Taxes & Spending

Please No More Taxes

Feb 8, 2016

 

 

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Examining the Staggering Cost of Pensions

CF senior policy analyst James Paul recently spoke with WURD Radio’s Stephanie Renee on Pennsylvania’s skyrocketing pension costs—and what can be done about them. Pennsylvania’s unfunded pension liability stands at more than $60 billion dollars, two times the annual General Fund budget, and it keeps growing. In short, state government is making promises it can’t keep.

Pension costs are also eating up new education funding. State spending on education has risen every year since 2010, and this year it is at an all-time high. Yet, pensions costs are taking a bigger and bigger chunk of education funding—meaning dollars targeted to education aren’t going to the classroom.

James explains that the answer is structural reform to our pension system. Switching to a defined contribution system will allow portability and affordability, giving employees more choice and helping protect taxpayers in the long run.

Click here or listen below!

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posted by Don Lim | 00:22 PM

Five Takeaways From the Governor's Budget Proposal

This morning Governor Wolf laid out his plan for the 2017-18 state budget. Here are the five things you need to know:

1. Shift to redesigning government. This is a sharp contrast from Gov. Wolf’s first two budget addresses. His focus has shifted from massive tax and spending increases to streamlining government and making government more efficient. This is a positive development, representing the economic and political reality in Pennsylvania.

2. Good news and bad news on taxes. Gov. Wolf has dropped proposals to raise the income tax or raise the sales tax ratetwo cornerstones of his first two budget proposals. He touts this as “no broad-based taxes” in the new budget.

He does, however, propose imposing the sales tax on several businesses services that are untaxed. Absent tax reductions elsewhere, it will increase Pennsylvania’s tax burdenalready 15th highest in the country.

For the third time, Gov. Wolf proposed a natural gas severance tax. This 6.5% proposal isn’t likely to get traction in the legislature. The severance tax, which targets one group of people, ignores the 5% tax drillers already pay, plus all of the high taxes every other Pennsylvania business pays. With gas prices still depressed, this tax wouldn’t generate much revenue, and would only hinder job growth at a time the gas industry is already laying off workers.

In total, Wolf calls for $1 billion in additional taxes or $315 per family of four.

3. Serious efforts to control spending. From closure of SCI Pittsburgh to reducing corporate welfare, Governor Wolf is making a real effort to control spending.

His proposal to reduce corporate welfare tax credits by $100 million is a laudable first step towards ending the $800 million practice of handouts to corporations. Yet, at the same time, he expands certain corporate welfare programs.

In addition, his corporate welfare reduction plan treats the Educational Improvement Tax Credit (EITC) and the Opportunity Scholarship Tax Credit (OSTC) like other tax credits, potentially cutting funding for students’ scholarships. Read more from James about why that would be a mistake, and why we should increase opportunities for educational choice.

Wolf has proposed merging four departments into the Department of Health and Human Services ($100 million savings); the Department of Correction and Probation & Parole into one agency ($10 million savings); and merging the management of the states two pension funds (SERS and PSERS). These mergers are intended to both eliminate unnecessary bureaucracy and to provide more efficient services. In principle, these recommendations are a welcome development. Commonwealth Foundation has long highlighted the need to streamline state government.

Wolf has outlined $2.1 billion in government efficiencies through these reforms—though these proposals will require more vetting and analysis to see if the administration's estimates hold true. More than $300 million of this is not savings but "revenue enhancements."

Gov. Wolf’s estimate of $95 million in new revenue from increasing the minimum wage mandate is the most dubious. Not only is he discounting the individuals who would lose their job under this mandate, but this projection acts as though a law can mandate a more robust economy. It doesn’t—minimum wage laws merely redirect money in the economy. 

Finally, the governor has proposed new sentencing reforms designed to reduce recidivism and help parolees stay in the community. These recommendations are estimated to save $108 million over five years.

4. Modest spending increase above TPA with some accounting gimmicks. Gov. Wolf proposes a General Fund budget of $32.34 billion, representing an increase of 1.8 percent. While a modest increase, certainly in comparison to prior proposals, it exceeds the index in the Taxpayer Protection Act (advanced in the Senate today). The TPA limit—the average increase in population and inflation over the past three years—was only 1.16 percent, as Pennsylvania’s population declined last year.

The baseline for this comparison also includes $234 million in “supplemental appropriations”—spending levels higher than the legislature passed last June. His proposal calls also for $300 million in borrowing to fund programs like health research grants and grants to the arts, which merely shifts spending to the future.

