State lawmakers have returned to Harrisburg with one major goal: finish the 2020-2021 budget.
Even under normal conditions, it’s no easy feat to negotiate a budget agreement. But now, lawmakers confront a revenue shortfall because of COVID-19. A prolonged business shutdown earlier this year, imposed by Gov. Tom Wolf, has only worsened Pennsylvania’s economic fallout. It remains unclear if any additional COVID-19 relief money from Washington will be added into the mix.
As negotiations continue, lawmakers must remain transparent, finalize a balanced budget that Wolf will sign and do so by Nov. 30.
Estimates project the current budget shortfall to be at least $3 billion — a significant amount and one that could tempt some lawmakers to raise taxes. Before any knee-jerk reactions are made, though, lawmakers have sensible options to consider, including a review of millions housed off the books in existing reserve funds, known as Pennsylvania’s “shadow budget.”
As it stands, Pennsylvania’s real operating budget includes more than 150 accounts that are set apart from the general fund. These accounts aren’t included in annual budget negotiations and consistently operate behind closed doors. To date, the shadow budget has amassed $10.6 billion in reserves.
At any time, housing $10 billion off the books is bad policy. Pennsylvania taxpayers — already struggling during the COVID-19 pandemic — deserve transparency, not a shadow budget hiding large spending increases from the public eye.
Moreover, reserves that could be made available for other critical programs are kept just out of reach. Continuing such practices, especially amid an economic crisis, is misguided. Lawmakers and citizens need an accurate picture of the state’s finances to budget appropriately during this challenging time.
The Commonwealth Foundation estimates that lawmakers could transfer $345 million from shadow reserves to help meet the current budget deficit, without even affecting current spending commitments. This transfer represents less than 5% of the shadow budget’s total reserves; reallocating these funds would not adversely impact any program or project.
Lawmakers should bring the shadow budget back into the light once and for all. That way, even more reserve funds could be tapped and Pennsylvania would have a fairer, more transparent budgeting process. Shadow budget programs would finally be subject to public scrutiny. Their efficacy, moreover, would be evaluated like other government programs. If total transparency can’t be achieved in the current session, both parties should agree that $345 million would go a long way toward closing the budget deficit.
But that amount would not close the gap entirely. Just as Pennsylvanians have made pandemic-era adjustments to their personal budgets, so must the state. For example, programs and projects that have saved money because of mandatory work-from-home arrangements and travel moratoriums should return those savings to the taxpayer.
Meanwhile, spending on nonessential programs should be temporarily paused so funds can be prioritized to meet our immediate needs.
Now is also the time for lawmakers to rethink corporate welfare programs that have little return on investment for Pennsylvania taxpayers. And opportunities to decrease state costs and raise revenues exist in commonsense proposals, such as leasing toll roads and privatizing the sale of liquor.
Combined with transfers from the shadow budget, these additional reforms and adjustments could save an estimated $10 billion of taxpayers’ money — more than enough to balance the 2020-2021 budget.
Pennsylvanians have already endured so much because of COVID-19 and the Wolf administration’s measures. While unemployment numbers have improved since the spring, many of this commonwealth's residents are still working hard just to make ends meet. The last thing they need is a tax increase. It’s incumbent upon our policymakers to take every available opportunity to balance the budget with existing resources — and they have plenty of good places to start.
Stephen Bloom is vice president of the Commonwealth Foundation, Pennsylvania's free-market think tank.