This page was last updated on July 21, 2011.
Op-Ed: 10 Reasons Why I Voted NO On The State Budget; State Rep. Jesse White (D-46); Beaver Countian; July 19, 2011.
Below is a detailed critique of the subject opinion piece.
“Several weeks have gone by since the Legislature passed Governor Corbett’s first state budget, and while the self-congratulatory backslapping for meeting the June 30 deadline has dissipated, the long-term effects of this budget have yet to be realized for most Pennsylvanians. I voted ‘no’ on Governor Corbett’s budget, and here are ten of the most important factors that influenced my vote.”
[RWC] As you will read below, Rep. White’s comments throughout appear not to match Governor’s Budget Office documents for the enacted budget. It’s possible Mr. White’s definitions of spending categories differ from those in the actual budget documents. Unfortunately, Mr. White didn’t provide links to the documents he used as data sources so I didn’t have a way to try to resolve the differences between his assertions and Governor’s Budget Office documents for the enacted budget.
“1. Property Taxes Increases
“By cutting over $1 billion in basic education funding, this budget will require school districts to raise property taxes. No school district could just ‘trim the fat’ with cuts so large.”
[RWC] According to Governor’s Budget Office documents for the enacted budget, “Basic Education Funding” (line 206) dropped $421,457 million (7.3%), not the “over $1 billion” Mr. White asserted. FYI, “Special Education” (line 222) was not cut and Early Intervention (line 223) received an 8.8% increase. To get anywhere near Mr. White’s $1 billion it appears you have to use the “Education Total” (line 274), which went from about $11.1 billion in 2010-2011 to about $10.1 billion for 2011-2012. If that’s where Mr. White got his $1 billion figure, his comments about school districts are invalid because “Education Total” includes a bunch of other line items, including but not limited to funding for Lincoln, Penn State, Pitt, and Temple. I don’t know how much of the other line items goes to school districts.
Let’s look at the “cuts so large” comment. According to Pennsylvania Department of Education (PDE) data for 2009-2010, commonwealth funding is only about 35.5% of total school district funding. This is only an average; some districts get more and some get less. Therefore, even if Mr. White’s $1 billion figure were correct, that amounts to about a 4% cut using the PDE 2009-2010 data. It’s hard to believe school districts can’t find decent ways to cut their budgets by 4%.
“2. No AdultBasic
“There was no attempt whatsoever to restore the successful AdultBasic program, which provided low-cost health insurance to over 40,000 working Pennsylvanians. Governor Corbett never even asked the large ‘non-profit’ health care providers to keep the program funded, which means we all will be stuck paying higher premiums to cover the uninsured.”
[RWC] For my comments about adultBasic, please read my critique of “Terrible Tom’s travesty.”
“3. More for prisons, less for schools
“While cutting education funding for our children, this budget increases funding for educating inmates in state correctional facilities. How is that justifiable?”
[RWC] Mr. White’s assertion appears to be in conflict with Governor’s Budget Office documents for the enacted budget. The enacted budget includes small spending cuts for “Inmate Education and Training” (line 196) and for “Corrections Total” (line 198).
“4. College tuition increases
“Massive cuts to state colleges immediately resulted in hefty tuition increases for students. How can we expect our young people to stay in Pennsylvania when this budget drives them out of state to get an affordable education?”
[RWC] To claim “[m]assive cuts to state colleges immediately resulted in hefty tuition increases for students” requires us to ignore history. College tuition has been skyrocketing for decades. Let’s look at college tuition increases since 1970 using Penn State as an example. The “Report of the Tuition Task Force - April, 2002” determined “When adjusted for inflation, Penn State’s tuition rate for undergraduates at University Park has doubled in constant dollars from 1970-71 to 2001-02.”
For the 1991-1992 school year, University Park undergraduate tuition was $4,332 for in-state students and $9,118 for out-of-state students. If tuition had increased at the Consumer Price Index (CPI) rate, those figures for the 2010-2011 school year would have been $6,936 and $14,598, respectively. The actual tuition for 2010-2011? From $14,412 to $18,604 for in-state students and from $26,276 to $31,110 for out-of-state students. For in-state students, the tuition more than doubled (2.1 to 2.7 times) in constant dollars in 20 years. In 11 fewer years, that’s more than the increase (both amount and rate) we saw from 1970-71 to 2001-02.