In total, the operating budget would reach $81 billion, or more than $25,000 per family of four ($6,300 per person).

5. Need remains for transformative structural reforms: No amount of new taxes, one-time revenue tricks or borrowing can permanently fix the commonwealth's fiscal woes. Pennsylvania is suffering from a deep-seated structural spending problem.

For starters, almost half of the Pennsylvania state operating budget (49 percent) is spent on Human Services, with the bulk of that on Medical Assistance and Long Term Living (i.e., Medicaid programs). Human Services costs are expected to increase by more than 5 percent every year, while state revenue growth is projected at around 2 percent per year. Yet Medicaid patients experience inferior care, such a long waiting times and difficulty finding a provider.

Structural reforms are essential to solving Pennsylvania's budget crisis once and for all. These structural reforms include limiting state spending to the growth of inflation and population through the Taxpayer Protection Act, fully privatizing the state liquor system, and reforming pensions to create an affordable system for taxpayers that gives workers more flexibility.

 

Governor Wolf's 2017-18 budget proposal is a welcome departure from past massive tax hike attempts. However, it doesn't do far enough to stem the rising costs of state government, which continues to burden families across the state.

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posted by Nathan Benefield | 01:25 PM

Pennsylvania Deficit Watch: February 2017

Revenue collections underperformed again in January, according to the Department of Revenue. This is the third straight month—and the sixth of the last seven—in which revenue collections fell short of official estimates.

The state collected $2.6 billion last month—$49.8 million or 1.8 percent less than anticipated. To date, revenue collections are approximately $416.8 million below estimates.

 

The $1.3 billion revenue package enacted in July has not generated enough revenue to pay for the state’s $1.6 billion spending increase. The package included $650 million in tax hikes, which not only failed to balance the state budget but also destroyed jobs throughout the commonwealth.

The latest revenue estimates from the Independent Fiscal Office (IFO) suggest the state will end the year with a deficit exceeding $700 million absent any significant policy changes or revisions to the state’s balance sheet.

The IFO warned about optimistic revenue projections back in August. At the time, the IFO identified major problems with the legislature’s assumptions and adjusted projections to account for them:

  • The legislature moved the Commonwealth Financing Authority (CFA) out of the General Fund Budget and created a new fund via the fiscal code. Legislative leaders have expressed an interest in passing gambling expansion to generate $100 million to cover CFA spending, but the proposal is still in the early stages of the legislative process. The IFO deducted $95 million from sales tax revenue to pay for CFA’s expenses.
  • The legislature predicted Act 39 (wine modernization) would raise $149 million in 2016-17. The IFO projected this number would be just $73 million—a $76 million difference.
  • Official projections over-estimated tobacco tax revenue (including taxes on cigarettes, e-cigarettes, loose, and roll-your-own tobacco). The IFO's estimate was $38 million less than official projections.
  • Official estimates assumed $75 million from the Philadelphia casino. The IFO does not expect the casino will generate revenue this fiscal year.

Though some of the above projections have changed, its clear Pennsylvania's current state budget was unbalanced from the start.

Acknowledging the seriousness of the commonwealth's financial position, legislative leaders and Gov. Wolf have committed to restructuring government. To achieve this goal, policymakers have a number of options, including a host of ideas found in our policy brief, Embracing Innovation in State Government. Our recommendations include, but are not limited to, the following:

With five months left in the fiscal year, revenue collections aren’t likely to improve much, if at all. A plan to reduce spending is needed soon to ensure spending matches revenues come June. The last thing Pennsylvanians need is another tax hike.

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posted by Bob Dick | 10:44 PM

Op-Ed: Opportunity Knocks for State Budget Innovation

“Nothing is more expensive than a missed opportunity.” Pennsylvanians should heed these words from author H. Jackson Brown, Jr. in the upcoming budget season. Governor Wolf and key legislative leaders repeatedly called this year’s state budget an “opportunity”—and rightly so.

The governor’s approach this year is vastly different from his 2015 plan, which called for the largest tax increase in state history and triggered the longest budget impasse in modern memory. It’s also a world away from Wolf’s retroactive income tax increase proposal last year.

Instead, Wolf recently promised, “I'm not going to call for an increase in the personal-income tax or sales tax. We have to make sure the Commonwealth lives within its means." This is a welcome change of heart.

In a matter of months, the policy discussion has flipped from demanding more from taxpayers to cost-cutting and restructuring state government. But closing this year’s estimated $524 million budget shortfall and tackling next year’s estimated $1.7 billion deficit while protecting Pennsylvanians from tax increases is no small task. It will require nothing short of reimagining how government operates.

