The Next Step

Governor Tom Corbett inherited a $4 billion plus budget deficit when he took office earlier this year. Keeping his pledge not to raise taxes, the new governor promptly outlined the spending cuts necessary to bring the state’s budget into balance. After a bit of tinkering, the legislature adopted the Corbett budget, thus taking the first step toward putting Penn’s Woods back on the path of fiscal responsibility.

But it was only a first step. Now that the crisis atmosphere has past, the time has come to address the underlying factors that drive state overspending. And we are overspending. Over the past decade the state budget has grown more rapidly than the rate of inflation and faster than the incomes of those who must pay taxes. At $27.4 billion there is plenty of money. The problem lies in how the money is spent.

Budget battles are typically framed as a choice between two undesirable options: cut spending or raise taxes. But there is a third choice and that would be to spend more efficiently. Determining the level of spending and taxation is only one step in the process. Within the confines of those parameters exists an almost limitless range of options as to what funds will be spent on and how.

Private enterprises ranging from home businesses to multi-national corporations have learned this lesson. Those companies that are surviving the Obama recession are doing so because they have cut costs, work smarter, and do more with less. Tough economic times lead to innovation and efficiency. We are having a jobless recovery largely because those with jobs are producing more.

To meet the pressing needs of the commonwealth state government is going to have to follow a similar path. As the governor’s cabinet secretaries settle in and begin to manage their departments every line item should be reviewed. State government is chock full of outdated, outmoded, and useless agencies, programs and projects that could be eliminated, freeing up dollars for more pressing needs.

Ronald Reagan once observed: "No government ever voluntarily reduces itself in size. Government programs, once launched, never disappear. Actually, a government bureau is the nearest thing to eternal life we’ll ever see on this earth!" For Pennsylvania to function efficiently the Corbett Administration is going to have to pare state government into a leaner, more efficient enterprise. This will, as President Reagan observed, be difficult, but it is the key to success.

For starters, the state’s Soviet-style liquor monopoly must be ended. Vested interests, specifically the labor unions, will fight privatization of the state stores. Pennsylvania is one of only two states, the other being Utah, that clings to a state run liquor monopoly. A recent Auditor General’s report detailed mismanagement in the agency. Even former LCB chief Jonathan Newman has publically called for putting wine and spirit sales into private hands. The time for change has come.

Privatizing the state store system will likely be the highest profile fight for change. But other battles must be fought as well. Waste, fraud and corruption run rampant through the state’s welfare system. Here too Auditor General Jack Wagner has detailed abuse. Hundreds of millions could be saved by revamping the welfare system.

Pennsylvania’s roads and bridges are in a state of advanced disrepair. But mass transit systems in Pittsburgh and Philadelphia continue to siphon a disproportionate share of the state’s transportation dollars. Reform of these agencies, coupled with a streamlining of the Department of Transportation are a necessary step toward freeing up current dollars which can then be spent on actual road and bridge repairs.

On and on I could go through agencies running from the state prison system, to education, to the state’s propensity to pick winners and losers via so-called economic development projects. All of these components of state government fail to deliver the maximum bang for the taxpayer buck. Collectively, the inefficient and ineffective spending that has been the hallmark of state government for years has robbed Pennsylvanians of the quality of life for which we have paid.

For decades state government has tried to tax and spend its way out of our problems. The situation has only gotten worse. With looming pension, unemployment compensation, and transportation crises it is clear the time has come to chart a new course. That third way is to fundamentally alter how our state government operates. If we chose this third way, we can effectively meet the many challenges we face. Failure to change will condemn us to more spending, higher taxes, fewer jobs and a diminished quality of life for all Pennsylvanians.

(Lowman S. Henry is Chairman & CEO of the Lincoln Institute and host of the weekly Lincoln Radio Journal. His e-mail address is [email protected].)

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