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Fireproofing PennsylvaniasEconomy:

PennsylvaniaStateBudget2012 P l i St t B d t 2012
ByNathanBenefield CommonwealthFoundation

Thomas Jefferson: ThomasJefferson:


Thenaturalprogressofthingsisforlibertyto yieldandgovernmenttogainground. yield and government to gain ground.

JamesMadison: d
Ibelievetherearemoreinstancesofthe abridgementoffreedomofthepeopleby g gradualandsilentencroachmentsbythosein y powerthanbyviolentandsudden usurpations. p

PATaxesAddUp PA Taxes Add Up


Pennsylvania has the 10th highest state and Pennsylvaniahasthe10 higheststateand localtaxburden,upfrom24th in1991 Pennsylvaniataxpayerspay$4,190percapita instateandlocaltaxes,10.1%oftheirincome i dl l 10 1% f h i i

From1991 2011,PARanks From 19912011, PA Ranks


41st in Job Growth inJobGrowth
13.2%,vs.23.3%Nationally

46th inPopulationGrowth
6.7%,vs.23.9%Nationally 6 7% 23 9% N ti ll

48th inPersonalIncomeGrowth l h
122%,vs.158%Nationally

Residents Movin Out of PA Residents MovinOut ofPA


IRS Tax Returns IRSTaxReturns
PAlostanet77,184taxpayerstootherstates from2000 10 from 200010 Netlossof$4.3billioninincome

United Van Lines: 53% of shipments out of PA UnitedVanLines:53%ofshipmentsoutofPA in2011.


Firsttimein6yearsPAwasnottop5outbound Fi t ti i 6 PA t t 5 tb d state

PABudgetOverview PA Budget Overview


201112: $27.15 billion enacted General Fund Budget 2011 12:$27.15billionenactedGeneralFundBudget TotalOperatingBudget:$64.9billion(firstcutin40 y years) )
IncludesMotorLicenseFund(highways),LotteryFund, UnemploymentCompensationFund,FederalFundsto state

CapitalBudget(notincludedinoperatingbudget): $1.6billioninbondissuesforprojects $1 6 billion in bond issues for projects Independentstateagencies(notincludedin operatingbudget)TurnpikeCommission,PHEAA,etc operating budget) Turnpike Commission PHEAA etc.

2011Budget 2011 Budget


ReducedspendinginK12Educationprimarilydue tolossofstimulusfunding(spendingfromstatetax l f i l f di ( di f dollarsactuallyincreases)
$800millionlessinstate/stimulusaid $800 million less in state/stimulus aid Totalpublicschoolspendingdoubledfrom1995to 2010,to$26billion. 2010 to $26 billion

Reductionof20to30%foruniversities:PennState, Pitt,Temple,Lincoln,andStateSystem , p , , y NoNewTaxes

GeneralFundSpending General Fund Spending


FromFY200203to20112012,GeneralFund spendingincreasedby$7.2billion,or35%. di i d b $7 2 billi 35% K12Education,PublicWelfare,Corrections,and Treasury(DebtPayments)represent84%ofGeneral T (D bt P t) t 84% f G l Fund. But these 4 categories represent ALL the growth Butthese4categoriesrepresentALLthegrowth.
K12Education,PublicWelfare,Corrections,and Treasurygrewby$7.6billion. yg y Restofbudgetcutby$426million

BudgetLegislation Budget Legislation


General Fund Budget Bill GeneralFundBudgetBill
IncludessomeotherfundsMotorLicenseFundand LotteryFundwhichareappropriatedeachyear y pp p y ratherthanbyformula

Nonpreferredappropriationbills p pp p
PartofGeneralFund,butnotdepartmentsofstate ExamplesPennState,Pitt,PAPublicUtilities p , , Commission

BudgetLegislationContinued Budget Legislation Continued


Fiscal Code FiscalCode
Taxcredits,transfersbetweenfunds,dedicatestaxesto specificfunds

TaxCode
Anytaxincrease/cut

CapitalBudget
Twobillsonetoauthorizeborrowing/bondissues,the secondtoitemizecapitalprojectseligibleforfunding d t it i it l j t li ibl f f di

Legislationtochangeprogramsdoneinseparatebills

StateBudgetThreats State Budget Threats


201112passedbudgetspends$578millionmore thanexpectedrevenue h d ShortfallthroughJanuaryof$497million IndependentFiscalOfficeOutlook:
GeneralFundrevenuegrowthtoaverage1.6%annuallyfor 2011 14. 201114

FourAlarmFire:
Correctionsspendingtogrow6.9%peryearfrom201114. p g g p y Debtpaymentswillgrowby7.3%peryearfrom201114. PublicWelfarespendingtogoupby8%peryearfrom201114. Commonwealthpensioncontributionswillskyrocketby40% peryearoverthenextthreeyears.