Simple economics tells us the more we subsidize a good or service, the faster its price rises.
“5. Our schools are under attack
“The cuts to public education are terrible not just because of the amount, but also because of their inequality. Wealthy school districts barely took a hit at all, while poorer areas got clobbered by losing thousands of dollars per classroom. Public schools have no choice but to cut programs and extra-curricular activities while increasing classroom size dramatically. Does anyone else think this might be a set-up by the Corbett administration for the upcoming school voucher battle?”
[RWC] Cool, a conspiracy theory!
Conspiracy theories aside, remember we’re talking about a 4% cut in total K-12 tax revenue.
I don’t have the data or time to research Mr. White’s assertion, but if “[w]ealthy school districts barely took a hit at all,” could that be because they already get relatively little from the state compared to “poorer areas?” For example, PDE 2009-2010 data shows Fox Chapel School District got only 15.5% of its total revenue from the state and 2.0% from federal taxpayers while the Midland Borough School District got 65.5% of its total from the state and another 12.7% from federal taxpayers. The less you get from government, the less dependent you are on government.
Because “[w]ealthy school districts” already receive less from the state as a percent of total revenue, cuts to their state subsidy likely affect them less. The “[w]ealthy school districts barely took a hit at all” comment is similar to what we hear from lefties when someone proposes tax rate cuts. That’s because our regressive federal income tax system provides leftists with a built-in argument against tax rate cuts. Since taxpayers toward the top of the range pay more taxes than taxpayers with lower incomes, higher-end taxpayers tend to get more dollars back than taxpayers with the minimum rates. The result is a cry of “tax cut for the rich” by leftists. The leftist solution is to increase the relative tax rate difference between high- and low-income taxpayers. If that happens, leftists are more likely to favor future tax increases because they will affect low-income taxpayers even less than before the previous tax cut. If someone proposes adjusting the higher rates to pre-tax-rate-cut levels, leftists cry “tax increases on the backs of the poor.”
“6. Corporate welfare through tax loopholes
“This budget fails to close massive tax loopholes that allow huge out-of-state corporations to get away with not paying their fair share in taxes. Not only does this shift the burden to Pennsylvanians, but leaves true small business owners at a competitive disadvantage by creating an uneven playing field.”
[RWC] To begin, I oppose so-called “business taxes” for at least two reasons. First, corporation income taxes are double taxation. That is, the government taxes a corporation’s taxable income and then taxes the dividends (after-tax profits) shareholders [including pension plans, IRAs, and 401(k)s] receive. Second, business taxes are a scheme to hide true taxation from the ultimate taxpayers, you and me. In some cases, businesses are prohibited by law from itemizing taxes on their invoices. You see, businesses - like government - don’t have any money; it all belongs to the owner(s). One way or another, business taxes are paid by individuals - customers, employees, and owners. According to the Tax Foundation, the average U.S. taxpayer worked eight days in 2002 to pay federal income taxes levied on corporations. In addition, we worked a fraction of a day to pay other business taxes. Business taxes are approximately seven percent of our total personal tax burden. That is, seven out of 100 tax dollars we pay are business taxes.
Note Mr. White’s use of the term “loophole.” A loophole is a legal provision of the tax code you don’t like, usually because you don’t believe it benefits you personally. For example, if you didn’t like the home mortgage interest deduction because you rent or your house is paid for, you would call it a loophole because the deduction reduces the tax liability of taxpayers who can use it. You would claim the deduction (loophole) allows some taxpayers to escape paying their “fair share” of taxes. That’s what Mr. White is doing with legal provisions of the PA tax code. To increase collections, Mr. White wants to eliminate certain legal deductions and/or exemptions. What follows is some information Mr. White probably doesn’t know or chooses to ignore.
The reason provisions like the “Delaware Tax Loophole” mentioned in some letters to the BCT exist is to help mitigate the problem of a high tax rate. At a flat 9.99%, PA’s Corporate Net Income (CNI) tax is second only to Iowa’s top rate of 12% for income over $250,000. In addition, PA corporations must also pay the Capital Stock and Franchise (CSF) rate of 2.9 mills, fifth highest in 2010. Pennsylvania is one of a minority of states imposing both CNI and CSF taxes. As of 2009, Pennsylvania and Massachusetts were the only two states that ranked in the top 10 for both taxes.
