Corporate welfare requires all taxpayers to pay higher taxes in order to give others a tax break or government aid. Elimination of corporate welfare in the state budget would reduce taxes on citizens by $1.7 billion. Examples include:

• Over $35 million in proposed taxpayer-backed bailout loans were promised to department store chain Boscov’s, in spite of a record $26 million profit in December alone.
• $44 million in “Recreation, Conservation Projects” including:
  • $45,200 to the Forest County Snowmobile Club for snow grooming equipment.
  • $142,500 for “workshops and technical assistance related to planting trees and shrubs as buffers along streams.”
  • $45,000 for the development of boat launches and access along the Beaver and Shenango rivers.
• $15.6 million Investment in Tourism Promotion including:
  • $100,000 to the Pennsylvania Golf Course Owners Association to promote golfing in Pennsylvania.
  • $100,000 to the Pennsylvania Ski Areas Association for the development and promotion of SkiPA.com.
  • $75,000 to the Pennsylvania Winery Association for the promotion of Pennsylvania’s wine trails.
  • $50,000 for development of the Pennsylvania Culinary Society.
• $553,000 through the Small Business Advantage Grant Program to 92 companies, including:
  • $61,505 for “high-efficiency washing machines” for laundromats.
  • $137,284 for “high-efficiency heating and air conditioning equipment.”
• Archer Daniels Midland Company (ADM) received $4.6 million which included a $925,000 grant, $2.5 million in“infrastructure development program funding,” $1.05 million in tax credits and $100,000 in job training assistance.
• $325,000 to buy dairy cattle and milking parlor equipment (to the J&J Dairy Farm in Myerstown).
• $150,000 loan to purchase a 61-acre poultry farm in Richfield.
• $200,000 loan to purchase a 108-acre farm for a dairy and hog farm in Peach Bottom.
• Novitas Capital LP, based in Wayne, received $4 million through the Venture Capital Investment Program.

About $201 million in “discretionary funds” is available for the governor and legislators to pass out to pet interests. These WAMs, or “earmarks” are controlled by legislative leaders and used to reward lawmakers, who can celebrate “bringing home the bacon.” There is no sure way of knowing which programs are discretionary, or which lawmaker requested the WAMs, except when lawmakers self-report—such as the $3 million in WAMs reported by the Lancaster County delegation to a local paper.

Examples include:

• Former state Senator Vince Fumo, is on trial for, among other things, misappropriating over $60,000 in WAM funds to a nonprofit he controlled.
• $2.5 million for salaries for the Pittsburgh Orchestra
• $200,000 to promote a parade in Philadelphia
• $200,000 for Golf Course Improvements

A great deal of taxpayer funding is wasted on promoting government or elected officials, lost in fraud or abuse, or simply buried in hidden accounts and forgotten about. Examples Include:

• $20,000 spent to produce GroundhogDreams.com, a psychedelic video and website of a man dressed in a groundhog costume being hit by a car and dreaming of his shadow, to promote Groundhog Day. Officials responsible for this video dismissed the cost as “nothing” compared to their $11 million budget to promote tourism.
• The Auditor General found that as much as $200 million of Medicaid funding was being abused or spent fraudulently.
• The state owns 16,637 vehicles (this excludes all PennDOT vehicles) costing taxpayers $72 million annually, yet there is little monitoring of these vehicles, including tracking of who is driving them.
• Millions of dollars were awarded in bonuses to legislative staffers, many of whom worked on political campaigns, leading to numerous indictments and a multi-year investigation. An additional $4 million has been spent in legal fees to prevent additional charges.
• Despite these legislative expenditures, an internal audit of the General Assembly found there is $200 million in taxpayer funds appropriated to the legislature being held in reserve.
• A recent audit of PHEAA found:
  • $62.5 million in legal and professional fees, including over $2.1 million in lobbying fees.
  • $121 million for management salaries, including $6.4 million in bonuses.
  • $30 million for promotional expenses such as towels and iPods.

