OP-ED: Pa. needs sensible budget compromises

York Dispatch

The Bureau of Labor Statistics reported on Thursday that Pennsylvania created 66,500 jobs in the last 12 months. At 1.1 percent, that's the fastest year-over-year job growth reported in any July since 2005. Relative to the 50 states, that's the 34th fastest pace in the country and the best Pennsylvania has ranked since July 2011 when it was in 26th place.

July 2011 is of note because former Gov. Tom Corbett's first budget was signed shortly before the stroke of midnight on June 30, 2011. While on time, the budget was even more remarkable because it cut $1 billion from education funding and set off a wave of school district layoffs that, as of the end of the last school year, tallied to 33,000 jobs.

Not surprisingly, layoffs on that scale delivered a body blow to a state economy still recovering from the worst recession since the Great Depression. The body blow dropped Pennsylvania's job growth ranking within a year to 44th and by July 2013 to 48th.

So what we learned this Aug. 20 is that job growth in the commonwealth is finally back to normal — Pennsylvania has ranked, on average, 35th for job growth since 1990. The future of the Pennsylvania labor market, however, is cloudier than it should be thanks to deadlock over this year's state budget.

Gov. Tom Wolf unveiled in March a budget plan that addressed the state's structural deficit and included the increased education funding for which Pennsylvania voters indicated strong support last November.

Nearly four months after Gov. Wolf released his budget, legislative leaders invited the governor's veto by passing, in the evening of another June 30, a budget proposal of their own which ignored the ideas advanced earlier by the governor. This budget only allotted a net $8 million in new funding for schools while growing Pennsylvania's budget deficit in the years ahead.

After Gov. Wolf's veto of the Republican budget, Harrisburg became something of a ghost town. Now, in the second half of August, Republican leaders have submitted a "take it or leave it" offer that promises to give Gov. Wolf the education spending he requested in March, but without specifying a revenue source.

Another catch is that Republicans demand that the governor sign a new version of their pension proposal, Senate Bill 1. This proposal would not substantially reduce taxpayer pension costs but would cut pension benefits for new teachers by as much as 70 percent. SB 1 achieves this undesirable combination by switching future workers to individual retirement savings accounts with high costs and low investment returns. Why is this a good idea? It's not — unless you work for one of the financial firms that manages those individual accounts.

The Republican pension proposal would also cripple the capacity of the commonwealth to recruit and retain good employees. Currently, Pennsylvania nurses and other public servants accept lower salaries than comparable private sector workers because they receive good pensions.

The Republican counterproposal makes no sense as policy, but it does attempt to bridge a divide within the Republican caucus. SB 1 satisfies the right wing by, in the words of New Jersey Gov. Chris Christie, punching teachers in the face with a cut in pension benefits. Embracing Gov. Wolf's school spending target provides aid to Republican moderates feeling the August heat in their districts for not supporting meaningful increases in education funding.

Pennsylvania doesn't need a budget based on the internal politics of the Republican caucus. It needs a budget that reflects the priorities and preferences of Pennsylvanians. A budget like that would include a severance tax on gas drillers and increased education funding. It should also include property tax relief — which many Republicans have championed in the past. And yes, it could include public pension changes that draw from a combination of Republican and Wolf administration ideas — but please not something as demonstrably a dud as SB 1.

A sensible budget compromise needs to come quickly. Every week that passes without one raises the risk that the budget standoff could set back the state's economy yet again. All Pennsylvania schools receive a portion of their operating budget from the state. Without a state budget, schools will have to dip into their cash reserves to meet payroll and pay vendors. When those funds run out, furloughs will follow. Therein lies the risk to all Pennsylvanians — another round of layoffs and reduced consumer spending that injures an already bruised economy that has yet to produce meaningful wage or income gains for the bottom 99 percent of families.

— This op-ed was written by Mark Price, Ph.D., economist and interim research director of the Keystone Research Center and Pennsylvania Budget and Policy Center in Harrisburg. PBPC is a nonpartisan, statewide policy research project of KRC that provides independent, credible analysis on state tax, budget, and related policy matters, with attention to the impact of current or proposed policies on working families.