendor Discount
    Under the Vendor Discount, Pennsylvania pays private businesses millions of dollars each year just to handle sales tax receipts and remit them to the state. This program was conceived many years ago before the advent of computers, and since there’s no longer a valid need for it, it’s time to end it. Currently, Pennsylvania is one of only 13 states with an unlimited sales tax vendor discount. If we stopped providing this unnecessary discount, our state would save nearly $75 million per year.
  4. Taxing Smokeless Tobacco
    Currently, Pennsylvania is the only state in the nation that does not tax smokeless tobacco. This would be an easy solution that would garner $50 million per year, simply by imposing a tax of $1.35 per unit — the same tax that is levied on cigarettes.