Luckily, many immediate and long-term solutions exist. If Wolf and lawmakers want reform opportunities with cross-party appeal, here are three not to miss.

First, end unfair taxpayer subsidies to big business.

This year, state government will spend more than $800 million to bolster billion-dollar corporations like Amazon and Netflix, subsidize sports stadiums, and prop up the horse-racing industry.

Pennsylvania leads the nation in these corporate welfare handouts but has little to show for it. Despite more than $6 billion funneled to politically favored businesses since 2007, Pennsylvania trails the nation economically: Between 2005 and 2015, the state ranked just 35th in job growth and 31th in personal income growth.

Meanwhile, the ten states spending the least on corporate welfare from 2007-2015 enjoyed greater job growth than the top ten spenders.

House Majority Leader Dave Reed (R—Indiana) recently expressed interest in reducing corporate welfare spending—a great first step toward alleviating budgetary pressure.

Next, fix Pennsylvanians flawed sentencing system.

Since 2005, corrections spending has spiked 55 percent and is now the third-largest General Fund expense. Despite a welcome drop in the state’s prison population last year, Pennsylvania’s incarceration rate remains the highest among Northeast states. The culprit? Not an abnormally high crime rate but flawed sentencing, according to the Council on State Governments.

This year, inmates will cost the state $48,200 each on average, nearly equaling Pennsylvania’s $53,599 median household income. Parolees, though, cost about 90 percent less—averaging just $4,200. Because probation and parole violators account for nearly one-third of the inmate population, there is a huge opportunity for cost savings. Swifter and more predictable sanctions can prevent parolees from becoming resource-draining inmates, saving tax dollars without compromising public safety.

This is just one of several corrections reforms ripe for implementation as a follow-up to 2012’s universally acclaimed Justice Reinvestment Act.

Finally, Wolf and lawmakers must rein in the shadow state budget.

The General Fund budget, which monopolizes headlines, is just 40 percent of state government’s true $78 billion cost. Hidden in the remaining 60 percent are more than 150 “special funds” whose existence and cost is largely unknown.

These funds have been used, for example, to bankroll pool feasibility studies and golf course acquisitions, subsidize well-paid farmers on the backs of the poor, and funnel additional tax dollars to initiatives already funded through other government means. Worse, these funds are often on autopilot—growing each year without review from elected officials.

Consequently, the commonwealth’s total operating budget has climbed 184 percent since 1970—an inflation-adjusted $3,975 more per person. Redirecting or reducing duplicate and questionable funds will stop the shadow budget from diverting more and more tax dollars each year.

This budget season, Wolf and lawmakers will be tempted to rely on targeted tax increases—like last year’s e-cigarette and digital download taxes—to balance the budget. Indeed, Wolf has already proposed a new natural gas severance tax. If they choose higher taxes over reform, they will once again miss a critical opportunity to change the state’s trajectory. And nothing could be more expensive for Pennsylvanians.

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posted by Elizabeth Stelle | 01:36 PM

Film Tax Credit Draws Bad Reviews

Be it Tom Cruise in Jack Reacher, Denzel Washington in Fences, or Gerard Butler in Law Abiding Citizen—everyone loves to see their favorite movie stars come to the neighborhood. This, combined with the promise of a local economic boost, provides plenty of incentive for Pennsylvania’s film tax credit program—which offers a 25 percent rebate on most film-related expenses. However, recent reporting shows the $60 million tax credit is inundated with waste, lacking oversight, and straying from legislative intent.

Reporter Eric Holmberg of Public Source obtained records for 339 film and television projects approved to receive 95 percent of tax credits allocated since 2007. Here are the major findings:

Pennsylvania productions received more than $116 million in tax credits. That’s more than one out of every five tax credit dollars, missing the program’s true intent to attract out-of-state productions.

Few productions use the tax credit; productions sell 99 percent of all film tax credits to companies that have nothing to do with film or TV. Essentially, the film tax credit is a backdoor tax break for some of the largest corporations and utilities operating in Pennsylvania.

Film tax credit dollars are frittered away in those transactions. The program wasted more than $27 million of taxpayer dollars by allowing credits to be sold to non-film companies, such as Apple. Secondary tax brokers also received thousands in fees from each transaction because of this arrangement.

Given Pennsylvania’s budget shortfall, it’s becoming nearly impossible to justify another year of this corporate welfare program. 