State spending is largely driven by cronyism—giving jobs and contracts to friends and political allies, and using taxpayer funds for personal or political benefit. Examples include:

• Despite a state hiring freeze, Gov. Rendell has created a new position paying $95,002 plus benefits for former state Rep. Dan Surra.
• 501 state employees have been hired since the hiring freeze, including several over $100,000:
  • a director of the Office of Economic Development at the Department of Banking, who will be paid $105,900 a year;
  • a policy manager in Rendell’s executive offices, who will make $101,281 a year;
  • a staff psychiatrist, staff physician and another position at the Department of Public Welfare, whose respective annual salaries are $128,529, $102,533 and $105,900;
  • and two officials at the Department of State who will be paid $100,086 and $125,103
• About $370,000 was spent to print and mail over 300,000 calendars from lawmakers, with no legislative value, to constituents.
• The Pennsylvania Turnpike Commission spent millions in lobbying against a Turnpike lease in Harrisburg and for the right toll of I-80 in Washington, DC. While the Turnpike Commission was evaluated to be one of the most cost inefficient toll roads in the country and continues to award patronage jobs and give bond contracts to politically connected firms, they are laying off rank-and-file workers and increased tolls by 25% in January.
• While a ban on out of state travel was in effect, Agriculture Secretary Dennis Wolff went to Washington at taxpayer expense – in order to attempt to get a new job with the Obama administration.
• Governor Rendell’s former law firm Ballard Spahr received a $1.8 million no-bid contract to work on the failed Turnpike lease, despite the hundreds of attorneys already employed by the state; they also were paid $770,000 for work done without a contract or competitive bidding for services. Ballard Spahr has also received $2.7 million in contracts from the Delaware River Port Authority since Governor Rendell has served as chair.

• Though the film “Zack and Miri Make a Porno” originally received an NC-17 rating and its posters were deemed inappropriate for display by the city of Philadelphia, the filmmakers received a $5.7 million tax credit from the state’s $75 million film tax credit.
  • Although politicians claim that these tax credits create jobs, several film producers have admitted that they would film in Pennsylvania without the tax credits.
• Restrictive licensing and professional monitoring makes PA less attractive to prospective entrepreneurs. Pennsylvania $31 million spent to enact or enforce regulatory laws on professions like manicurist, auctioneer, and hair braider.
  • The state has also attempted to force eBay sellers and people giving rides to the Amish to get a license from the state.
• Over $3 million is spent on funding museums; most getting funding directly from the state legislature.
• Privatization of the Liquor Control Board could lead to more tax revenue for PA, as well as a potential $1.7 billion one-time windfall from the contracting of LCB operations.
• This July, lawmakers expanded the Redevelopment Assistance Capital Program to allow an additional $800 million in borrowing. This funding goes to such things as:
  • $50 million for a soccer stadium in Chester
  • $250 million for a cargo airport near Hazleton – though the project may fall through if the business partners are convicted in a current criminal investigation or the airport continues to have no success finding a tenant
  • The Lancaster Convention Center, originally estimated to cost $20 million, now projected to cost 5 times that amount.

On July 4, 2008, the Pennsylvania General Assembly approved, and Governor Ed Rendell signed, a $28.3 billion General Fund Budget. Since then, a $2.3 billion revenue shortfall has emerged, and politicians are scrambling to fill the budget gap. The cause of this budget deficit should be obvious –(bold, underlined>) overspending by state government.

The state General Fund Budget comprises less than half the $61.2 billion operating budget, and Pennsylvania local governments spending nearly the equivalent of state government ($61 billion). Here are some facts about the growth in government spending:

• Since 1970, Pennsylvania’s operating budget has increased by 1,353%, from $4 billion to $61 billion in FY 2008-09, an inflation-adjusted increase of over 167%.
• Since Gov. Rendell took office in 2003, the state General Fund Budget has increased 39% (18% after adjusting for inflation)—more than twice the increase in the eight years of Governors Ridge and Schweiker.
• Even after recent budget reductions, the 2008-09 budget still represents a 2.27% increase over FY 2007-08, and a 36.3% increase over FY 2002-03.
• Pennsylvania state and local government spending has doubled from just over $4,400 per person ($6,800 in inflation-adjusted, 2008 dollars), in FY 1991-92 to almost $10,000 per person in FY 2008-09 (or from $18,000 to $40,000 per family of four).

