This page was last updated on April 3, 2011.
Quick hits; Editorial; Beaver County Times; April 3, 2011.
“DO THE MATH” is a shorter version of “Money matters” (3/20/11) with some variations so please forgive me for repeating myself below.
I’m glad I’m not holding my breath waiting for spending cuts the Times can get behind other than symbolic cuts by the General Assembly on itself and the executive branch on itself. Despite all the editorials we read professing to abhor deficits and debt, nowhere did this editorial seem to find spending cuts of which the Times approved. This is just more evidence the Times merely cries crocodile tears when it “complains” about deficits and debt (here and here).
The Times is back after $200 million allegedly in the hands of the General Assembly. Even if the allegation is true, it’s a one-time deal plus a drop in the bucket. Don’t get me wrong; I’m all for liberating the money if it exists. It’s just BS to assert it would have any impact on the budget cuts the Times so despises. There’s more on that later.
The Times is still whining about the lack of a tax on Marcellus Shale natural gas. As I’ve written previously, while I’m not unalterably opposed to such a tax within limits, it doesn’t represent “found” or “free” money. For example, why should a tax on Marcellus gas go for anything other than covering regulatory costs? Anything else creates a slush fund for politicians to spend as is/was the case for Medicare and Socialist Security taxes. Texas taxes natural gas production at 7.5% of market value plus a regulatory fee of $0.000667 per thousand cubic feet, with variances for natural gas that’s expensive to produce. I’m not an expert, but a lower tax rate than Texas and some other states may be appropriate due to the higher costs of producing from formations like the Marcellus shale. Keep in mind, though, natural gas consumers (you and I) will ultimately pay any severance taxes via our gas bills. It’s true for all so-called business taxes. Opponents of Marcellus gas production tend not to mention that little fact.
As it has been reported to date, I do like the “impact fee” idea floated in the PA Senate. According to the Pittsburgh Tribune-Review, the fee would be used “in an effort to offset costs municipalities experience dealing with the growing natural gas industry.” The fee would be based on actual additional costs incurred by local communities as a result of natural gas operations. This is how I’ve always maintained additional costs incurred by a municipality as the result of any business should be addressed. The revenue would go to the municipalities and not the General Fund, thus avoiding the slush fund I mentioned above.
Now, let’s follow the editorial title’s advice and “do the math.” The $200 million we could allegedly get from the GA is a lot of money, but it needs to be put in context. $200 million is only about 0.75% of the proposed General Fund (GF) budget ($26.8 billion) and 4.9% of the budget deficit ($4.1 billion) had we done nothing. Suddenly, $200 million doesn’t seem like a lot. That’s why the editorial didn’t give context. It’s also a one-time deal so it does nothing to address ongoing revenue needs.
In “Money matters,” the Times told us “Estimates are that an extraction tax could produce $200 million or more in new revenue for the state.” Remember, though, projected revenue estimates for new taxes and increased tax rates tend to overstate actual collections. There’s more about that in my critique of “Money matters.”
Together we’re talking about 1.5% of the GF budget and 9.8% of the deficit.
In this editorial, the Times only whined about education spending cuts but in previous editorials it also complained about cuts to healthcare spending. What the editorial doesn’t tell us is even in the proposed budget, GF spending on education and health & human services are 38.9% and 43.5% of the total, respectively. That’s 82.4% of the GF budget.
To most of us, focusing on increasing tax revenue an optimistic 1.5% (one year only, then 0.75%) vs. cuts to programs that make up 82.4% of the GF budget would seem silly. Exactly six weeks ago, so did the Times regarding a similar situation with the federal budget. In “Quick hits/NUMBERS GAME” (2/20/11), the Times took President Obama and Republicans to task for proposing relatively small “cuts [that] are coming out of just 12 percent of the budget.” The editorial concluded, “Don’t be fooled. Both sides are playing with numbers, and neither is addressing in a serious manner the budget deficits and the shared sacrifices that would be needed to do that.” Isn’t this exactly what the Times did in this editorial? Let’s hope the glass house the Times lives in has rock-proof windows.
Finally, as I’ve noted often before, lack of tax revenue isn’t our problem, excessive spending is. Since at least 2003, PA spending has outpaced inflation.
© 2004-2011 Robert W. Cox, all rights reserved.