By Berwood A. Yost
Why don't we have a state budget? The answer is neither short nor simple.
Pennsylvania's budget impasse is the direct result of three state policy failures: the failure to find the reliable funding sources that state government needs to operate, the failure to reduce the spending growth that existing laws require, and the failure to support reforms that make elections more competitive.
Corporate taxes as a share of general-fund revenues have steadily declined because the amount of money generated by those taxes has remained, in inflation-adjusted terms, unchanged since 1988. Revenue based on consumption taxes, such as the state sales tax, has grown by 27 percent, and revenue from other sources, such as the personal income tax and table games, has grown by 87 percent. This is policy failure one: not finding a sustainable revenue stream to replace money lost because of changes to corporate taxes.
State spending continues to grow mostly because existing laws mostly determine how the state spends money. Pensions, medical assistance, and debt service are the biggest contributors to state spending growth. While the share of state spending on education has remained mostly stable over time, human services and corrections spending have been trending upward. This is policy failure two: not finding a way to slow mandatory spending.
These two failures have produced a structural budget deficit in that expenditures will be higher than revenues if state laws and policies remain unchanged. The state's Independent Fiscal Office predicts annual revenue growth of 3.3 percent per year at the same time that annual expenditure growth increases by about 4.5 percent per year. If corporate tax revenues had kept pace with the total increase in revenues from other sources, the general fund would have had about $2 billion more last fiscal year, which would have eliminated the structural deficit.
It is at this point when questions about the proper size and scope of state government should be considered. But this simple question is incredibly hard, if not impossible, to answer because no set of statistics can provide a definitive answer about the proper size of government.
State government spending has increased by more than the rate of inflation during the past 30 years, which is evidence that state government is probably consuming too many resources, right? On the other hand, state general-fund spending has represented about 5 percent of the state's gross domestic product during the same time period. So, although general-fund spending has increased by about 40 percent in inflation-adjusted dollars since 1988, general-fund expenditures are at the lowest point as a percentage of state gross domestic product (about 4.4 percent) since 1985. From this perspective, state spending is in line with or slightly below recent norms.
Since no statistic will convince everyone about what the right amount of state spending should be, how can we answer questions about what is the right amount?
The question should be answered, and for much of history has been answered, through contested elections. This is the reason Gov. Wolf used his budget address to call attention to the state's structural deficit without emphasizing the budget details: It was a call to action for voters to encourage their legislators to act.
The governor knows that a majority of residents support key parts of his agenda. Polls show that large majorities favor a cigarette tax increase and a shale tax increase, and most believe the budget should be balanced through both program cuts and tax increases. He can also point to the defeat of incumbent Gov. Tom Corbett as providing support for his agenda. Corbett's loss was driven by a significant share of voters who were concerned about perceived reductions in state support for education and human-services programs.
Here is policy failure three: The electoral mechanism we've relied on to answer such questions and resolve conflicts no longer seems to work. The state's legislative redistricting process has helped change our politics from compromise to confrontation because it has created legislative districts that are rarely competitive during general elections.
The 2014 state Senate election shows how uncompetitive the state's general elections have become: Out of 25 state Senate contests in 2014, nine were uncontested, and the winners of 14 races received more than 55 percent of the vote. These are landslide wins.
Noncompetitive general elections mean that legislative change takes place in primary elections. Primary challengers are more likely to have strong ideological and partisan priorities that affirm confrontation and ideological purity, not compromise. Lawmakers' concerns about primary challenges can eliminate the incentive to compromise.
The budget is state government's most important work product. Laws aren't enforced and programs cannot function when they aren't funded.
Our budget mess makes clear the price we pay for our broken electoral system. It's not a price we can afford much longer.
Berwood A. Yost is the chief methodologist for the Franklin and Marshall College Poll, director of the Floyd Institute's Center for Opinion Research, and director of the Floyd Institute for Public Policy Analysis. email@example.com