Families are paying substantially more of their income to fund government:

• As a share of personal income, the state’s operating budget rose from 8.8% in FY 1970-71 to an estimated 12.2% in FY 2008-09—an increase of more than 39%.
• Local government spending has mirrored the rise in state spending, increasing substantially faster than personal income. Almost one-fourth of Pennsylvanians’ incomes goes to fund state and local government.
• Each 1% of state personal income represents $5 billion, or about $400 per capita ($1,600 per family of four). Had Pennsylvania state and local spending remained at a constant level of personal income since FY 1991-92, the average family of four would be paying $3,900 less for the cost of government.

Pennsylvania’s tax burden is high, and growing, relative to the rest of the nation.

• Pennsylvania residents pay, on average, $13,000 per person each year in federal, state, and local taxes.
• In 2008, Pennsylvania had the 11th highest state and local tax burden. Pennsylvania moved from ranking near the middle of the fifty states (24th) in tax burden in 1990 to near the top today.
• Pennsylvania’s state and local tax burden (taxes as a percentage of total income) grew 5% since 1990, according to the Tax Foundation.
• This increased tax burden means that it takes Pennsylvania workers 111 days—nearly one-third of the year—to pay off their federal, state, and local tax bills.
• In a recent poll, 62% of Pennsylvania voters said that state taxes were “too high,” only 1% thought they were “too low.”

As Pennsylvania’s government spending has grown faster than the income of its residents, lawmakers have found new ways to tax its citizens.

• The state Sales & Use Tax first appeared in 1954 at the rate of 1%, but increased by 500% over the next 14 years to its current rate of 6%.
• Policymakers added the state Personal Income Tax in 1971 at the rate of 2.3%, which has increased 35% since then, to its current rate of 3.07%.
• State government implemented the Inheritance Tax in 1971, which began taxing the estates of the recently deceased.
• In 2002, the state began taxing cell phone usage for the first time under the Gross Receipts Tax and increased the Cigarette Tax by over 300%.

Taxes on families and businesses harm Pennsylvania’s economic growth.

• States with high tax burdens and increasing tax burdens—Pennsylvania ranks among the highest in both categories—have slower economic growth than the U.S. average. States with lower tax burdens and falling tax burdens have much stronger job, income, and population growth.
• Taxes on businesses consume almost 5% of Pennsylvania’s Gross Domestic Product.
• Pennsylvania’s 9.99% corporate income tax ranks as the second highest rate among U.S. states, combined with the federal rate, Pennsylvania’s combined rate is higher than any other industrialized country and every state but Iowa.

While Gov. Rendell is fond of claiming Pennsylvania has a low state debt burden relative to other states, this ranking excludes a vast majority of taxpayer-owed debt. In fact, state debt is concentrated in off-budget state agencies and authorities, and local governments owe nearly twice what the Commonwealth does.

Pennsylvania taxpayers owe $115 billion in state and local government debt. That debt amounts to over $9,000 for every resident of Pennsylvania, or over $37,000 for the average family of four. These totals exclude recent increases in local debt.

Gov. Rendell frequently claims that his policies — namely increased government spending on “economic development”, and the higher taxes and debt that accompany that — make Pennsylvania more friendly to businesses and job creators.

But independent rankings of Pennsylvania’s economic climate give the Commonwealth poor marks relative to other states:

• Forbes – 41st  “The Best States for Business”
• CEO Magazine – 37th  Best States to do Business
• Small Business and Entrepreneurship Council – 28th Best Business Tax Climate
• American Legislative Exchange Council State Economic Competitiveness Index:
  • 46th Best Economic Performance
  • 42nd Best Economic Outlook
• Small Business and Entrepreneurship Council – 24th Best Policy Environment for Entrepreneurship.
• United Van Lines – 47th  Best in State Migration
• Beacon Hill Institute – 39th in State Economic Competitiveness
• Pacific Research Institute –  46th Best on  Index of Economic Freedom
• Pacific Research Institute – 45th Best in State Tort Liability Rankings
• Fraser Institute – 49th Best Labor Markets in the US and Canada (out of 60)
• Alliance for Worker Freedom – Tied for Worst on Index of Worker Freedom
• Tax Foundation – 28th Best State Business Tax Climate Index
• Tax Foundation – 40th Lowest State and Local Tax Burden

Data also confirm Pennsylvania’s economic growth lags the national average, and ranks Pennsylvania among the worst states in the nation.  Indeed, under Governor Rendell (2003-2008) Pennsylvania ranks:

• 33rd in Job Growth;
• 40th in Personal Income Growth; and
• 43rd in Population Growth.

