RENDELL BLUEPRINT: TOO MUCH, TOO FAST, TOO FAR?
February 2007
By VINCENT P. CAROCCI
As the House and Senate Appropriations committees prepare to take their first in-depth look at the broad blueprint Gov. Edward G. Rendell proposed for Pennsylvania early this month, the overriding question to be answered once the issue ultimately is joined is this: By reaching so far for so much so fast, did the Governor help or harm his cause?
The agenda the Governor laid out the first week in February in his annual budget message to a joint session of the General Assembly was called by politicians and pundits alike everything from “ambitious” and “aggressive” on the one hand to “bold” and “visionary” on the other. What it wasn’t called in any quarter, by friend or foe, is “timid.”
For good reason. The Governor’s program touched on major subjects ranging from universal health care to alternative sources of energy; from additional sources of dedicated funding and increased spending on the highway and mass transit demands of the Commonwealth to extended and accelerated property tax relief for all homeowners in the state.
Rendell proposed to pay for these expensive initiatives in a variety of ways, primary among them: A 3 percent payroll tax on employers who do not offer health care to their employees; a 1 percent increase in the state’s 6 percent sales tax; a tax on oil company profits generated by business activity within the Commonwealth; and leasing the Pennsylvania Turnpike, a multi-multi-million-dollar Commonwealth asset, to the private sector.
On reflection, one might wonder whether “ambitious” or “bold” actually did the Governor’s agenda justice. Whether his audacity—Rendell, himself, has never been called "timid” during his long, extended and largely successful political career—proves to be an asset or a detriment to his program is something only the coming months can answer in particular detail. One can argue the question either way at this point.
Peter DeCoursey, Bureau Chief for Capitolwire.com, an Internet news service providing extensive coverage of Pennsylvania politics and public policymaking from the State Capitol, suggests, for one, that Rendell advanced his cause in reaching so far as he did. DeCoursey put it this way for his reading public:
…”Rendell has charted out much of the ground he plans to cover not just in 2007 but by 2010. He will push the legislature, make up fake deadlines, watch them (the deadlines) pass without action…and, when he can, he will squeeze through…as much as he can. Then he’ll start over again.” DeCoursey reminded his audience that was Rendell’s pattern for much of his first term. The Governor proposed to legalize slot machines in racetrack casinos for property tax relief revenues in early 2003; he got it in June of 2006. His economic revitalization plan was unveiled in 2003; enacted in 2004. Wrote DeCoursey: “He doesn’t think in budget years, but in terms of relentlessly pressing forward, getting as much as he can and fighting again next year.”
Largely lost in the breadth of the Governor’s discourse was the structural deficit confronting the Commonwealth just to balance the 2007-08 state budget come June 30 of next year. Democratic budget analysts have fixed that shortfall at almost $2 billion—the Rendell initiatives aside. Two-thirds of the $1.3 billion to be raised by hiking the state’s 6 percent sales tax by 1 percent as the governor proposed would be dedicated to meeting that shortfall.
The Governor’s position wasn’t helped in a public relations context. Most of the media coverage seemed to give short shrift to the deficit and focused, instead, on the remaining 1/3 of the sales tax increase to be assigned to accelerating property tax relief to more Pennsylvania homeowners (while awaiting an adequate return from Pennsylvania gaming revenues dedicated to that goal).
When prior state Administrations of relatively recent vintage faced revenue shortfalls of the magnitude facing this one, the conventional approach of the incumbent Governors was to lay out the problem in its most stark terms, essentially forego other initiatives as well-intended but unaffordable under existing circumstances and direct the Legislature’s attention primarily if not solely on restoring the Commonwealth to fiscal solvency.
