Happiness is Reading a Government Budget

The state budget is at a rare crossroads that provides ADAers a unique opportunity to stand up and defend social programs at a time when they are financially threatened. The Federal government’s funding of state operated social programs has been increasing at rates below the inflation rates. While this allows them to insist they are increasing social services spending, the true results are that programs can not meet continuing existing expenses. Cutbacks are required, and fewer people can be served. For the state budget, the issue sometimes becomes the degree to which state funds can replace or supplement vanishing Federal funds. Yet, the percent of the state budget that is mandated spending has been increasing. This diminishes the ability of the state budget to be flexible enough to fund un-mandated needs.

The fiscal health of the state budget faces mixed prognoses. Income tax revenues are strong. Whether this means total income tax collections will be strong or this only reflects a large proportion of high earning Pennsylvanians only filing earlier than usual remains to be seen.

Sales tax collections are affected by a nationwide sharp decrease in consumer spending and are being collected below expectations. Housing starts are at their lowest levels in several decades. This further depresses consumer spending on household items and lowers sales tax revenues.

Consumers are increasingly purchasing goods over the Internet. Several states have created a consortium to collect sales taxes on Internet goods. Congress is considering legislation that would require all Internet purchases to include state sales taxes from purchases made from consortium state members. Several large Internet retail establishments have voluntarily allowed this consortium to collect states sales taxes. Pennsylvania conservative legislators and the Rendell Administration see this as a tax on their constituents and have prevented Pennsylvania from joining this consortium. Thus, the state budget loses out on collecting these revenues.

Gaming revenues to the state have been unexpectedly stronger than expected. It remains to see whether these revenues will be maintained, or whether this only reflects new excitement over legalized gambling that will soon fade. The financial troubles of Trump Casino in Atlantic City may provide warnings that the market for gaming in our region is reaching a saturation point where further expansion will be less profitable. In addition, there are serious concerns over the degree to which gaming revenues are only shifts from other consumer spending that is lowering sales tax revenues.

The sum of these conflicting forecasts presents uncertainly regarding the state’s future budget health. There are serious concerns that the 2008-2009 budget is headed towards a deficit For ADAers, now is the time to not only fight for 2007-08 budget priorities but to see they receive long term commitments. Agencies are now drafting their budgets for 2008-2009. Advocates should contact legislators concerning next year’s budget yet should also be contacting the Governor’s office regarding the following year’s potentially more constrained budget.

The Federal government appears unlikely to assist state governments. Indeed, they appear more posed to mandate the spending of greater state funds without providing adequate Federal funds. Children’s health programs, Medicaid, and Medicare are among programs that are under threat from funding cuts. Congress should also be lobbied to restrict unfunded mandates, such as a Real ID, at a time the state cannot afford them.

The time to lobby for your budget priorities is now. Early input can be more effective rather than waiting until late in the budgeting process. Future budget priority conflicts will likely intensity, and those priorities that are advanced and defended earlier are more apt to succeed.