Conservative Think Tank Confirms that PA Needs a Budget that Boosts State’s Fiscal Condition

Stephen Herzenberg |

One sticking point in Pennsylvania’s budget battle is whether the next state budget needs to improve the state’s fiscal condition. Recent budgets reliant on one-time revenues contributed to the repeated downgrading of Pennsylvania’s debt. The Wolf administration estimates that the Republican budget proposal vetoed by the Governor would increase the state structural deficit to over $3 billion by 2016-17.

Earlier this month, the Mercatus Center, a conservative think tank at George Mason University funded by the Koch Brothers, put forward a ranking of state fiscal health that buttresses Gov. Wolf’s position on the need to address the Commonwealth’s fragile fiscal position.

The report, released July 7, ranks Pennsylvania 41st for its fiscal health based on its fiscal solvency in five categories.

Pennsylvania does worst, ranking 45th, for cash solvency, which measures whether a state has enough cash to cover short-term bills. The category in which Pennsylvania does second worst, ranking 39th, is budget solvency — whether the state has enough money to cover its fiscal-year spending from current revenue. These two low rankings show that cutting spending without raising new revenue over the past several budgets has left Pennsylvania in poor fiscal health. We have not cut our way to prosperity (as we showed here).

Of the five Mercatus categories, Pennsylvania does best, ranking 17th, because its taxes, revenue and spending are lower than two thirds of other states (and the national average) compared to state personal income. (This measure is called “service-level solvency.” Don’t ask why.) This means, according to Mercatus, that Pennsylvania is in a relatively “good position to increase taxes without hurting the economy.”

The Commonwealth ranks squarely in the middle, 26th, for trust fund solvency, the only one of the five measures that mentions the state’s unfunded pension liabilities.

Based on the Mercatus report, another “more of the same” budget, held together with scotch tape and bobby pins, and without an increase in recurring revenues, is a recipe for sinking below even 41st for fiscal health.

By contrast, the recurring revenues in Gov. Wolf’s budget, in addition to providing resources to invest in education, jobs, and communities, would begin to improve the state’s fiscal health.