Why We Shouldn’t Raid Special Funds to Balance the General Fund

Read the full briefing paper here.

By Marc Stier

Last November we elected a President who reminds many of us of a cranky uncle who sits at the far end of the Thanksgiving or Christmas table, muttering under his breath about the “damn government” and “wasted taxes” and, quite often, “those people who cause all the trouble.” When you try to engage him in discussion, you find that he has a ready – and extremely simplistic – answer to every question, one that is lacking in any detailed understanding of what government actually does and that assumes that “it’s very simple to do x or y” if not for conniving politicians. And if you try to point out to him that government is not quite so simple, he is quick to point to some over the top blog post or email that assures them that, yes, it is all very simple.

Right now, some Republican members of the House of Representatives, with the support of outside advocates, are readying a plan to borrow massively, perhaps up to more than $2 billion, from many of the 100 or so special funds that, along with the General Fund, are part of the state budget. Their justification for doing so is that, at the end of each year, many of these funds have a surplus. So it seems easy enough to shift those surpluses – money they are quick to say is “just sitting there not doing anything” – into the General Fund. Voila, the state’s budget deficit is solved, and we don’t have to raise taxes. 

And if you doubt that this plan makes sense, they can point you to a blog post or two that gives some assurance about it. Indeed, those posts egg them on by calling those special funds the “shadow budget,” as if there are places where large sums of money are being hidden by our politicians.

This plan, however, is one more example of the know-nothing politics that from time to time overtakes both parties in American politics, but today especially afflicts Republicans. This idea appears to be coming from supporters of Speaker of the House Mike Turzai who is determined never to raise taxes under any circumstances and believes that there is some “simple solution” that will make it possible to avoid a tax increase this year. 

In this paper, we examine this plan, first from a theoretical point of view and then by looking at a few of those state funds. We conclude that is it is largely based on a misunderstanding of how government works in Pennsylvania and elsewhere. 

Read the full briefing paper here.