Those who feed at the trough of taxpayer funding typically argue that the state budget can’t possibly be reduced—or even see its growth limited to inflation and population growth—without jeopardizing key services. These critics typically incite fear that the state might have to shut down public schools, cut low-income households off medical assistance, let violent criminals out of prison, or cut funding for roads and bridges already on the verge of collapse.

Yet in a recent report, Government on a Diet, Spending Tips 2009, the Commonwealth Foundation identified $4.94 billion in wasteful spending, including $1.41 billion in the General Fund budget. The Commonwealth Foundation found three categories of state programs outside the proper role and functions of government.

• Corporate Welfare—programs which force all taxpayers to surrender more money which is redistributed to select, politically connected entities in the form of a government grant or tax break. Eliminating corporate welfare would save Pennsylvanians $1.7 billion in higher taxes and debt this year alone.
• Yellow-Pages Government—government-provided goods and services that compete directly with private enterprises and could be found in the Yellow Pages of the phone book. Privatization of yellow-pages government would return $2.5 billion in taxes and government revenue to the private sector.
• Self-Service Government—state programs and expenses actually work to the detriment of citizens, for the benefit of government officials, or reward the misuse of taxpayer dollars. Controlling self-serving government would save taxpayers $700 million annually.

Indeed, this $5 billion in wasteful state spending could be eliminated without touching basic education funding, road and highway funds, medical assistance, or state corrections. But that is not to say taxpayers aren’t spending too much on those programs already.

Market-based reforms in the delivery of public education, higher education, Medicaid, corrections and prison administration, and transportation would provide untold savings to taxpayers—and deliver better services to Pennsylvania residents.

Harrisburg policymakers need to reprioritize spending and cut waste from state government to avoid a tax increase on working Pennsylvanians and job creators. In short, they need to put Pennsylvania government on a diet and back on a path to fiscal and economic health.

Unlimited Government View: One view of government spending is that government deserves a constant, or even increasing, percentage of taxpayers’ income, implying there should be no limit to the size, scope, or function of government. This view holds that government deserves a percentage of everyone’s income regardless of how it spends the money. Taxation replaces tithing (giving a portion of income to a church or charity), as government is believed to be the servant of the greater good. In this view, government should grow as your income grows—creating new programs to meet an ever-expanding role.

Limited Government View: America’s Founding Fathers believed that government should be limited to its defined role—namely, to secure the rights of citizens. National defense, protection of life and liberty, and public goods are among the proper functions of government. Once the proper functions of government are established, government spending should grow not with income, but only with inflation and population, i.e. the cost of providing these functions and services.

Had Gov. Rendell and the General Assembly held spending growth over the last six years to inflation and population growth (a 19.8% increase), Pennsylvania would be looking at a surplus of $1.2 billion rather than a $2.6 billion deficit. Additionally, $15.9 billion could have been returned to the taxpayers during this time period—more than $5,000 for every family of four.

It has been proven that you can have government growth or you can have economic growth, but you can’t have both. Since 1970, Pennsylvania’s state operating budget increased from $4.2 billon to $61 billion in FY 2008-09, an inflation-adjusted increase of over 167%. Yet from 1970 to 2008, Pennsylvania ranked an abysmal 49th in job growth, 46th in personal income growth, and 48th in population growth.
Contrast this with Colorado, where in 1992 voters enacted a Taxpayer Bill of Right (TABOR) that limited the growth of state and local government spending. Key performance indicators illustrate the benefits of TABOR to Colorado’s economy and citizens.

In the eight years before TABOR (1984-92), Colorado ranked 43rd among the states in median family income growth, 33rd in job growth, and 43rd in economic growth per capita.

In the 13 years after TABOR (1992-2005), Colorado ranked 7th among the states in median family income growth, 6th in job growth, and 7th in economic growth per capita.

To get Pennsylvania back on the path to prosperity, lawmakers should enact fiscal guardrails, limiting spending increases to inflation and population growth.

