STATEMENT: Sen. Wagner, Rep. Grove Mislead on "Savings" to Cut Structural Deficit

HARRISBURG, PA – Senator Scott Wagner (R-York) and Representative Seth Grove (R-Dover) today announced a series of budget cuts, problematic ideas, and one-time savings that do little-to-nothing to address the immediate structural deficit facing Pennsylvania for the 2016-17 fiscal year.

“The budget proposals put forward by Senator Wagner and the 'Taxpayer’s Caucus' begin with denial and then enter the world of fantasy, problematic ideas, and one-time savings,” said Marc Stier, Director of the Pennsylvania Budget and Policy Center.  

“The denial is that we do not face a structural deficit, in which continuing and mandated costs cannot be met by current revenues. But that is exactly what we face. There is no conceivable level of economic growth that could eliminate deficits year after year. Those deficits are a product not of cyclical economic changes but of our failure to meet our responsibilities to fund pensions in the past combined with irresponsible cuts in corporate taxation,” Stier continued. 

Specifically, the report misses the mark on a number of fronts:

Suggestions for selected budget cuts where the savings are already included in the cost to carry budget

  • Human services. $922 million. Most of the savings based on Medicaid Expansion, Super Utilizers, Pharmacy Rebates, and CHIP savings, are already included in the budget necessary to maintain current services. 
  • GO-TIME $158.7 million. Everyone applauds the use of effective, lean government practices to save money. But the savings from practices are also included in the budget necessary to maintain current services.  

Among the problematic ideas and one-time savings:  

  • Lapsed Funding $319 million. The proposal simply assumes that funds that were appropriated in previous years but not yet spent shouldn’t be spent. But many projects the state undertakes cannot be completed in one year. So reprogramming previously appropriated funds is a real cut to those projects.  Some funding can and should be lapsed but the proposal  significantly overstates the amount.
  • Pension reform $600 million. While costs for private managers of the PSERS and SERS can be reduced—although the proposal overstates the savings by around one-third--they should not be used to reduce annual payments into the pension systems but to reduce the long-term liabilities of the pension systems. That’s especially true because, As Senator Wagner admitted, both systems expect higher returns than is reasonable.
  • State Health Care Costs $153 million. These costs cannot be set by legislative fiat but, rather, are the product of negotiations between the administration and public sector unions – negotiations that include wages as well as health care costs. And while the state has an interest in reducing the costs of its workforce, it also has an interest in hiring and keeping effective workers. Picking out one element of the compensation package and insisting that it should be reduced makes little sense. On the whole, state workers are not over-compensated compared to those in the private sector.  
  • Liquor privatization $220 million. The proposal calls for securing short-term revenues in return for giving up recurring long-term revenues.  
  • Tax Amnesty $150 million. Coming so soon after the previous amnesty this proposal rewards tax scofflaws. And it does not provide the recurring revenues needed to eliminate a structural deficit that grow every year.