It’s getting to be late June in Harrisburg, which means a budget is about to be passed (let’s act like the Pennsylvania Constitution’s dictum that it be in place by July 1 is upheld again this year). I think we often get myopic about budgets — the process in the Capitol is so intense that one forgets the big picture — but this week’s G8 Summit in Northern Ireland has highlighted the bigger issues in our budget.
President Obama is being hailed in Europe as an economic genius for keeping the American economy out of the doldrums that Europe is in — with unemployment EU-wide now around 11 percent. The policy answer is that the Obama Administration avoided the “austerity” policies that have helped acerbate the recession in Europe, and the American people are reaping the (sparse) benefits while Europe continues (relative) suffering.
But here in Pennsylvania, Governor Corbett seems to have ignored the message seen elsewhere, or the (commonplace) lesson of the Great Depression, by continuing the Commonwealth in austerity mode. His first two budgets have done more damage than good (that in a moment) and it seems likely that the General Assembly will pass another budget based on his February proposal that continues the trend.
In fairness, Governor Corbett was elected on a different platform than President Obama, and he has held true to it. He ran as a conservative money manager and someone who wouldn’t raise taxes (he signed the famed Norquist pledge). His 2011 budget proposal used severe cuts to balance the budget in what no one would say weren’t tough times, and he’s followed that with two budgets that have been sub-inflationary and “more of the same.”
The downside to this policy is its effects. The governor is watching PA’s unemployment rate sit at 7.6 percent. Instead of being lower than the national average of 7.5 percent, as we were when he started, we are now above it.
Why? One reason is we have given up 32,000 public sector jobs since he started. Cutting spending in a service business like government means that people are put out of jobs, not replaced, or underworked. There’s a multiplier effect to that loss in the economy — sometimes it’s 10x, but let’s be conservative and say 4x. If we had just held steady in employing people in the public sector, we’d have 32,000 more jobs, billions more in the economy (assuming they make $40k a year), and a different view from Harrisburg.
The governor claims that the cuts are necessary because of lack of revenue. However, there is a whole list of taxes and fees that could be adopted by the Commonwealth that would generate enough income and have little or no effect on the pocketbook of Joe or Josephine Citizen. Those include stopping the phase-out of the Capital Stock & Franchise Tax, really closing the Delaware Loophole (that allows business to not pay taxes in PA with a dummy office in our neighbor), actually having a gas extraction tax (West Virginia’s nation’s-smallest model would generate hundreds of millions of dollars), and increase license fees and lift the cap on the oil franchise tax so we can start to meet the transportation needs of the Keystone State (while creating thousands of short-term jobs). None of this is onerous. All of it, with judicious placement of jobs, could be beneficial for the Commonwealth.
Two years of austerity, heading for a third, puts us at a competitive disadvantage with our neighbors for both businesses and quality of life. The education sector took a $2 billion cut in 2011 and it’s never been replaced — the current budget proposal would be the second after that of “flat funding,” which isn’t even a “carry budget” (where you plan on providing the same services and budget accordingly), especially given the pension “collar” increase of 4 percent this year. Inflation these last two years (using CPI-U through April) has been 2.3 percent & 1.1 percent (in other words it takes $103.90 now to buy what $100 did then). That’s $390 million effective less money for school districts, universities, and community colleges to provide education services.
We’ve seen it at the 14 state-owned universities: we’ve had over 100 programs put on moratorium (limiting incoming students’ selection of options) and the State System reports over 900 positions unfilled. We saw a faculty hit in 2011, after the budget cut by the governor, with the retirement of 150 more faculty than were replaced in terms of full-time equivalents (FTE). Fewer faculty mean fewer seats for students and fewer options – in other words, in one measure, a poorer education.
And it’s that much less for human services, where many jobs have been loss. And the governor is balking at taking federal money to add tens of thousands to Medicaid rolls — another service and economic loss that screams “we’re backing up.”
Austerity is a painful, negative plan. We should learn from President Obama — you can’t cut your way out of a recession. Europe has learned.
We in Pennsylvania need to learn, too, and let our leaders know we understand and we want to do better.
– Steve