Pennsylvania faces a $3 billion tax revenue shortfall in the state’s General Fund Budget.  Competing proposals from Gov. Ed Rendell and the Republican-led Senate differ on raising taxes and reducing/reprioritizing spending.  This is the first in a series of fact sheets on the state budget.

HOW MUCH DOES THE STATE SPEND?

• Pennsylvania state and local governments will spend approximately $10,000 for every man, woman, and child in the 2008-09 fiscal year.
  • State government spending per-capita = $4,925
  • Local government spending per-capita = $4,900
    
• State government’s Total Operating Budget (estimate) = $61.2 billion (FY 2008-09)
  • General Fund Budget (enacted) = $28.3 billion
    NOTE: Most “budget” references are to this portion of the Commonwealth’s total Operating Budget and represents less than half of the state’s total spending.
  • Other/Special State Funds (estimate) = $14.9 billion
    NOTE: This spending includes the Lottery Fund, Motor License Fund, Gaming Fund, and other such dedicated funds.
  • Federal Funds (estimate) = $18.0 billion
    NOTE: These funds from the federal government are spent by the state.
• Local government spending (projection) = $61.0 billion (FY 2008-09)

HOW LARGE IS THE CURRENT BUDGET DEFICIT?

• On July 4, 2008, Gov. Ed Rendell signed a $28.3 billion General Fund Budget, despite predictions by both Senate Democratic and Republican Appropriations Committee members and staff that such a spending plan would likely result in a multi-billion dollar deficit.
• Gov. Rendell began reducing FY 2008-09 spending to $27.4 billion in December 2008.
  • Reductions have not keep pace with additional revenue declines.
• Tax revenue shortfalls for the first 11 months of FY 2008-09 suggest a $3 billion General Fund deficit.
  • Total General Fund revenues will approximate only $25 billion.

HOW MUCH WILL THE STATE SPEND IN 2009-10?

• Gov. Ed Rendell proposed a $28.9 billion General Fund Budget on February 4, 2009.
  • The governor’s proposal is out of balance due to declining state revenues beyond expectations.
  • Additional spending reductions or tax increases will be needed by the administration to produce a balanced budget.
• The Pennsylvania Senate passed a $27.3 billion General Fund Budget on May 6, 2009.
  • Passed by a 30-20 vote, SB 850 uses expected state tax revenues for FY 2009-10 plus federal stimulus money, and does not require tax increases.
  • The House Democratic Leadership has no plans to allow all members to vote on SB 850.

GOVERNMENT SPENDING HAS GROWN FASTER THAN THE RATE OF INFLATION

• During Gov. Ed Rendell’s tenure (2003-2008), General Fund spending has increased by more than double the rate of inflation (39% vs. 18%).
• Although the Senate budget proposal (SB 850) represents a decrease from last year’s budget by $1 billion, it still represents a 36.2% increase in General Fund spending since 2003.

IS PENNSYLVANIA A HIGH TAX AND HIGH DEBT STATE?

• Pennsylvanians pay, on average, $13,000 per person each year in federal, state, and local taxes.
  • Pennsylvania moved from ranking 24th of the 50 states in tax burden in 1990 to near the top today.  In 2008, Pennsylvania had the 11th highest state and local tax burden.
  • This increased tax burden means that it takes Pennsylvania workers 111 days—nearly one-third of the year—to pay off their federal, state, and local tax bills.
• Pennsylvania taxpayers owe $115 billion in state and local government debt.
  That debt amounts to over $9,000 for every resident of Pennsylvania, or over $36,000 for the average family of four.

Pennsylvania faces a $3 billion tax revenue shortfall in the state’s General Fund Budget. Competing proposals from Gov. Ed Rendell and the Republican-led Senate differ on raising taxes and reducing/reprioritizing spending. This is the second in a series of fact sheets on the state budget.

