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Commonwealth Foundation


Welfare Costs Driving State Budget Up

by Erik Randolph
 

Pop quiz: What's the largest spending increase in Governor Tom Wolf's budget proposal? You might assume education, as the governor has repeatedly insisted the state must reinvest in public schools. Paying for ballooning public pension costs would also be a reasonable guess.

But neither is correct. The biggest spending boost of all is for the Department of Human Services, or DHS, formerly known as the Department of Public Welfare.

Wolf's budget includes a $4 billion spending increase from all funds for DHS, bringing the department's total budget to more than $36 billion–more than twice as much as the Department of Education. DHS will spend an incredible $12 billion–two of every five dollars–out of the General Fund.


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To put this in perspective, every resident of Pennsylvania will fork over an average of $1,197 in state taxes to support DHS services. That hefty sum does not even include federal money the department will spend–an additional $1,690 per resident.

Budget negotiators need to consider the burden this imposes on working families. On average, a family of four will be saddled with a bill of nearly $12,000 to support this one department.

Despite the sheer magnitude of welfare spending, very little has been reported on how it is impacting the budget impasse in Harrisburg. Consider the fact that in mid-June with the deadline fast approaching, the Wolf administration sent a letter to legislative leaders asking for another $160 million for DHS. That was on top of the record spending request he introduced in March.

Welfare spending has long been one of the most difficult areas for budget negotiators. And it keeps getting worse.
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Historically, welfare spending has always been one of the most difficult areas for budget negotiators. And it keeps getting worse.

Welfare spending has been growing faster than inflation, consuming more money every year both in inflation-adjusted dollars and as a percentage of the overall budget. This leaves fewer resources available for other priorities including education, pension payments, and the criminal justice system, to name a few.

Equally concerning, the poverty rate in Pennsylvania remains largely unchanged despite surging welfare spending. Over decades, there has been no correlation between DHS spending and reducing poverty.

Ignoring DHS's out-of-control spending is unwise: It fails to reduce poverty while guaranteeing budget crises will continue in the future. But it doesn't have to be this way. Pennsylvania can provide an adequate safety net while simultaneously controlling spending.

Other states are showing it's possible to achieve better outcomes with less spending. For example, Rhode Island negotiated a global waiver with the federal government that provided higher-quality services for long-term care at lower costs. Harrisburg should pursue similar reforms.

Instead of spending an additional $150 million on developmental disabilities programs that already receive $3.2 billion, the state should do a better job of managing provider rates and helping these individuals find productive employment.

Instead of placing non-disabled and non-elderly adults on Medicaid, the administration should aggressively retool welfare programs to provide assistance to the truly needy, while equipping them with the tools to land good jobs and achieve self-sufficiency.

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Instead of removing the SNAP test for excessive assets, as the Wolf administration recently did, the state should be deploying effective eligibility tools that ensure aid reaches those who need help the most. At the same time, we should address the welfare "benefits cliff" that traps people in poverty.

Currently, recipients of welfare programs could lose more in benefits than they might receive in net earned income if they find a better paying job or get a raise. We should ensure that Pennsylvanians are rewarded, not penalized, for working hard to provide for their families by smoothing the transition out of government assistance. In the long run, that's best for both those in need and for taxpayers.

Ultimately, good welfare policy encourages work, protects and empowers the vulnerable, and delivers services in a compassionate and cost-effective manner. Pennsylvania is far from reaching those goals.

It's time Harrisburg realizes it is not always necessary to spend more money to gain better results but instead pursues ways to truly reform welfare and reduce poverty.

Erik Randolph is a senior fellow for the Commonwealth Foundation, a conservative think-tank in Harrisburg. He recently authored the report: Out of Control: How Welfare Spending Is Driving the Budget Crisis.


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