Fundamentally, the film tax credit is bad economics. The jobs it creates are relatively few and never permanent. It has largely failed to seed a permanent, successful native industry in Pennsylvania to work with outside studios.

Time and again, the film tax credit provides a net loss in economic activity. In Michigan, a review of the program’s performance in the 2010-2011 fiscal year found a net cost of $111.5 million. An earlier study from South Carolina found it generated only 19 cents in tax revenue for every dollar spent, which, according to the Tax Foundation, is close to the average return.

The lack of accountability is another issue plaguing the program. In 2014, an Auditor General’s report on the Pennsylvania agency tasked with overseeing the credits (DCED) concluded that "DCED did not provide true accountability and transparency." Attempts at clarification from DCED concerning its metrics for conducting and evaluating the program provided no answers at all, let alone “evidence that metrics even exist.”

Pennsylvania already leads the nation in corporate welfare. This distinction is unacceptable in light of the state’s persistent and immense budget challenges. It's time to reevaluate these programs and make better use of taxpayers’ funds. The film tax credit is a great place to start.

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posted by James Paul, Kris Malysz | 00:55 PM

Budget Solution of the Week: Reduce Special Interest Spending

In our budget solutions blog series, we’ve covered the benefits of a government efficiency review, the need to modernize the commonwealth’s corrections system, and the importance of school choice. This week, we shift attention to special interest spending.

In Embracing Innovation in State Government, we recommend reducing spending on corporate welfare and in funds outside the General Fund Budget. Combined, these programs cost more than $2.6 billion.

If lawmakers reduced this spending by half—through program elimination or structural reforms—it would save approximately $1.3 billion. This savings could then be used to close a projected $1.7 billion shortfall in the 2017-18 budget.

All the corporate welfare programs and funds identified above deserve a thorough review, but a few stand out either for their extravagance or futility. Pennsylvania’s Film Tax Credit falls into the latter category. The Independent Fiscal Office analyzed the tax credit in 2013 and found most of the production-related wages went to nonresidents. And the return on investment was just 14 cents for every dollar in tax credits.

The credit is little more than an ineffective handout to the wealthy. According to a recent investigation by PublicSource, film production companies have sold off 99 percent of all credits redeemed. Effectively, the credit transfers wealth from taxpayers to corporations like Apple, Comcast, and Exelon.

Pennsylvania First is another corporate welfare program with a record of failure. In 2013, the Department of Community and Economic Development gave a Lehigh Valley Kraft plant almost $340,000 in subsidies to expand its operations. The plant eventually closed its doors late last year. After the announcement, the state vowed to recoup the subsidies—a move that could have been avoided had the state not taken on the role of an economic development agency.

In addition to corporate welfare, Harrisburg funds a collection of programs best described as nonessential. The most prominent example is the Keystone Recreation, Park, and Conservation Fund. Its past projects include pool feasibility studies, golf course acquisitions, and sports complex rehabilitations. Funding these types of projects while the state taxes businesses out of existence is indefensible.

For reformers looking to redesign government, eliminating ineffective and nonessential government programs would be a great place to start. Reducing special interest spending would shrink the budget deficit in the short-term and allow time for larger, long-term reforms to take effect.

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posted by Bob Dick | 10:43 AM

Budget Solution of the Week: School Choice

Earlier this month, House Majority Leader Dave Reed challenged his colleagues to change the way Harrisburg operates: “Now is the time to reimagine and redesign government, our state and our future.” A change in Harrisburg’s culture is surely needed. Decades of high taxes, wasteful spending, and poorly designed policies have sunk the commonwealth’s finances and stymied economic progress.

What's most devastating is when poor policies impact the future of our children—which is why reimagining our education system is so critical. Too often, Pennsylvania’s education model prioritizes systems over students. School officials—rather than parents—are given precedent to make consequential decisions affecting the education of more than 1.7 million students. This top-down management style has produced subpar outcomes in too many schools, forcing parents to seek alternatives to traditional public schools.

Unfortunately, not every family is lucky enough to send their son or daughter to a high-performing school. The education establishment will place the blame on funding shortages, but as my colleague James has noted, education spending is at its highest level ever. School districts spend, on average, $15,800 per student. This figure could always grow higher, but inflating school budgets will only add to Pennsylvania’s high tax burden, without guaranteeing any improvement in academic achievement.

The solution to the state’s educational woes doesn’t require more political control. It requires more parental control. To a limited extent, Pennsylvania encourages parental control with programs like the Educational Improvement Tax Credit (EITC) and Opportunity Scholarship Tax Credit (OSTC). But more needs to be done.

