2014 Pennsylvania State Budget

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Governor Corbett’s proposed budget of $29.4 billion in General Fund spending (a 3.3% increase) and $71.8 billion in spending from all funds represents Pennsylvania’s highest spending levels ever—exceeding years when federal stimulus dollars were used to balance the budget.

Spending Outpaces Inflation

  • Pennsylvania’s fiscal challenges persist due to the state’s inability to rein in spending. From 1970 to 2015, state government increased spending from $4 billion to a proposed $71.8 billion, an inflation-adjusted increase of $12,836 per family of four (or $3,209 more per resident).
  • If state government had limited its total spending growth to inflation and population since 2000, taxpayers would be saving nearly $15.3 billion this year, or $4,767 per family of four ($1,194 per person).

Total Operating Budget 2015

Pennsylvania State Budget Basics

While the General Fund Budget is the primary focus of both legislative discussions and public attention, it represents only about 40% of the commonwealth’s total operating budget.

  • Total Operating Budget (estimated) – $71.8 billion
    • General Fund Budget (proposed) – $29.4 billion
    • Federal Funds (estimated) – $24.2 billion
    • Special Funds (estimated) – $4.8 billion
    • Other Funds (estimated) – $13.3 billion
  • General Fund spending has increased by approximately $8.7 billion (42%) since FY 2002-03, not including spending directed to other funds.
    • The four largest departments (Welfare, Education, Corrections, and Treasury) represent about 86% of all General Fund spending.
    • Since FY 2002-2003, the budgets of these four departments have increased by more than $10 billion (60%) and are projected to increase even further, threatening Pennsylvania’s fiscal health

GF Spending 2015

Rising Debt and Tax Burden

  • From 2002 to 2013, Pennsylvania state debt—including debt held by state agencies—more than doubled, from $23.7 billion to $50.4 billion.
    • Today, Pennsylvanians owe $128.6 billion in combined state and local government debt, or a little more than $10,000 for every man, woman, and child.

Pennsylvania State & Local Government Debt

Debtor

Debt Outstanding

Per Person

Total State

$50,429,717,000

$3,948

   State

$11,188,917,000

$876

   State Agencies & Authorities

$39,240,800,000

$3,072

Total Local

$78,216,434,000

$6,123

   School Districts

$27,278,259,814

$2,315

   County/Municipal/Twp/Other

$50,938,174,186

$3,988

Total 

$128,646,151,000

$10,071

Sources: Governor’s Executive Budget (http://www.budget.state.pa.us) December 2013 data; PA Dept of Education (http://www.pde.state.pa.us) June 2012 data; U.S. Census Bureau (http://www.census.gov/govs/www/estimate.html) 2013 data

  • Pennsylvania has the 10th highest state and local tax burden in the nation, up from 24th in 1991, according to the Tax Foundation.

Pennsylvania is Overspending

  • For the seventh consecutive year, Pennsylvania will spend more from the General Fund than the state will collect in taxes.
  • Federal stimulus funds, transfers from the “rainy day fund,” and other one-time revenue sources have allowed lawmakers to spend beyond the state’s means for years.
  • Pennsylvania will begin next fiscal year with an estimated $216 million remaining in General Fund accounts and end with $20 million (based on the proposed budget)—spending $189 million more than state revenue.
  • The budget also assumes reduced pension payments (which require legislation) and federal approval of “Healthy PA” to move some Medicaid recipients off of state funding and onto federally-funded Healthy PA.

Education

  • Governor Corbett’s budget proposal calls for $10.4 billion in funding for public schools and support services, the highest level in state history.
  • Governor Corbett’s proposal includes nearly $400 million in new spending, including a $240 million student-based supplement as part of the Ready to Learn block grant.
  • Despite the claims of billions in cuts from the education budget, the $10.4 billion represents an increase of 3.1% over 2010-11 spending (which included federal stimulus funds) and 9.9% since 2007-08 (the last budget balanced prior to federal stimulus funding funds) and 9.9% since 2007-08 (the last budget balanced prior to federal stimulus funding).

Pensions

  • Pennsylvania’s unfunded pension liability—the amount the state should have in its pension funds earning interest to be able to make payments for the benefits retirees and current workers have earned—now exceeds $50 billion.
  • Because of past policy decisions, this unfunded liability will continue to grow, even as pension contributions rise.
  • Taxpayer costs for pensions are scheduled to skyrocket over the next few years. In the state General Fund alone, pension contributions are projected to increase nearly 143% by 2018-2019, from $1.4 billion to almost $3.4 billion. School districts will face similar increases in their pension contributions.
  • The total increase, between the state and school districts, amounts to almost $900 per household.

State Pension Contributions

Overspending Hampering Economic Growth

  • From 1991 to 2013, Pennsylvania has ranked a dismal 44th in job growth, 38th in personal income growth, and 46th in population growth. This contrasts sharply with the robust economic growth in low-tax, low-spending states. 

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To find more information on Pennsylvania’s State Budget, visit CommonwealthFoundation.org/Budget