SENATE BILL 850 MAINTAINS ABOVE-INFLATION INCREASES IN SPENDING OVER RENDELL TENURE

• Senate Bill 850 represents a 36.2% increase in spending since he took office in 2003 (a 17.2% increase in inflation-adjusted spending)—despite reducing Gov. Rendell’s proposal by $1.7 billion.
  • SB 850 represents an increase in spending over fiscal year 2002-03 by inflation and population growth, plus an additional $2.8 billion

SENATE BILL 850 INCREASES SPENDING IN K-12 PUBLIC EDUCATION AND PUBLIC WELFARE

• K-12 Public Education and Public Welfare—the two largest budgetary items in the General Fund Budget (representing 80% of all General Fund Budget spending)—would receive increased state and federal funding in FY 2009-10 over the current fiscal year
  • K-12 Public Education would receive $360 million more in 2009-10 than in 2008-09—a 37.6% increase in spending since 2003 (18.5% in inflation-adjusted spending).
  • Public Welfare would receive $504 million more in 2009-10 than in 2008-09—a 62.6% increase in spending since 2003 (39.9% in inflation-adjusted spending).

Pennsylvania faces a $3 billion tax revenue shortfall in the state’s General Fund Budget.  Competing proposals from Gov. Ed Rendell and the Republican-led Senate differ on raising taxes and reducing/reprioritizing spending.  This is the third in a series of fact sheets on the state budget.

SCHOOL DISTRICTS WOULD RECEIVE INCREASED SUPPORT FROM THE STATE AND FEDERAL GOVERNMENTS

• Under Senate Bill 850, Pennsylvania school districts will receive an average 11.7% increase in Basic and Special Education funding over 2008-09 levels through federal and state sources.
  • State Basic and Special Education funding = $6.2 billion
  • 2009-10 federal stimulus funds directly to school districts = $720 million
• This increase in funding support across the state will range from 3.1% to 32.8% per school district under the new budget.

PENNSYLVANIA CANNOT SPEND IT’S WAY TO EDUCATIONAL SUCCESS

• K-12 Public Education spending has skyrocketed:
  • Since 1970, public school spending increased from $2.3 billion to $24 billion—a 956% increase.
  • Over the past 25 years, per-pupil spending has increased 364% (vs. inflation of 141%).
  • Under Gov. Rendell, state spending on K-12 education has increased 43%.
• K-12 Public Education performance has stagnated:
  • The average combined verbal and math SAT scores of Pennsylvania students has dropped from 1,000 in 1986 to 995 in 2008—even among “high participation rate” states, PA ranks among the worst performing.
  • Rigorous academic studies have found little or no correlation between student achievement and class size, teacher salaries, or per-pupil expenditures.

THE STATE SHARE HAS ALWAYS BEEN LESS THAN HALF OF SCHOOL DISTRICT SPENDING

• Until 1983, a state law dictated that the Commonwealth should provide 50% of K-12 funding. This mandate was never fully fulfilled, however, due to consistent increases in local district spending.
  • The state’s share of education funding peaked in the 1971-72 school year at 45%.
  • The state’s share has diminished not because of reduced spending but due to sharper increases in spending and property taxes by local districts.

SCHOOL CHOICE SAVES TAXPAYER MONEY

The $75 million Educational Improvement Tax Credit (EITC) is currently a 75-90% tax credit for businesses that contribute to a non-profit scholarship or educational improvement organization.

• The EITC provides $44.7 million in K-12 scholarships for low-moderate income families, $8 million in pre-K scholarships, and $22.3 million for aid to “innovative” educational initiatives.
  • In the current school year, 44,000 students are receiving EITC Scholarships.
  • Since 2001, 244,038 students benefitted from a better or safer school through the EITC.
• The EITC saved taxpayers over $500 million in the 2007-2008 school year alone.
  • The average EITC Scholarship is $1,100, compared with average school district spending of $13,300 per-pupil n 2007-08.
  • If the EITC were to be cut and scholarship opportunities reduced, many students would be forced back into high-cost public schools, resulting in higher property taxes.
• Taxpayers saved approximately $3.622 billion from other school choice options in the 2007-08 school year.
  • Charter schools saved taxpayers $80.03 million in the 2007-08 school year.
    45,560 students were served at an average savings of $2,589 per student.
  • Cyber charter schools saved taxpayers $94.14 million in the 2007-08 school year.
    19,715 students were served at an average savings of $4,775 per student.
  • Private and nonpublic schools saved taxpayers $3.15 billion in the 2007-08 school year.
    260,000 students were served, with an average savings to taxpayers of over $12,000 per-pupil.
  • Home schooling saved taxpayers $297.5 million in the 2007-08 school year.
    22,316 students were served at virtually no cost to the taxpayers.