With election near, Pa. finances tumble
It seems as if the race is on, and not a good kind of race, at least for the people of Pennsylvania. In lane No. 1 is Gov. Tom Corbett. In lane No. 2 is the state’s fiscal health. The question is, can Corbett make it to the November election before the budget situation he helped to create gets any worse?
It has been just two and a half months since Corbett signed a budget crafted along with his Republican partners in the state Legislature, but already the financial boat has sprung a major leak. State Treasurer Rob McCord announced Tuesday that he OK’d a loan of $700 million to the state government’s central bank account, which hit its lowest point in a decade and actually dipped into the red.
When he was campaigning for his job the first time around, Corbett pledged that he would rein in state spending and would never agree to raise taxes.
He’s already reneged on the second promise, by virtue of an increase in a state gasoline tax. One also could argue that boosts in fees for various driver services also qualify as tax increases, since they hit a wide swath of the population.
Regardless, Corbett’s aversion to an increase in other taxes, or even certain adjustments in tax policy, left him doing a tightrope walk when budget time rolled around this year. The state already was in a precarious fiscal situation, and Corbett’s answer to this was a smoke-and-mirrors, move-the-money-around spending plan that avoided tough decisions.
No extraction tax on the gas industry (Pennsylvania is the only major drilling state without one). No tax on smokeless tobacco and cigars (Pennsylvania stands alone on chewing tobacco and with only one other state on cigars). And no closing of the so-called Delaware loophole, which allows Pennsylvania businesses to avoid taxes.
It is an election year, after all.
But had Corbett pushed for reasonable tax increases that could have provided the revenue necessary to plug the holes in the state’s financial ship and also perhaps addressed some of its pressing needs, we believe he could have secured the necessary support in the state House and Senate, and been able to sell his decision to the people of Pennsylvania.
But Corbett and his allies in the Legislature took the easy way out – they even cut business taxes – and now the chickens are coming home to roost, no doubt much earlier than the governor had hoped.
But if this is just a one-time shoring up of a budget shortfall and things are going to get better, what’s the big deal? Well, if you believe McCord and fellow Democrat Eugene DePasquale, the state auditor general, the situation is going to get worse before it improves.
McCord says more borrowing will be needed in the relatively short term. DePasquale was even more blunt, saying, “There’s going to be a day of reckoning very soon.”
The Corbett camp says the concern expressed by McCord, DePasquale and Tom Wolf, the Democrat who is seeking Corbett’s job, is pure politics.
The governor’s budget chief, Charles Zogby, said there’s nothing unusual about the state having to borrow to keep things in the black. He says this is typically a bad time of year for cash flow.
Not so, according to McCord and Pasquale, who said it absolutely is unusual for the state to need such a fiscal bailout this soon after passage of a budget.
Others, who can’t be accused of having political motivations, have noticed the commonwealth’s financial ill health. After Corbett signed the last budget, Pennsylvania was the target of a third bond downgrade in two years.
In the months ahead, we’ll find out whether Corbett or his Democratic critics are right. But we’ll make a prediction now: Whoever wins the gubernatorial election is going to face a financial mess next year, and that person is going to have to sign off on some tax increases to right the ship. We’re guessing that Corbett – if he bucks the odds and wins re-election – would be a lot less opposed to tax increases in his next term. There would be no re-election to worry about.