Today Pennsylvania Governor Ed Rendell signed the $28 billion general fund budget that passed out of both chambers of the General Assembly last week. However, it is widely understood that this budget deal is unlikely to hold up to economic and political realities, setting the state up for its day of fiscal reckoning next year when lawmakers will be forced to finally deal with the gimmicks that have papered over state overspending for far too long and the absence of federal stimulus dollars that have propped up PA’s bloated state government for the past two years. Next year lawmakers are projected to face a $5 billion structural deficit, along with a significant increase in pension payments.
The fantastical revenue assumptions in the new budget include $850 million in supplemental federal Medicaid funding that Congress has yet to approve and appears increasingly unlikely to do so at that. Even the most optimistic assessments have the state receiving $300 million at most from the feds, meaning that the FY ’10 – ’11 budget is unconstitutionally out of balance. Further calling into question the soundness of the new spending plan is it’s assumption of a 3% uptick in tax receipts in the new fiscal year, which began last Thursday. After two years of negative growth and remaining concerns about a double dip recession, this optimistic growth projection looks to compound the looming state fiscal crisis. Even lawmakers who approved the budget admit that it is technically not in balance.
Gov. Rendell and a number of legislators claim that they had already “cut to the bone,” yet that is a tough argument to make when one considers that the new budget represents an increase in spending from the previous year. These false claims of frugality are further debunked by the legislature’s approval, just three days after passing the budget, of $298 million in corporate welfare and pork for Gov. Rendell to handout as he sees fit. Included in this shameless package is $20 million in new spending on shrines to outgoing Sen. Arlen Specter and the late Congressman John Murtha.
While no tax increases were included in the budget itself, a handshake agreement to pass a job-killing severance tax on natural gas extraction was assumed. In fact, language alluding to this agreement was included in the fiscal code, which passed both chambers on July 3rd. As a result, ATR scored a vote for the fiscal code as a violation of the Taxpayer Protection Pledge, a written commitment that 29 members of the PA General Assembly have signed to “oppose and vote against any and all efforts to raise taxes.” The following lawmakers broke this promise to their constituents last week:
(*Denotes those who broke their Pledge last year as well)
Pennsylvania lawmakers have until October 1st to work out the details of the severance tax, which is to become effective no later than January 2011. However, don’t be surprised if Rendell and Co. come calling for further tax increases beforer that time when their new budget, which has been accurately described as a “house of cards,” falls apart.