The miserly budget projection is at odds with the Corbett Administration’s own pledge to give Harrisburg up to $15 million a year in new parking and fire protection funds, as proposed in the bailout plan
A budget document circulated by Gov. Tom Corbett’s Office of Budget to state government departments on August 30 paints a dismal portrait of the commonwealth’s finances going into next year’s election cycle, and casts doubt on the state’s long-term ability to bail out Harrisburg.
The 2014-2015 Program Policy Guidelines is meant “to provide direction” for state departments preparing budget requests for Corbett’s 2014-2015 Executive Budget, the document states.
The document instructs department heads that, “Executive Budget planning for 2014-15 is to be predicated on the fact that the Pennsylvania economy is growing very modestly and a number of factors are restraining its growth.
“The commonwealth budget, which is highly dependent on a growing economy, faces additional challenges, such as increased pension obligations, wage and benefit increases, debt service and medical and entitlement costs. These mandated cost drivers will consume virtually all revenue growth.
“Therefore, agencies should not assume funding increases for the 2014-15 fiscal year and should focus on efforts that contribute to achieving structural balance as well as on evaluating current programs and recommending changes that will improve program management and operations, reduce costs and optimize direct services.”
How bad is the budget problem for Corbett? The document states:
“To illustrate the depth of the financial issue the commonwealth faces, agencies should consider the following and begin to develop and implement strategies to live within the same amount of funding in 2014-15 as available in 2013-14:
• The commonwealth is spending more than $500 million more than it is taking in this year;
• The commonwealth’s Rainy Day Fund balance is $61,000 when rating agencies suggest a minimum of about $1.5 billion and a process for replenishing it when it is drawn upon;
• For every dollar of salary costs, the commonwealth will spend an additional 72 cents for employee benefits for the average employee. The ratio of salary to benefits will be nearly $1 to $1 for jobs at the lower end of the commonwealth’s pay scale; and
• Rating agencies have already begun to downgrade the commonwealth’s bond rating, which increases borrowing costs and which has already had an impact on agencies’ workers’ compensation rates.”
The document states, “The 2014-15 Executive Budget that is presented to the General Assembly must be fiscally responsible and focused on supporting the core functions of state government and growing Pennsylvania’s economy.”
To meet these goals, state department heads are instructed by the document:
“Agencies should submit budget requests that adhere to the following guidelines:
• Request administrative appropriations at levels that do not exceed 2013-14 Enacted Budget amounts. When requesting administrative appropriations that do not exceed enacted levels, agencies must absorb all increases in salary and benefit costs within level funding.
• Agencies must eliminate positions that cannot be accommodated within the level-funding guidance. If necessary, agencies should actively begin to manage complement this fiscal year to mitigate the need for employee layoffs.
• Request no operating and fixed asset spending increases unless other efficiencies, consolidations or personnel cost reductions are sufficient to offset any increases in a realistic and sustainable manner.
• Request no program revisions requiring new or increased funding unless those program revisions can be offset by savings that are achievable in 2014- 15 and sustainable in future years. Overall funding requested by the agency cannot exceed funding levels in the current year.
• Reexamine current responsibilities and functions and propose opportunities for consolidation of intra- and inter-agency administrative functions. Agencies should submit administrative consolidation proposals in their budget requests consistent with the guidance provided in the Cost Cutting, Cost Avoidance and Consolidation of Administrative Functions section of this document.
• Request no additional state funding to replace lost or reduced federal funding.”
The miserly budget projection is at odds with the Corbett Administration’s own pledge to give Harrisburg up to $15 million a year in new parking and fire protection funds, as proposed in the bailout plan that was unveiled on August 26.
The Harrisburg bailout fund’s proposed budget obviously exceeds the “2013-2014 Enacted Budget” demanding by the budget document. The Harrisburg bailout, overseen nominally by the Department of Community and Economic Development, is obviously a special exception made by Corbett’s office.
There are other hidden and highly political messages in the budget document.
While the commonwealth faces a $500 million shortfall with a rainy day fund of only $61,000, the document makes clear Corbett has no intention of approaching the problem in a balanced manner, such as by raising individual or sales taxes.
And increased corporate taxes? Corbett tells department heads:
“Increasing tax rates when Pennsylvania already has one of the highest corporate tax rates in the world would have a negative impact on job creation and would actually result in less tax revenue,” the document states.
Less clear is the extent to which corporate giveaways, such as those to oil companies exploiting Marcellus Shale reserves, contribute to the growing budget problem.
Corbett’s solution? The document reads:
“Programs with less than acceptable performance results should be considered for elimination. Programs that do not directly contribute to job creation or other core functions of government or critical services should be considered for elimination. Programs where funding has been reduced to a level where they have minimal impact should be considered for elimination. Programs previously proposed for elimination in the governor’s budget but restored in the enacted budget should not be included in agency budget requests.”
How many hundreds of millions of dollars in corporate taxes has Corbett cut while in office?