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You sin and government wins

Published January 11. 2017 12:25PM

Because the Pennsylvania General Assembly doesn't want to raise broad-based taxes, it resorted last year to an assortment of sin taxes and fees to try to shore up a shaky budget. The problem is that when taxes on even items like liquor and cigarettes become too high, there becomes a tipping point for consumers.

The City of Philadelphia found this out when its much ballyhooed $2 a pack cigarette tax is likely to come up about $26 million short of expectations. Your first reaction might be: "Hey, I don't care about what happens in Philadelphia." Well, you should, because all of us nonsmokers across the state will help bail out the City of Brotherly Love with our taxes.

There is a provision in this legislation that if local revenue does not reach $58 million, the state will make up the difference. That was a nifty safety gap that the huge Philadelphia legislative delegation was able to quietly insert into the bill. The tax is earmarked for the nearly bankrupt Philadelphia School District, whose chief financial officer Uri Monson pronounced that the shortfall will present no risk to the school district.

This shows the unpredictability of basing a tax on an unstable source of revenue. When taxes become too burdensome for consumers, they will seek these products elsewhere either by going to nearby states or, worse, smuggling them from low-tax states such as the Carolinas and other southern locations which are more tobacco-friendly. Philadelphia's equally hated soda tax went into effect at the start of the year; these proceeds are also targeted to help the school district.

The Philadelphia situation is symptomatic of a much larger problem across the state. According to the state Department of Revenue, general fund collections were $105 million below projections for December, marking five of the past six months that estimates have failed to meet expectations. So far during the fiscal year (July 1, 2016-June 30, 2017), revenue projections are $370 million below estimates. It has become painfully clear that the $1.3 billion revenue package that the General Assembly passed last July will miss its target and fail to cover the $1.6 billion increase in government spending.

It finally appears that the dire situation is beginning to sink in for the 253 legislators and Gov. Tom Wolf as they begin work on the 2017-18 budget. The governor has been crying "wolf" for more than two years, but his pleas have gone largely unheeded as the Republican-controlled Legislature continues to resist broad-based tax increases. Independent policy makers say the state is looking at five more years of red ink if something significant is not done to deal with the problem. Key Wall Street rating agencies continue to trash the state with poor grades which, in turn, results in higher borrowing costs.

Wolf refuses to go down the same path that he did during the first two years of his term when he proposed higher income and sales taxes to stabilize education whose funding had been decimated during the four-year term of Gov. Tom Corbett.

The Wolf administration has put a hiring freeze into place. It has announced the merging of the state's technology and human resources departments and is looking to close two of five possible state penitentiaries with one of these under consideration in our area - Frackville.

Wolf has decided to play ball with the Republicans and shift the emphasis from revenues to cost-cutting. While President-elect Donald Trump is about to "drain the swamp" in Washington, Republican legislators want to do the same in Harrisburg by poking a hole in a massive and overinflated state bureaucracy.

We encourage Harrisburg to adopt the rallying cry of "do more with less." We don't want to see people lose their jobs any more than you do, but the focus must shift from throwing more money at problems to streamlining and economizing.

State government needs to be dismantled then rebuilt, starting with the size of the General Assembly. We were happy to report that a measure to do just that may come before the voters in 2018 to reduce the number of House members from 203 to 151. The proposal introduced by state Rep. Jerry Knowles, R-Schuylkill, keeps the number of senators at 50, but, quite frankly, this number could be reduced by 20 to 25 percent without any loss of efficiency. This alone can save the state about $15 million to $20 million a year in salaries, benefits and daily payments.

The constitutional amendment was approved in 2015 and 2016 and needs to be approved again in this legislative session to go on the 2018 ballot.

Some states have turned to efficiency reviews to identify key areas where performance improvements are necessary. These reviews have resulted in savings of 5 to 6 percent of the general fund budget. If such savings could be brought about here in Pennsylvania, it would add up to an eye-popping $1.5 billion to $2 billion in annual savings. All legislators elected in November took the oath of office last week. They solemnly swore to support, obey and defend the Constitution of the United States and the Constitution of this state and that they will discharge the duties of their office with fidelity.

We believe the oath should contain one more line: "I pledge always to put the concerns of my constituents before my own."

With all this work to do, the legislators adjourned after their swearing in and won't be back in session until Jan. 23. The House will be in session just 41 days and the Senate 42 days between now and the budget deadline of June 30.


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