Is it Time to Return to a Two-Year State Budget Cycle?
We are now nearing the midnight June 30th deadline for passage of a state budget – and once again it is unlikely a new fiscal plan will be in place. It will be the fourth time in Governor Josh Shapiro’s four years in office he has failed to get a budget through the legislature on time.
Passage of a state budget has become the fiscal version of the iconic film Groundhog Day. Most years when the sun dawns on July 1st residents of Penn’s woods awake to find state spending authority has lapsed. Such has been the case for decades, but it has recently happened more often.
Governor Shapiro blames the partisan divide in the legislature – Democrats control the state House of Representatives; Republicans control the Senate. But, for a governor whose self-adopted slogan is that he “gets (stuff) done,” he has been unable to deliver on the most important task of state government.
Most Pennsylvanians suffer no consequences of a lapsed state budget. But for some the impact is severe. Last year, the state endured a months-long budget impasse that put a financial squeeze on counties and school districts some of which resorted to short term borrowing and even lay-offs to survive the disruption. Many non-profits that provide human services also felt the impact of delayed state funding.
In February, Governor Shapiro offered up a proposed state budget that calls for spending in excess of $5 billion more than projected revenue. He wants to drain the state’s “rainy day” emergency fund to cover the deficit. He also relies on two sources of projected revenue which do not currently exist – and which are unlikely to do so during the coming fiscal year.
In what Senate Majority Leader Joe Pittman (R-Indiana) termed a “performative” action dutiful House Democrats passed the governor’s proposed budget. Then, in an act of political jujitsu, they claimed the budget impasse is the fault of senate Republicans.
This despite the face everyone from the governor down to the most junior legislative back bencher knows the Shapiro proposed, House passed budget is completely unrealistic. For the past four years senate Republicans have been the fiscal adults in the room. Of course they are not about to agree to that level of unfunded spending.
It doesn’t take a degree in economics to understand that you cannot continue to spend $5 billion more each year than you receive in revenue. Draining the “rainy day” fund could get you through this year (not coincidentally a year in which Shapiro stands for re-election), then creates a gaping hole for every year thereafter.
The state’s independent fiscal office has already pointed out the obvious: significant broad-based (ie; sales or personal income tax) tax hikes will be necessary beginning with the 2027-28 fiscal year should the governor’s TikTok ready budget be approved.
And so, we approach another budget deadline with Democrats playing fiscal politics and Republicans trying to rein in the spending. This has become an annual charade with senate Republicans being partially successful at holding the line.
The Groundhog Day film was entertaining, but the yearly state budget wrangling has become tiresome. This raises the question as to why we must do this each year?
Prior to the 1950’s the state budgets were adopted for two years aligned with the two-year legislative session. At the time the advanced forecasting models we have today did not exist, so the one-year fiscal cycle made sense to allow the commonwealth to more quickly adapt to changing financial tides. But is an annual fiscal cycle still necessary?
The unique way the Pennsylvania legislature does business nurtures gridlock. Real negotiating and real decisions are made by a handful of legislative leaders. The only influence most members of the General Assembly have in the budget process comes in fleeting comments during caucus meetings.
In the highly charged partisan atmosphere of Pennsylvania state government a two-year budget cycle is starting to make sense. If budgets are passed at the beginning of each two-year legislative session that would free legislators to focus more on long-term issues and planning. A two-year budget cycle would provide some stability for both taxpayers and tax-funded organizations with predictability in state taxation and spending.
A two-year cycle would also take budgeting out of election years thus encouraging more serious proposals and minimize the political performances such as we have seen from Governor Shapiro and House Democrats this year.
It is an idea worth considering.
(Lowman S. Henry is Chairman & CEO of the Lincoln Institute and host of the weekly American Radio Journal and Lincoln Radio Journal. His e-mail address is [email protected].)
Permission to reprint is granted provided author and affiliation are cited.
