3--The Budget from Hell…
I don’t know if 1991 was a good year for wine, but I do know it wasn’t a good year for Governors across the country…Pennsylvania’s Robert P. Casey included. Call it the case of a failing national economy. Because that’s exactly what it was…and for governors in most states across the country, it posed a host of fiscal problems so serious that it made their public lives just simply terrible. In Pennsylvania, the problem for Governor Casey was compounded by the fact he had just been re-elected to a second term by over a million votes…the largest margin of victory ever bestowed on a successful gubernatorial candidate in state history...and the principal theme of his re-election campaign was that things had never been better in Pennsylvania. The premise, obviously, was that there was more of the same to come in a second Casey term.
Truth was that between 1987 and mid-1990, the economic climate and fiscal strength of Pennsylvania state government had seldom been better…so much so that Casey was able to fulfill his 1986 election campaign pledge not to raise taxes in his first term with no difficulty at all. But now, entering the second term in January of 1991, with the national economy in a virtual free-fall since late October-early November of 1990, the Administration was looking at a very unsettling fiscal predicament. Revenues were down; entitlement expenditures were up; and a large deficit loomed. The combination of circumstances made a tax increase for fiscal 1991-92 all but inevitable. The only question was exactly how substantial the increase was going to be.
The Governor knew from June of 1990 that the Commonwealth’s condition in the new fiscal year beginning July 1 would be very precarious, at best. With a stable national economy, things were going to be very, very tight. If the economy spiraled downward as the national economic indicators suggested it would…well, that spelled disaster. The Governor went to great lengths when he signed the 1990-91 budget to warn the public that hard times may be coming. The state of the economy heading into 1991 was just too fragile, he said. He was very up front in acknowledging that he could not repeat for his second term the pledge he made for his first…that taxes would not be increased. We’d just have to see how the economy played out over the next year, he said in his budget signing remarks. Casey would repeat this warning throughout his fall campaign. The problem was that no one seemed to hear it because the admonition was drowned out by “The Beautiful Day in Pennsylvania” storyline of his re-election campaign.
And the economy did, in fact, turn for the worst as feared. The downtown began in October, a month before the 1990 election. By the time the full impact of the decline had manifested itself in November and December, the election was over and landslide Bob Casey…no longer the “three-time loss from Holy Cross”…was preparing to be inaugurated to a second term.
Heading into Bob Casey’s second term, the 1990 re-election campaign proved to be the easiest part of the equation. Now came the hard part…the part that Adlai Stevenson, so prescient 40 years earlier, called “Governing!” Robert P. Casey’s governing skills were about to be tested as they had not been tested before.
The exact dimensions of the fiscal problems confronting the Commonwealth started to define themselves almost immediately after the Governor’s re-election. What started out in October as a bottoming out of the economy became a plummet by November, with no end in sight. Governor Casey huddled with his fiscal staff and senior advisors in late November…A deficit of major, perhaps massive proportions appeared inevitable…stretching to the neighborhood of $1 billion…and that was after the Governor cut current spending by a quarter of a million dollars and reduced new departmental budget requests by another $750 million. (The Governor also ordered that top executives in his Administration, including himself and his senior staff, go without pay for one biweekly pay period.) The dimensions of the problem were becoming clearer with each passing week. How to break the news to the people of Pennsylvania who had just been told things were never better was another matter. But try we must.
We took our first crack by having the Secretary of Public Welfare write a memorandum to the Secretary of the Budget early in November officially advising him that the state’s medical assistance program for the poor was running a serious shortfall that could not be reversed. We made the memorandum public. A few weeks later, the Budget Secretary sent the Governor a communication that the worsening economy had thrown projected revenue collections totally out of kilter. We made that public, as well. It was not the best of timing, however, because few people were paying attention to matters of state during the Thanksgiving/Christmas holiday season.
The rubber hit the road in January with the Governor’s second inaugural. The sober reality of a multi-million-dollar deficit and a massive tax increase was beginning to set in. The situation was compounded by the fact the Governor decided a salary increase for his office and his cabinet…enacted by the General Assembly in 1987 to take effect in 1991 with the inauguration of a new or re-elected State Administration, whoever that might be…would be implemented on schedule. It was not the best confluence of events. It didn’t help that Mark Singel, Casey’s lieutenant governor, was quoted publicly as saying the Governor would have been better advised to defer on the salary increase.
Meanwhile, the Republican opposition was piling on and enjoying it. After all, they had just been whipped by one million votes. If payback was their aim, they didn’t ignore their opportunity to take their best shot. The firestorm had started. It reached such a fervor when the Governor presented his budget to a joint session of the General Assembly calling for about $1billion-plus in new taxes, House Republicans hooted him. “If you have a better idea, let’s hear it,” the Governor snapped back in an off-the-cuff reaction. It was going to be a long, hard summer in Harrisburg.
Casey, who valued his integrity as much as he loved his family, was having his veracity questioned—by his political opponents, by editorial pages across the state, and by citizens in their everyday conversations. It did not sit well with him. I remember one particular lecture I received from him as the flames were blazing around us. It happened in the Governor’s Office when just he and I were present. The press clippings and the public criticism were wearing on him. He and I had just finished a brief conversation, when he admonished: “We need to fight back hard on this. We’re not going to take this with equanimity!” I recognized it immediately for what it was—a direction for me to abandon my relatively low-key, detached approach to relations with the press corps and fight back aggressively on his behalf. He wanted me out there punching for him, and he wanted to be certain I understood. I did. But a confrontational style did not fit me well. So I doubt I ever satisfied him sufficiently on that score.
The budget took eight months to settle. They were the most difficult eight months of my five years on the job (as press secretary). Taxes were raised about $3 billion. Democratic legislators took the view that if they were going to have to raise taxes, they were going to raise them enough to take something home with them—like more aid to education, more aid to colleges and universities, more programs that benefited their constituencies. Once the budget passed, time began to take its healing course, Casey regained his standing with the public. His integrity was on the road to recovery. The economy started to build again. Sufficiently so that he reduced taxes twice before his term ended. One time around the tax track was enough for him. (I second the motion.) And when he left office, he turned a $500 million surplus and another $500 million in savings to his successor. I’d call that vindication.