According to the Tax Foundation in 2010, “If Pennsylvania were its own country, it would have the highest overall corporate tax rate in the world at 41.5% (federal plus state, accounting for the state-local deduction).”
“7. Welfare ‘reform’ sham
“Much was made about eliminating ‘fraud, waste and abuse’ in the Department of Public Welfare; however, the ‘reform’ bills passed by the Legislature earlier this year will actually cost us money, not save any. Because finding the waste was apparently too difficult, this budget gives the Secretary of Welfare the ability to simply slash $400 million from wherever he wants and then label it ‘fraud, waste and abuse’ whether it was or not.”
[RWC] Mr. White’s assertion appears to be in conflict with Governor’s Budget Office documents for the enacted budget. The enacted budget cut spending for “Public Welfare Total” (line 452) by only 0.5% ($54.6 million out of $10.6 billion). Mr. Corbett’s proposed budget actually had a small increase for Public Welfare.
“8. Those in need get hurt the most
“This budget will hurt women, children, seniors, veterans, the disabled and our most vulnerable citizens by cutting their Medicaid and health care programs by nearly half a billion dollars. With the state of the economy and families struggling to support loved ones with special needs, this is a harsh and unnecessary move.”
[RWC] I swear, if the end were near, we’d see a headline like “World ends tomorrow; ‘women, children, seniors, veterans, the disabled and our most vulnerable citizens’ to sacrifice most.” It’s not original but it fits here.
“With the state of the economy and families struggling,” is this the time to increase our tax rates? Regardless of what some people would like us to believe, increasing tax rates for anyone tends to hurt everyone, except for politicians.
“9. No Government Transparency
“Despite all the promises of ‘transparency in government’, this budget was negotiated in secret behind closed doors. Even worse, for the first time in my five years in office, negotiations were limited to just the majority party. By keeping the Democrats totally out of the room, a majority of Pennsylvania’s voters were effectively disenfranchised and denied a voice. What happened to bipartisanship?”
[RWC] I have no way to validate Mr. White’s claims in this paragraph. In any case, I’m confused. If “a majority of Pennsylvania’s voters” voted for Democrats, why is our Governor a Republican and why are Republicans the majority in both houses of the General Assembly (GA)? I believe Mr. White confused voter registration with how we actually voted.
I know he had no role in it, but I don’t recall Mr. White worrying about “bipartisanship” in Congress when Democrats rammed through their agenda when they held the majorities in the House and Senate.
“10. Fiscally Irresponsible
“Governor Corbett pledged not to spend any more money than we have in this budget, and I agree with the sentiment. The Pennsylvania Constitution requires a balanced budget so we avoid running a deficit like the federal government. But the state ended up with a $785 million surplus this year. This surplus, which is by definition the taxpayers’ money, should have been returned to the people by restoring some of these draconian cuts; instead, the Corbett administration decided to hang on to it for us. How exactly does the state keeping and controlling the peoples’ extra tax dollars equate to the smaller, fiscally responsible government we were promised?”
[RWC] Yep, a state that faced a $4 billion deficit and just managed to balance its budget needs to go out and spend $785 million of “found money.” When did not letting money burn a hole in our state pocket turn into being “Fiscally Irresponsible?” This kind of thinking is why there are 12-step programs for treating addictions.
Mr. White said “taxpayers’ money …. should have been returned to the people by restoring” spending, not by cutting their taxes. It’s not returning taxpayers’ money when government spends it for them. Mr. White then complains about “the state keeping and controlling the peoples’ extra tax dollars.” Doesn’t Mr. White want “restor[e] some of these draconian cuts” by “controlling the [disposition of the] peoples’ extra tax dollars,” and isn’t he part of state government? It appears Mr. White isn’t as concerned with “the state keeping and controlling the peoples’ extra tax dollars” as he is with who in “the state [gets to] … control the peoples’ extra tax dollars.”
Finally, I believe the last time we spent “found money” for recurring spending was in 2001 when then-Gov. Tom Ridge (R) and the Republican-majority General Assembly used it to increase state pensions. I don’t know if it’s true or not, but I’d like to think Gov. Corbett and other Republicans learned from that blunder. Why not use most or the entire surplus to pay down some state debt, thereby reducing ongoing interest expense in the budget?
© 2004-2011 Robert W. Cox, all rights reserved.