Every student deserves a quality education. And every family deserves to determine what a quality education looks like. Expanding school choice programs can help make these goals a reality. Putting parents firmly in control of educational decisions has led to improved student outcomes and savings for taxpayers. The latter is especially relevant in the context of the state’s fiscal outlook.

Pennsylvania is staring down a $600 million shortfall for the year, and will need to deal with a projected $1.7 billion projected shortfall in 2017-18. To address these challenges, CF released Embracing Innovation in State Government, detailing how policymakers can reduce state government’s cost to avoid another round of tax increases.

School choice is one of the cost-saving measures included in the report. The costs of the EITC and OSTC represent just a fraction of student funding in a traditional public school. For example, in 2013-2014, the average EITC scholarship was $1,587 per student, whereas funding in a traditional public school exceeded $15,000 per student. Moving students to the less expensive, more effective alternative nets taxpayers significant savings.

Taking a hard look at how Pennsylvania funds education will play a critical role in controlling spending and truly reimaging government. 

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posted by Bob Dick | 10:13 AM

Budget Solution of the Week: Corrections Reform

The Department of Corrections (DOC) recently announced its intentions to close two state prisons and reduce capacity at community corrections facilities (halfway houses). These decisions will cut state incarceration costs—an amount now north of $2 billion—without jeopardizing public safety.

That's a big win for taxpayers and an important move towards redesigning state government to avoid new taxes.

Unsurprisingly, the Pennsylvania State Corrections Officers Association is highlighting the potential for job losses and overcrowding. But these concerns are weak justifications for saddling taxpayers with the costs of two unnecessary prison facilities

Why? The DOC has already promised to move all displaced employees to another position within the department. As for overcrowding, the changes will bring “emergency capacity” up to 92 percent, which isn’t ideal, according to Corrections Secretary John Wetzel, but it also doesn’t constitute a crisis.

Lawmakers can ensure the prison population continues to responsibly decline by adopting the reforms laid out in our policy brief, Embracing Innovation in State Government:

  • Ensure individuals are released when they’re eligible for parole. Too often prisoners are kept beyond their minimum sentence without good reason. This additional time in prison costs taxpayers an estimated $69 million a year.
  • Base sentences on cost-effective recidivism-reducing sanctions. Judges don’t have access to the pertinent information needed to impose sentences most likely to reduce recidivism. If lawmakers give judges the tools needed to hand down effective sentences, they will be in a better position to move less dangerous offenders out of prison.
  • Avoid lengthy prison terms for minor probation and parole violations. According to the Independent Fiscal Office, housing an inmate costs $44,000 more than supervising the average parolee. Ensuring “swift and predictable” sanctions for probation and parole violators can keep people out of prison and drive down costs.
  • Properly utilize community correction facilities. DOC is already pursuing this course of action. According to Sec. Wetzel, community correction facilities have not been “yielding satisfactory outcomes.” This is why DOC is cutting facility capacity. Under the department’s plan, people who would normally be sent to these facilities would be supervised by a parole agent at home.

These reforms stem from the Justice Reinvestment Initiative Working Group, which seeks to build on the landmark reforms passed in 2012. These reforms helped reduce the inmate population by 850 in 2015the largest one-year decline in 40 years.

Reducing overtime pay and merging the Pennsylvania Board of Probation and Parole with the Department of Corrections are two additional ideas not included in our report but worth pursuing. DOC is in the process of addressing the former by filling vacant positions, conducting a staffing analysis to determine the optimal number of employees, and of course closing down two prison facilities.

Senator Stewart Greenleaf introduced the latter reform last session. It passed the Senate on a bipartisan basis, but it unfortunately died in the House. According to the Wolf Administration’s conservative estimate, the merger would save $10 million in the first year of implementation.

By adopting the reforms above, lawmakers can adequately keep Pennsylvanians safe, protect their wallets, and improve the state's unacceptable financial position.

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posted by Bob Dick | 09:38 AM

The Inquirer's Problematic Budget Prescriptions

A Philadelphia Inquirer editorial urges optimism about the forthcoming state budget debate. It’s certainly well-warranted. Gov. Wolf and legislative leaders have repeatedly expressed interest in redesigning state government to avoid broad-based tax increases. This is a welcomed departure from past proposals to enact large tax hikes on working Pennsylvanians.

