Pa State Budget

After Tom Corbett was elected governor, I wrote a post about his first budget.  That was 2011.  At the time, I was saddened by the deep cuts the first Corbett budget offered as a way to balance the state's income and revenue, but not surprised, as he ran on a campaign of no new taxes.  What surprised me was the general sense of outrage over that budget, and the next 3 budgets, that helped lead to the first incumbent governor to lose a reelection bid in PA history. 


I say surprised because he told us he wouldn't raise taxes, we foolishly believed that was the solution to our problems, then gnashed our teeth over the cuts that were passed.  Of course, since we seem to be stuck in a no win battle of raise taxes or cut benefits kind of thinking, no new solutions were offered either.  So, for 4 years we passed a balanced budget only to find ourselves towards the bottom of lists such as state revenue growth, job creations, and education funding. 


Now comes the 2015-16 budget battle between newly elected Democratic Governor Tom Wolf and the increased GOP majority in the House and Senate.  In some ways, I admire Pa voters for choosing a new leader while presenting him with a similar arrangement of house reps and senators.  Not sure if we meant to do that, not sure if we are actually thinking that when we vote, but by electing a DEM Gov and a GOP controlled legislature, we are saying to our public servants, Hey, we aren't sure what we want, but we expect you to work together to find common ground between our own schizophrenic needs and wants, and make the best choices possible for all of us.


So far, unfortunately, neither side has acted as adults.  Wolf's budget is unanimously voted down due to a clever politically motivated approach by the GOP, then the GOP budget is vetoed by Wolf.  One might say, score 1-1; or one might say score 0-2 where 0 represents the citizens of PA, and 2 represents the bullshit of PA politics.


Admittedly, Pennsylvania is a difficult nut.  A huge portion of our state population lives in or near a city, while a majority of state reps and senators come from counties that are rural.  The phrase Pennsyltucky has been used to describe this dichotomy.  It takes quite a balancing act to understand the opinions, perspectives and needs of such a diverse population.  One might even say it takes a lot of compromising so that each position gets a bit of what they want.  And, while compromise is an extremely dirty word in our national political debate, it is only a bit less dirty in our state debates.


As a tax payer, a parent with one child still in college and one a recent graduate with large college debt, and as a public employee with a job in the oft maligned PLCB, I believe I have a rather unique perspective.  Here are my thoughts.


Education funding should be our top priority.  When we continue to allow wave after wave of urban children leave school early, or graduate with inferior skill sets, we create future expenses that cost much more per individual whether it be through incarceration, public assistance, or reduced tax revenue.  Funding needs to be from stable sources and needs to be equitable in its dispersion.  There is a new formula recently proposed that, with a few tweaks, should be enacted so that so school systems with the least ability to generate revenue, get a bigger share of state aid.


Just as important, since less money is finding its way to the classroom, pension reform goes hand in hand with education funding.  The fact that it is through poor, past legislative decisions and the refusal by the state to always pay their legal obligations to the pension fund that has created this mess seems lost in the solutions.  That being said, there will need to be a reduction in the multiplier which is used to calculate pensions.  We can't continue to promise money that is not there.  Of course, those about to retire must not be affected, but for those decades away, a new formula needs to be enacted.  Perhaps even an option to take the money already invested, and opt out of future contributions and a future pension.  Personal choice.  And, however the details shake out, the state needs to recognize its debt to the pension fund and find a (hopefully) temporary revenue source to erase that debt.


There is also a huge need for transportation funding.  Literally billions of dollars are needed to fix our infrastructure.  Inevitably, higher taxes will be required.   A small increase in the base income tax rate, in addition to a sliding tax rate not unlike what many states have in place will help.  Also, while I have said many times before that the window to tax the Marcellus shale boom has closed somewhat, an extraction tax needs to be enacted.  For now it will not provide as much revenue as needed, but the cycle of high oil prices will certainly return again, and perhaps this tax will become a more productive source of revenue in the future.  I am not a big fan of applying the sales tax to more products and services as it tends to fall disproportionately on the lower income brackets, but there are luxury products and services that could be removed from the exempt list.  Perhaps even an increase in the liquor tax which began as the Johnstown Flood tax.  Clearly, the tax money no longer goes to anything related to Johnstown, but is a stable revenue source for the state.  Lets rename it what it is, an alcohol tax, increase it by 2%, and earmark the money for education or transportation or both.


Speaking of the PLCB, Pennsylvania is one of only two states that controls the sale of wine and spirits.  It is a system that was historically poorly run with little concern for customer service.  When I first was legally able to drink, the state stores were of the "conventional" model.  That meant you stood on one side of the counter, told the clerk what you wanted, and he picked your product for you then tallied up the total and collected the money.  Now, 30+ years later, wine and spirits shops are self service.  There is a website which provides information on store hours, product availability, an online store, monthly wine club subscriptions, and even advice on mixing drinks and hosting parties.


Even better, the PLCB generates millions of dollars in profits in addition to the taxes that are automatically collected.


Still, product availability is restricted to the 600 or so state run stores.  Legislation that will allow for direct wine purchases by Pennsylvanians from out of state wineries and vineyards while also offering separate liquor licenses to existing beer distributors and restaurants to allow their patrons to purchase wine and spirits will increase revenue while improving convenience.  Additional legislation that frees the PLCB to expand hours when and where necessary, vary profit margin by product, and other such common business practices will also improve customer satisfaction while increasing revenue.


If we want to allow beer and wine sales in grocery stores (I would not include spirits at first), then we need to make sure that this decision will create jobs, not just convenience. New items in convenience stores do not require new employees, but getting new product to those new outlets might.  That is why maintaining the PLCB's wholesale system is key.  This will force importers to find new ways to get their product to market, resulting in the need for sales, warehousing, and transportation positions.  As a PLCB manager, I am less concerned about losing our monopoly as I am about losing much needed state revenue.  A compromise approach (oops, there is that word again), that maintains the state presence in alcohol sales, while creating more outlets for the consumers seems the best of both worlds.  And, again, an increased revenue stream that can be earmarked for specific needs helps eliminate the yearly wrangling over what benefits to cut or what taxes to raise.


Also, what about more cooperation between the business sector and government?  It is so often presented as an adversarial relationship but the truth is that with cooperation both sides win.  Don't all business owners want our schools to produce smarter kids, don't they want safe roads to more their goods, don't they want a strong middle class to purchase their products and services?  And, don't politicians want successful businesses which means a bigger tax base along with less need for public assistance?  You would think that such intelligent, innovative people who can build businesses and win elections would also realize that we succeed, or fail together. 


Obviously, there are no easy answers.  But solutions come more readily, if priorities are set and referenced with each possible answer.  Lastly, and perhaps most importantly, sometimes sacrifice is required.  We can't eat our cake and have it too.  Sometimes we must decide to forego satisfying a need now, for a more complete satisfaction in the future.  I truly believe that most Pennsylvanians accept that philosophy, but don't often trust their public servants to use additional money (the sacrifice today) for a better tomorrow.  Frankly, the performance regarding the 2015-16 budget does nothing to alleviate that concern.  Let's hope that compromise becomes the buzz word in Harrisburg over the next few months, and that common sense, and common goals are the methods used to craft the 2015-16 state budget.