By Vincent Hughes
Tough decisions will have to be made as state lawmakers draft next year's budget by June 30. With revenues lagging and belt-tightening a possibility, we must reset our priorities to take the commonwealth in a new direction.
Three issues loom: revenue is projected to be off by about $500 million; school districts, which have lost about $1 billion in funding from Harrisburg, are hurting badly; and job creation is at a standstill.
Misplaced priorities by the Corbett administration have meant nearly $1 billion in business tax cuts in the past two years without any positive impact on jobs. As a result, the state unemployment rate has exceeded the national average for the first time in five years.
Meanwhile, reductions to basic education funding have forced school districts to raise property taxes, cut programs, and lay off personnel.
The poorest schools have been hit the hardest. The Philadelphia School District, which has been forced to close 23 schools, is facing a deficit of more than $300 million and is demanding major concessions from its teachers in contract negotiations. It may eliminate more than 2,300 positions. The lowest-paid workers in the district, its support staff, have already agreed to significant givebacks. The central office staff has been cut by nearly 50 percent.
We can solve this funding crisis by resetting our priorities. We can meet the June 30 deadline without balancing the budget on the backs of our students. We can make the necessary investments to get our education system going in the right direction again, and invest in proven job-creation programs. Of the many options available, here are three where the money can be found:
Postpone the reduction in the capital stock and franchise tax. More than 15 years ago, Pennsylvania began to slowly eliminate a tax levied on buildings, land, and other corporate assets. As a result, businesses have saved more than $1.4 billion. During lean budget years, we have regularly postponed the annual reduction to meet other commitments, including education. Given the current economic climate, we can postpone this break for one year and realize almost $365 million in tax revenue that can be invested in public education and job-creation initiatives.
Accept federal funds to expand Medicaid under the Affordable Care Act. Pennsylvania has the option of enrolling more than 350,000 new people in the program that provides health-care to low-income individuals. This would be accomplished through an infusion of $4 billion in new federal funds. Every state has the option of expanding Medicaid, but Gov. Corbett has not yet committed to this course of action. The total savings in the first fiscal year would be $257 million.
Modernize the state liquor system. The modernization of one of Pennsylvania's greatest financial assets, its liquor system, could conservatively yield an additional $100 million to the state's budget and education system. This would mean expanding hours, providing more competitive pricing, creating flexibility in staffing, and making stores more customer-friendly. This could be a huge financial benefit to schools and even reduce local property taxes. We should make what is already a half-billion-dollar asset work even better for state residents and students.
The above options total more than $700 million, and would require no tax increases. They would fix a tight budget environment, help us reinvest in Pennsylvania's education system, provide money to create jobs, and put the state in the right direction. And it can all be done by midnight on June 30.