source – Bloomberg
The six month budget impasse is already costing residents of Pennsylvania because investors are demanding higher rates of return on PA debt that reflects the higher risk of those investments. The higher interest rate PA must pay for borrowing dollars means the state is spending more dollars without getting any more services in return.
source – openpagov.org
A major point of contention in the budget negotiations has been Governor Wolf’s demand for greater spending on education, but the charts above show both total spending on education and state spending per student has been steadily increasing even while enrollment is declining. The governor is demanding still more spending for education and the no tax increase $30.3 billion budget he currently has on his desk provides an increase, though not as much as he wants and his press secretary has labeled those legislators unwilling to spend the additional dollars as “extremists.” The budget he wants requires a tax increase to cover the higher spending, yet no tax plan was agreed upon.
Unfunded pension debt affects you
The real problem these budget proposals do not deal with is the rapidly rising unfunded pension debt. Those costs will mean steadily rising taxes, steadily rising state borrowing costs, fewer state services, declining state infrastructure, a less friendly business environment and a state in rapid decline. Very few people understand or even know what is going on, legislators included, the explanation is complex, the solutions politically hard to swallow and it’s so easy for lawmakers to point fingers and blame the other guy.
Gradually, then suddenly
This budget is reminiscent of a well known conversation in a Hemingway novel:
How did you go bankrupt? … Two ways, gradually, then suddenly.
Pennsylvania is headed the same direction, we’re still on the “gradually” part. Let’s hope we fix this before “suddenly” hits.