For years, Pennsylvania has created budgets partially based on, what I call, “fake revenue.” This is revenue believed to be coming in but never materialized.
There have been several examples of this. There was the $100 million windfall from the 1,000 to 2,000 taverns expected to apply for and receive small games of chance licenses in 2014. As you may recall, the high number of licensed taverns never materialized, leaving Pennsylvania high and dry on its expected revenue. Instead, a mere $10 million in revenue came into the state.
The transfer of the Joint Underwriting Association fund of $200 million has been carried as a revenue source for three fiscal years, which has never materialized. Pennsylvania budgets have also carried a $50 million category 1 casino license as an expected revenue source as well over several budgets. Or my favorite, during the 2016-17 budget, expecting to get an agreement on a comprehensive gaming expansion package after the budget was signed. Since Pennsylvania has a balanced budget amendment, the official revenue estimate artificially increased other taxes by $100 million to cover the expected revenue from gaming expansion that never happened.
These unrealistic expectations are akin to you or me assuming to we will get a second job, but never do and increase our spending as if we did. All it does is create instability in an already volatile financial situation for the Commonwealth. The net financial position in the Comprehensive Annual Financial Report (CAFR) reflects this as well.
I recently had a great opportunity to serve on a panel during the “Preventing the Next State Budget Crisis: Improving Budget Transparency to Bolster Fiscal Sustainability” conference hosted by the Volcker Alliance, the Federal Reserve Bank of Chicago, Pew Charitable Trusts and the Lincoln Institute of Land Policy. This was a great honor as I was the only elected official to serve on a panel. During the conference, I addressed the issue of governments, not just state governments, relying on fake revenue data when creating yearly spending plans.
When you build your budgets based on non-realistic revenue, and add in ever-increasing demands for spending, you create deficits. This is not the way to create fair and truly balanced budgets.
This is not a political problem. It has occurred when Democrats and Republicans have held the governor’s office. This had led me to draft legislation, House Bill 2013
, to create the Joint Revenue Estimate Committee.
The nonpartisan committee could be tasked with producing truly realistic revenue estimates for the Commonwealth. This would provide better and more realistic revenue estimates for budgeting purposes and would create a more transparent government to better serve the people.
Under the bill, 12 members would serve on the committee. The members would include the secretary of Revenue, secretary of the Budget, the majority and minority chairs of the House and Senate Appropriations committees, the director of the Independent Fiscal Office and one member of the public each appointed by the governor, president pro-tempore of the Senate, speaker of the House and minority leaders of the House and Senate.
The committee would have to formulate a joint revenue estimate for the General Fund by Dec. 16 and May 15 each year. This estimate would provide to legislators a realistic view of revenues to better assist with creating a budget. For the taxpayers, it would increase transparency so they can see exactly how much in taxes they are paying. If the committee would fail to agree on a revenue estimate, the governor and General Assembly would use a revenue estimate provided by the Independent Fiscal Office.
But transparency doesn’t end with what money is coming in. To ensure taxpayers know how their money is being spent, I also introduced legislation, House Bill 1843
, to enhance the Transparency Portal website and codify the program so it’s available to taxpayers for decades to come. You may recall this legislation from a previous column I penned.
Ensuring fair, balanced budgets are passed and your tax dollars are spent in a responsible manner comes down to one thing: transparency. This is something I strive to be as a state representative, as I am accountable to those I represent. Additionally, the public simply deserves to know what is happening within their government and with the taxes they pay.
Representative Seth Grove
Pennsylvania House of Representatives
Media Contact: Greg Gross