Gov. Milton Shapp certainly took that approach in 1971. Within 60 days of his inauguration, the new governor had to propose new taxes not only to balance his first budget for fiscal 1971-72, but also to pay for the remaining three months of the budget he inherited for the then-current fiscal year of 1970-71. The fiscal dilemma of the Commonwealth—the prior Administration and the General Assembly were unable to agree on a full 12-month budget—came as no surprise, however. It was the critical issue of the 1970 gubernatorial campaign. Businessman Shapp told the electorate that only hard decisions (code words for taxes) could restore the fiscal foundation of the Commonwealth and that his private sector background best qualified him to deal the problem. The electorate bought his argument. Democrat Shapp solved the issue by proposing and achieving enactment of the first state Personal Income Tax in Commonwealth history. The fact that the dimensions of the fiscal crisis by the time of his inauguration were so well established, and abetted by the fact that he was working with a Democratic-controlled legislature thanks to the first Democrat state Senate in 35 years, made a relatively timely solution possible.
Twenty years later, another Democrat, Gov. Robert P. Casey, was confronted with a budget shortfall approaching $1 billion when the bottom of the national economy fell out in the Fall of 1990 as his overwhelming re-election campaign was heading into its homestretch. Casey saw the economic uncertainty on the horizon. He told the electorate repeatedly during the campaign that he could not renew the pledge of his first term not to raise taxes over the course of the next four years. Casey cut almost a quarter of a billion dollars from state spending, laid off almost 2,000 state employees, and ordered a payless payday for everyone (himself and his senior staff included) who remained on the payroll. Still, when he proposed his 1991-92 state budget within weeks of his second-term inaugural, he had to call for tax increases in the neighborhood of three-quarters of a billion dollars to bring the state into fiscal balance. It took the better part of eight very contentious and politically difficult months to get it done in August of 1991. By the time the solution was at hand, the price tag had jumped to approximately $3 billion. Those who supported those revenue enhancements (another code word for taxes) essentially took the position if they were going to have raise taxes and/or fees by that amount, they needed something to take home with them for their effort—like increased school, highway or community aid for their districts. Hence, the $3 billion settlement figure.
There was a principle lesson for students of state government to take from those two episodes. While the political principals might have argued over the scope or the responsibility for the situation, the reality of the revenue shortfall was never in doubt. It wasn’t a case of do we really need to do this? It was a case how can we settle the matter with the least pain to the taxpaying public who had the largest personal stake in the outcome.
The Rendell approach, on the other hand, courageously or foolishly as events ultimately will prove, ignores that lesson. Rather by its very dimensions, it runs the risk of reaching so far in so many ways as to disguise the true depth of the revenue needs of the Commonwealth. It may prove too much for the citizenry to absorb, much less support. In the very least, it certainly opens the door to charges of a typical “tax and spend” mindset of an urban Democrat Governor. Newly installed Senate President Pro Tempore Joseph Scarnati (R-Jefferson) took exactly that tack in his post-budget comments (although he protected his political flanks by pledging to work with the Administration where possible and “not be an obstructionist”) and we can expect to hear more of that in the months ahead.
The Governor’s strategy is further compounded by the fact that 50 new members of the General Assembly, 20 percent of the membership, took their first oaths of office last January. They were not part of the deficit problem as it developed over the past year or, for that matter, the past four years. They may not feel any responsibility to be part of the solution, certainly in the magnitude the Governor proposed. Many, in fact, campaigned on dual platforms of state fiscal restraint and substantial reform of the way state government conducted its business.
The Governor’s allies in the General Assembly will have a dual a challenge confronting them in the months ahead. The first is to educate their colleagues, the freshmen in particular, on the depth and immediacy of the problem. Then they will have to sell them on a solution, whatever form that solution ultimately might take. The broad Rendell policy agenda only makes this situation increasingly complex if not costly.
How much of the full plate he proposed will the governor get? The immediate prognosis certainly points to a very long summer and spring ahead in the very least. But the ultimate answer probably won’t be known in one budget or one legislative year. The best advice for those who care about such matters is simply to stay tuned. As Pete DeCoursey posited for his Internet subscribers, this may take awhile…most of the Rendell second term, in fact.
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