The PA House GOP Budget Plan to Raid Special Funds Explained

Marc Stier |

The Pennsylvania House Republican plan to balance the budget by, among other things, raiding other state funds is something of a moving target. A new amendment Representative Moul (A03286) to House Bill 593 is the legislative vehicle in which elements of the plan will move to the floor of the House as early as today.

We want to take a step back and put the whole plan to use supposedly “surplus” money that is “sitting around doing nothing” into perspective. This plan rests on a fundamental confusion between bank balances and budgets, one that has played a role in the life of most married couples once or twice. And perhaps the easiest way to understand it is to consider a scenario not unfamiliar to most of us.

One partner — I’m going to make him the husband in this version but it doesn’t have to be — picks up a flyer from a big box store Buy and says, “Honey, look! That 70 inch 4k ultra-high definition TV we’ve always wanted is on a 20% off sale! We can get for only $3,000.”

The wife says, “You mean the TV you always wanted is on sale. But it’s still $3,000 and we can’t afford it.”

Husband: “Oh, you know you want to watch your romantic comedies on it.”

Wife: “You mean your football games.”

Husband: “Whatever…we can get it now.”

Wife: “But we still can’t afford it.”

Husband leaves room and returns with his computer: “I’m logging onto our bank account now. I’m sure we have enough.”

A minute later, he continued, “We’ve got $5,400 in our bank account. I told you we can afford it. The money is just sitting there.”

Wife: “But we can’t use more than half of our savings when that money is budgeted for other things”

Husband: “For what?”

Wife: “Well, we need money for plane tickets to go to my sister’s wedding. That’s $900 or $1,400 when you include the hotel room. The dentist sent us a proposal for Little Johnny’s braces and they are going to cost $2,500. And we budgeted $1,500 to fix the back steps before someone hurts themselves. That’s $5,400 right there. It doesn’t leave enough to spend more on anything else let alone $3,000 on a TV.”

The husband retreats in silence.

The husband in this little drama is confusing the family bank balance with the family budget. The bank balance is how much money the family has saved. The budget reconciles how much they plan to spend over the course of the year with how much income and savings they have. And in my little scenario, the family’s bank balance is already committed in their budget for certain purposes. Money that the husband thinks is just lying around doing nothing (except earning interest) is already committed.

The 17 Republicans who put forward their budget plan yesterday are making exactly the same mistake. It appears that they came up with their plan by working almost entirely with bank balances, ignoring the detailed spending plans for each of the special funds they seek to raid. They used the new Treasury portal to find large sums of money, “just sitting around doing nothing” and thought to themselves, “voila we can do what we always wanted and balance the budget without raising taxes or cutting any government programs.”

But, leaving aside the problem that this is only a one-year fix and that next year there won’t be any more funds to raid to pay for what the ongoing costs of the level of government House Republicans voted for this year, Representative Moul and his allies have it fundamentally wrong. The money saved in the special fund accounts is committed to the purposes for which the special funds were created. Raiding those funds means that the government will do less than planned in all the areas in which the special funds operate.

  • There are $507.5 million in cuts to transportation programs, from the Public Transportation Fund, the Multi-modal Transportation Fund and the PA Infrastructure bank.
  • There are $379 million in cuts to environmental and agricultural programs, even after the reduction in the cut to the Keystone Recreation, Park and Conservation Fund. These include raids on the Hazardous Sites Cleanup Fund, the Agricultural Conservation Easement Purchase Fund, the Industrial Sites Cleanup Fund. The latest version of the Moul plan ups the ante in this area by increasing the raid on the Recycling Fund from $75 million to $104 million. (We are assuming that the reduction in the cut to the Keystone Recreation, Park and Conservation Fund from $100 million to $100,000 is a typographical error. If not then the total in this category is $279 million.)
  • There are $122.7 million in cuts to business and economic development programs, with raids on the Machinery and Equipment Loan Fund, the Small Business First Fund, the CFA New PA Venture Capital Fund, the Ben Franklin Tech Development Fund (which is increased from $12 million to $75 million), and the municipalities Financial Recovery Revolving Aid Fund.
  • There are $94 million in cuts to public safety programs with raids on the 911 Fund, the Volunteer Companies Loan Fund, the Manufacturing Fund, and the Justice Reinvestment Fund.
  • There are $31.2 million in cuts to gaming-related programs including the Racing Fund and the Compulsive and Problem Gambling Fund.
  • There is also, in the Moul Amendment, a new proposal to cut health care programs by increasing the raid on the Tobacco Settlement Fund from $14.8 million to $120 million. There are no provisions to replace these funds, which pay all of the costs for tobacco use prevention and cessation, CURE health research, and hospital uncompensated care payments and part of the costs for the Medicaid entitlement programs that provide nursing facility care, home- and community-based services for seniors, and medical assistance for workers with disabilities. Those Medicaid programs earn federal matching funds, which would be lost if the tobacco settlement funds are not replaced.

No matter what Representative Moul and his allies assert, these raids on the special funds are or will lead to real reductions in government programs — programs that both Democrats and Republicans have supported. Perhaps he and others don’t support them any more. If so, they should say so and hold a public debate, in committee and on the floor of the House, about the value of these programs.

But it is pretty shocking that a group of representatives who say they want to bring a so-called shadow budget into the light are making these stealth cuts to vital government programs while denying that this is what they are doing.