However, the governor still won’t completely rule out tax hikes. He’s likely to propose an energy tax to the delight of the Inquirer’s editorial board, which supports the tax as a way to make natural gas companies pay their “fair share.” This political slogan ignores all of the taxes natural gas companies already pay, including an impact fee, which effectively operates as a 6.9% severance tax.

The board also criticizes the tax relief extended to businesses, asserting this policy failed to stimulate job growth. Sure, businesses did see some relief through the elimination of the capital stock and franchise tax, but Pennsylvania’s overall tax burden ranks 15th highest in the nation. Weak job growth should be seen in light of the commonwealth’s broader tax and regulatory climate. The implication here is that a lower tax burden doesn't grow the economy. The evidence suggests just the opposite.

The editorial's assault on the state's tax structure continues:

Instead, the [tax] cuts lowered the public's quality of life by reducing revenue needed to educate children, fix roads, and provide other services. Business tax cuts account for about half the state's $600 million deficit.

These two sentences are plagued with problems. First, as CF has demonstrated in the past, more education spending does not necessarily lead to improved academic achievement. As a matter of fact, policymakers could improve the educational system while spending less on education if they embraced school choice.

Secondly, the state already has a dedicated source of funding to fix roads. That’s why the state’s gas tax jumped 8 cents to kick off the new year. If more money is needed for transportation, why not embrace public-private partnerships or repeal the prevailing wage mandate?

And third, placing blame for the deficit on tax cuts implies state government hasn’t taken enough out of the pockets of taxpayers. This flatly ignores the state’s overspending problem.

State spending has risen 46 of the last 47 years—climbing by $4,010 per person over that time. Had the state kept spending increases in line with inflation and population since 2000, it would have produced a budget surplus during this fiscal year. With spending increases possible each year, is it really reasonable to say Pennsylvania has a revenue problem?

Finally, the editorial suggests raising the minimum wage to improve residents’ quality of life and make Pennsylvania a destination state. But mandated wage hikes haven’t stop residents from fleeing other states. In fact, of the ten states that saw the biggest declines in state-to-state migration, nine had minimum wages exceeding the federal level. The only exception was Pennsylvania.

In contrast, of the ten states experiencing the largest increases in state-to-state migration, only half mandated wages above the federal minimum. The editorial board correctly identifies the importance of higher wages for Pennsylvania, but their policy prescription will ultimately undermine employment opportunities for the people who need it most.

Thankfully, Pennsylvania's dismal economic rankings are reversible. But turning the tide requires rejecting attempts to solve every problem with more government spending. What's the alternative? Robust economic growth driven by entrepreneurs and consumers pursuing their happiness.

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posted by Bob Dick | 04:01 PM

Budget Solution of the Week: Government Efficiency Review

With the budget deficit casting a shadow over the current fiscal year, and deficits projected for at least the next five years, policymakers are acting to stem the tide of red ink.

The Wolf administration has adopted a hiring freeze—an idea CF proposed back in October. And just this week, the administration announced the consolidation of the state’s technology and human resource functions—a move aimed at achieving savings for taxpayers.

The governor has also ruled out broad-based tax increases this upcoming fiscal year, which were the central components of his two prior budget proposals. Instead, he—and legislative leaders—are putting greater emphasis on reducing the costs of a bloated state government. Taxpayers should be optimistic about these developments, which all point to a culture shift in Harrisburg. Instead of seeing large tax increases as a viable solution, the focus has shifted to the spending side of the ledger.

Beyond the promising cost-savings steps taken thus far, more must be done. State government needs a complete overhaul. In our latest policy brief, Embracing Innovation in State Government, CF outlines solutions to reduce government spending and improve the institutions and programs now failing too many Pennsylvanians.

Over the next month, we will highlight at least one budget solution per week. First up, a government efficiency review.

This review would identify ways government can make the best use of each tax dollar. The State of Louisiana conducted such a review in 2013 with the help of Alvarez & Marsal (A&M)—a business management firm specializing in performance improvement. The firm made 72 recommendations, which were estimated to save or raise $2.7 billion over five years.

According to state's final report on the recommendations, “efficiency reviews have generally identified savings of five to six percent of the general fund budget” in other states. For Pennsylvania, this would mean $1.5-$1.9 billion in savings. Such a significant sum would go a long way toward helping policymakers reduce government spending.

An efficiency review is just one of many ideas that can lead to savings for taxpayers. As we move closer to the governor’s budget address, we’ll be exploring other ideas to balance the budget without taking more out of the pockets of working people. Be sure to check back next week for the 2nd blog in our series.

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posted by Bob Dick | 09:40 AM

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