House Members Offer Balanced Budget Proposal

Member Group : Allegheny Institute

At the end of June Pennsylvania’s 2017-2018 budget became law. It was unbalanced and there wasn’t a plan in place for how to pay for it. A significant part of the problem was that the Governor and legislature did nothing to reduce spending in 2016-2017 after it became clear that the revenues they expected were not going to materialize. The Governor and the majority of the General Assembly could have reduced spending in the new budget, but they didn’t. Instead Senate Republican leadership and Democrats in that chamber passed a tax increase and want to rely of borrowing to balance the budget.

The Governor, the media, and Senate Republican leaders have been insisting that the House Republicans were being negligent in not passing the tax hike. CAP and other organizations have insisted that there were other ways of balancing the budget. As we’ve noted it is possible to cut earmarks and overhead. We can add another option to that list as well: tapping the "Shadow Budget".

Our friends at the Commonwealth Foundation have written extensively on this subject. Now, a group of lawmakers have taken the next step and introduced a proposal to tap into reserves from the Shadow Budget to make up for the revenue shortfall. Per the Commonwealth Foundation:

"…Pennsylvania holds nearly $73 billion in surplus fund balances, including $11 billion in the Treasury’s shared pool. This includes funds for many of the state’s shadow budget programs. The funding for these and other programs are deposited into three investment pools."

The proposal offered by House members would transfer $1.2 billion in excess reserves, from Treasury’s shared pool. This is money that taxpayers, ratepayers, and/or fee payers have already sent to the Treasury Department. Furthermore, this isn’t money that has been allocated to a specific project. Instead, this is money that is being held well in excess of the expected expenses and future revenues. In some cases, these are structural surpluses that have been accumulating for years or decades outside of the General Fund and normal budgeting process.

Taking money from the Shadow Budget’s unexpended funds won’t affect a single state employee or budgeted expenditure. However, it will save taxpayers from yet another tax increase. The question is whether the majority of Republicans in the General Assembly and the Governor will side with taxpayers or tax-and-spend special interests.