Way No. 15: Job Growth

Wolf Budget Raises Revenue to Reinvest in Schools

Republican budget leaves a $2.3 billion deficit in the next fiscal year

Gov. Wolf in March, and again in October, submitted proposals that would raise revenues to reinvest in schools and address the state’s structural budget deficit.

The Republican legislative majority in June, and again in October, rejected both the governor’s proposals for raising revenues.  Enacting the Republican budget would leave the commonwealth facing a budget deficit in the next fiscal year of $2.3 billion.  The only way to produce a constitutionally required balanced budget under this scenario would be to cut spending, most of it from public schools and programs that serve seniors, poor children, people with disabilities, victims of abuse and the addicted because that is where most state funding goes.

In 2011, Pennsylvania schools absorbed $1 billion in funding cuts, which led to 33,000 teachers, school nurses and other school staff losing their jobs. The body blow to the economy from these unprecedented layoffs slowed employment and economic growth in Pennsylvania in 2011 and 2012, with the pace of job growth returning to normal only in the last 12 months.

Another round of budget cuts next year could potentially repeat the commonwealth’s economic experience of the last four years.

Over the past few years, many other states, similar to Pennsylvania in 2011 and today, have faced critical choices about whether to raise state revenues, hold firm to “no new taxes” policies or even cut taxes. California and Minnesota chose to raise taxes to improve their fiscal health and reinvest in education. Two other states – Kansas and Wisconsin – followed the same path as Pennsylvania under Gov. Corbett, cutting taxes and education spending to varying degrees.

The results of this policy experiment are in:  

• Revenue-raising California and Minnesota have enjoyed percent job growth since 2010-11 that is one-and-a-half to three times larger than the three tax-cutting states – including Pennsylvania.
• The states that increased taxes have seen revenue growth – as a result of both tax changes and stronger recoveries – of 8 percent and 15 percent.
• Conversely, Kansas has seen its revenues fall 5 percent and Pennsylvania and Wisconsin have seen smaller revenue growth of 5 percent and 7 percent, a meagre enough recovery from the Great Recession to make fiscal stability and reinvestment in vital programs difficult.

The definition of insanity is doing the same thing over and over again and expecting a different outcome. Pennsylvania in 2011 tried big cuts in spending. The result was slower job growth and deep budget cuts for schools and human services.  California and Minnesota charted a different path by seeking to raise more revenue. These two states saw more job growth over this period than Pennsylvania or its fellow revenue-cutting states Kansas and Wisconsin. And of critical importance to the debate in Harrisburg, California and Minnesota didn’t raise taxes just for the sake of doing it: they raised taxes to get their fiscal houses in order while also boosting education spending. 

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