Thoughts on the Budget deal

This may yet be premature, but…the fact that we once again appear to be close to a budget deal in Harrisburg is bringing tentative sighs of relief across the Commonwealth. However, there is a lot that should be said about the deal and the process before we move onto the next thing. So, before we forget…

We came uncomfortably close to enacting a so-called ‘back-end referendum’ which would have required voter approval for all school tax increases. While the idea has an intrinsic appeal, few taxpayers understand what the potential consequences of such legislation would have been.

For example, most of the public wouldn’t know that school districts and their boards have little control over the main drivers of property tax increases: health care, special education, and the pension liability, the last two being state mandates. Without the ability to raise taxes when necessary, each year fewer funds would be available for the education of students.  This is particularly problematic for districts that must raise the lion's share of their revenue from local taxes. It’s hard not to see this as an attack on the idea of public education, itself. 

As we know from experience, passing a referendum is an extraordinarily difficult thing to do, further compounded by the fact that this requirement would have made school taxes the only tax that people get to vote on directly. Passing a referendum requires considerable administrative time and effort – time and effort that would be taken away from the more important task of educating students. Due to the uncertainty involved, two budgets would have to be prepared, one for each scenario, and you can pretty much forget about multi-year budget planning. And, of course, you never know what you’re going to get from the state, since they generally can’t pass a budget on time.

Ironically, besides being bad policy, the concept of referendum is also deeply undemocratic. There already exists a time-honored and often-used mechanism for affecting school board actions you don’t agree with. They’re called elections! There is no evidence to support the idea that state legislators are somehow in a better position than locally elected school boards to determine what is in the best interest of local schools and communities.

We also came perilously close to eliminating the property tax altogether. While this idea is certainly worth considering – the reliance on the property tax is one of the main drivers of education funding inequities - this is not the sort of change one should make in the middle of the night behind closed doors, with no public discussion!

One thing that can be said in favor of the property tax is that it is relatively progressive: on average, wealthier people pay more, and allowances can be made for retired people on fixed incomes. Another thing that can be said is that, unlike sales and income taxes, property taxes are relatively stable and predictable. Was any consideration given to what would happen to education funding in an economic downturn?  Or how education funds would now be distributed?

Which brings me to my larger point: it is the job of our legislators to be aware of the consequences of the legislation they pass. Isn’t that what they’re being paid to do? Otherwise, who needs a legislature? We could have the public vote directly on everything.

Here’s one more example of what struck me as questionable process: tying the budget negotiations to pension ‘reform’.  Unless changes to the pension system would have significantly impacted next year’s budget - something the current proposal doesn’t do - the merits of making changes to the public pension system really deserves its own conversation. And that conversation ought to include any potential impact on public schools.

However, it should be noted that the hybrid pension proposal is not half-bad as these things go; it’s actually pretty close to what was proposed by PSBA over eight years ago. But the House initially voted it down by an astonishing 149-52. On one side, legislators insisted on keeping the system as it is; on the other, they wanted to eliminate the public pension system altogether. Only 26% of our legislators were willing to accept the compromise. Both then and now, it’s amazing how many people are willing to hold out for what they see as the ‘perfect’ solution, rather than accept that which is merely ‘good’.

Finally, on to the budget itself…  It’s also astonishing to me that we're still willing to subsidize the Marcellus Shale industry. Instead of enacting a reasonable extraction tax, we’re raising sales taxes - which are by nature regressive, having the greatest impact on those with the least ability to pay.

Incredibly, you actually heard Shale industry defenders saying that were we to enact an extraction tax, the Shale drillers would go elsewhere. Like, where else were they going to go??  The gas is here, in Pennsylvania!  Further, most of the jobs that have been produced by the shale boom are short-term in nature, and they’re being filled by people with experience from out-of-state. By far, the greatest potential benefit to the citizens of Pennsylvania of Marcellus Shale lies in taxing it, which so far, we have refused to do.  

Between the refusal to tax Marcellus shale, or to enact common-sense modifications to the charter school law (which currently subsidizes for-profit charter schools to the tune of hundreds of millions of dollars per year), legislators are leaving on the table in the neighborhood of a billion dollars a year. Why? Because they won’t stand up to the special interest groups that fund many of their election campaigns.  It’s really as outrageous as it sounds.

So while I’m relieved that Pennsylvania (once again) appears to be on the verge of a budget deal, I can’t say I’m really happy about it. We could have done a lot better.