Geico Budgeting: So simple even a cave man could understand

Member Group : Lincoln Institute

As state government struggles with a ballooning budget deficit it has become abundantly clear that the Rendell Administration is completely unwilling to make the tough decisions necessary to bring spending under control. Rather, look for the Governor to continue his spendthrift ways while counting on a hand-out from the federal government to stem the flow of red ink here in Penn’s woods.

The rate of increase in state government spending has significantly outpaced the rate of inflation for decades. While the legislature has put the brakes on tax hikes in recent years, it has allowed spending to continue apace. With the recession dragging down tax receipts, years of state government living beyond the taxpayers’ means has finally driven the commonwealth into insolvency.

It is abundantly clear that there is little appetite within the General Assembly to raise taxes. In fact Lt. Governor Joseph Scarnati, who does double duty as the top Republican in the state Senate, has flatly ruled out a tax hike. Most Republicans and many Democrats in the House – all of whom face re-election next year – also appear to oppose raising taxes.

Major tax hikes during a recession only tend to prolong the economic crisis. In fact, the state is still suffering from a competitive disadvantage as a result of major tax hikes enacted the last time the state faced a major budget deficit which was back in 1991.

If you take raising taxes off the table that leaves but one alternative: cut spending. And while there are some obvious cuts, the size of the current budget deficit (now in the $2 billion range) means a few sacred cows will get trimmed as well. A clear signal that the Governor and his administration are not serious about budgeting responsibly came when his chief spokesman, referred to Republican calls for pruning the waste from welfare spending as "the caveman caucus."

Ardo, who sports a Cro-Magnon appearance, was employing the old bureaucratic tactic of suggesting that anyone who would even suggest cutting spending on social services is insensitive and cruel. Those who want to raise taxes rather than cut spending always pick the most sympathetic of programs to cut first in an effort to prompt the biggest outcry against efforts at belt-tightening.

The legislators calling for cuts in welfare spending were not suggesting the truly needy be deprived of assistance, but rather were pointing out there is great waste and inefficiency in the process and that can no longer be tolerated. Given the amount of money the state spends on entitlements and social services, there is no way to balance the budget unless expenditures in those areas are reduced. It is clear from Ardo’s comments that the Rendell Administration is going to resist even reasonable cuts, preferring instead to fear monger.

At this point, the Governor is more willing to pick a fight with state labor unions than to roll up his sleeves and root out waste and inefficiency. He is suggesting between 1,000 and 2,000 state employees could be furloughed as he struggles to balance the current year’s budget and develop a spending plan for the 2009-2010 fiscal year. There is no doubt the state’s employment rolls are bloated, but his moral authority in this area has been undermined by reports that over 500 new employees have been added to the payroll in recent months, this despite a so-called hiring freeze being in place.

Governor Rendell is right about one thing, the state’s labor unions are going to have to come to the table and be part of the solution. So far labor leaders are literally saying cut everything and everybody but us. The size of the deficit coupled with the percentage of the budget that goes to payroll makes that impossible. Wage freezes and even wage roll-backs are going to have to be part of the equation.

The governor is going to have to cut much deeper. Discretionary spending, such as funding the construction of pro soccer stadiums and giving tax breaks to soft core porn film makers, is going to have to end. State government agencies are going to have to learn to do more with less. Years of economic good times and ever increasing tax revenue coupled with an administration that favors big government has allowed spending to skyrocket. With the economy in recession the party is now over.

Cutting the waste, and even saying we can’t afford some programs of merit is not Neanderthal, it is merely a reflection of the times in which we live. State government, like the citizens it serves, must start living within its means. And that is something even a cave man can understand.

(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])

Permission to reprint is granted provided author and affiliation are cited.