Corrections
Pennsylvanias per capita incarceration rate Pennsylvania spercapitaincarcerationrate hasexplodedbymorethan500%since1980.
Despite constructing 18 new prisons since 1980, the 2010 Despiteconstructing18newprisonssince1980,the2010 prisonpopulationis13%overprisoncapacity.

Threenewprisonsandadditionalfacilitiesare scheduledforconstruction,bondedat$695 million. Overthelast30years,theCorrectionsbudget increased1,700%to$1.9billion. increased 1,700% to $1.9 billion.


ItisnowthethirdlargestofallstateagenciesinGFbudget.

PAStateDebt PA State Debt


Pennsylvania State & Local Government Debt
D ebtor Total State State State Agencies & Authorities S A i A h ii Total Local School Districts County/Municipal/Twp/other D ebt Outstanding $ 4 5 ,0 2 0 ,3 1 0 ,0 0 0 $10,356,710,000 $34,663,600,000 $34 663 600 000 $ 7 5 ,7 5 9 ,7 0 6 ,0 0 0 $26,618,928,378 $49,140,777,622 $49 140 777 622 Per Person $ 3 ,6 2 1 $833 $2,788 $2 788 $ 6 ,0 9 4 $2,141 $3,953 $3 953

Total

$120,780,016,000

$9,715

Pennsylvania State, State Agencies & Authorities Debt


D ebtor D ebt Outstanding 2 0 0 2 D ebt Outstanding 2 0 1 1 Increase C hange State $6,805,184,000 $10,356,710,000 $3,551,526,000 52% State Agencies & Authorities $16,848,800,000 $34,663,600,000 $17,814,800,000 106% Total State $ 2 3 ,6 5 3 ,9 8 4 ,0 0 0 $ 4 5 ,0 2 0 ,3 1 0 ,0 0 0 $ 2 1 ,3 6 6 ,3 2 6 ,0 0 0 90%

PublicWelfare Public Welfare


Largest Department in State Budget for first time LargestDepartmentinStateBudgetforfirsttime Welfarespendinggrewthreetimesfasterthanrest ofbudgetfrom200203 g DespiteSpending,PovertyRateContinuestoClimb to12.2%in2011 Represents39%ofGeneralFund,43%ofTotal OperatingBudget
MedicalAssistanceisbiggest

MaintenanceofEffort federalmandatein StimulusandinAffordableCareAct:Statescant reduceMedicaidenrollment

StateGovernmentPensions State Government Pensions


Increase in taxpayer contributions to SERS intaxpayercontributionstoSERS andPSERS
Act 120 of 2010 turns spikeintostaircasetaxpayer Act120of2010turns spike into staircase taxpayer contributionstorisefrom$500millionin2010to$6 billionin2015

Causes
2001pensionbenefitsincreaseand2002COLA 200102and200809investmentlosses(currently assume7.5to8%annualreturn) 2003 & 2010 legislation to delay payments on liability 2003&2010legislationtodelaypaymentsonliability

FiveFactsAboutCorbettsBudget Proposal
Reduces spending for 2nd Consecutive Year Reducesspendingfor2 ConsecutiveYear
$27.14billionGF,$63.3billionoperating.

Spending is slightly more than revenue Spendingisslightlymorethanrevenue Debtandpensionpaymentsincrease


Debt payments up $73 million Pension payments up by Debtpaymentsup$73million.Pensionpaymentsupby morethan$500million.

Correctionsislevelfunded
Beginspathtoreform.

Welfare spending basically flat Welfarespendingbasicallyflat


ButincreaseinMedicalAssistance,largestprogramand biggestthreat.

FireproofingtheEconomy Fireproofing the Economy


Transparency:putspendingonline Transparency: put spending online NextStep:SpendingCaps
Limitgrowthofspendingtoinflation+ population Forceslawmakerstopracticefiscal F l k t ti fi l restraint

C Corrections:reformsthatreduce ti f th t d spending&crime MedicaidReform

FireproofingtheEconomy(2) Fireproofing the Economy (2)


Privatize Yellow Pages Government Privatize YellowPagesGovernment Redefineprevailingwagelawsthatinflatethe costofgovernmentconstruction cost of government construction Eliminatedebtforcorporatewelfare SchoolChoice
EducationalImprovementTaxCredit,charterschools, vouchers,andhomeschoolingcostmuchless h dh h li t hl SchoolChoiceimproveseducationaloutcomessavingon futurecorrectionsandwelfarespending

NathanBenefield Nathan Benefield


DirectorofPolicyAnalysis Director of Policy Analysis CommonwealthFoundation 7176711901 6 90 nate@CFPolicy.org CFPolicy.org BudgetLinks:CFPolicy.org/Budget Budget Links: CFPolicy.org/Budget Facebook.com/CommonwealthFoundation