Op-Ed: Taxes, Spending and the Economy

 

The General Assembly recently finished its work on the 2016-17 state budget, which thankfully avoided many of the problems we experienced in 2015.

The adopted budget increased spending by 4.7% and required a $1.3 billion revenue package, including new taxes on digital downloads, tobacco, and other items.  While I supported the budget, I could not vote to support the new taxes.

Like everyone, I was pleased that a compromise solution was reached in a far timelier manner then last year, however I can’t help but think the General Assembly missed another opportunity to position our state for economic growth and ensure all our citizens have the chance to experience earned success.

Since I have been in Harrisburg, political leaders have presented the public with what I believe is a false choice – to balance the budget by either cutting spending or raising taxes.  This “either/or” scenario ignores what I believe is the best way to generate new and recurring revenue for government – through increased economic activity and output.

A strong, working economy built on the free enterprise system is achievable if state government would adopt and foster policies that promote it.  Instead of reaching back into the pocketbooks of taxpayers, state government should be looking at ways to expand our economy, reduce unemployment and underemployment, and foster manufacturing and other industrial processes.

The difference between these two choices is real and it greatly matters.

One approach, which is often the preferred method for government, takes from the economy through additional taxes.  This results in a reduction in economic output and further limits opportunity for individuals, families, businesses and industry who now have less disposable income to spend, save or invest.

Additionally, this vicious cycle of new taxes can also create additional financial stress on fixed and low-income people.  As these citizens are required to give government more of their already limited means, they have less to meet their needs.  In some cases, this results in driving them to use public programs to make up the difference, further increasing costs for taxpayers, resulting in more dependence on government, not less.

And even though state government realizes an initial benefit from the taxes it increases or creates, it eventually suffers from the subsequent economic stagnation that results, necessitating more or new taxes again in the future, which only further harms the economy.

The other approach, which is predicated on a well-balanced and strong economy, allows everyone – including government – to benefit from increased revenues through growth.

Here, government spurs economic activity through policies that allow the private sector to expand, not contract.  Pro-growth strategies are used to grow our economy by working to control or reduce anti-businesses taxes, such as Pennsylvania’s Corporate Net Income Tax.

Additionally, unnecessarily high-cost regulations are avoided in an effort to promote additional production and output.  Government should partner with the private sector to enhance economic opportunity and allow small businesses, entrepreneurs and industry to grow, to the benefit of working people.

In this model, everyone wins.  Businesses and industry flourish by fully experiencing their economic potential.  People have meaningful employment opportunities and can take advantage of additional wage growth, advancement or other job prospects.  And state government realizes additional revenue based on existing tax structures to pay its bills, rather than new or increased taxes.

However, revenue is only one side of the equation.

These economic realities are strained even more when you consider that of the $1.4 billion increase in new spending for 2016-17, $1.2 billion of it was due to mandated cost increases.  In total, non-mandated (discretionary) spending only went up only 1.8%.

If those cost-drivers that we know exist do not get addressed, no amount of pro-growth policy will meet the financial challenges that await us.

For example, one of the largest cost-drivers for our state budget is human services.  Despite this, Governor Wolf recently expanded Medicaid through the Affordable Care Act to an additional 500,000 people.  Now, in addition to trying to manage the high year-to-year increases in the existing programs, these new, additional costs will be coming due as well.

Another example is the pension system for public employees and teachers – which has strangled both the state budget and our local school district budgets.

In the 2016-17 budget, $345 million in new contributions was necessary to pay for teacher pensions and $140 million more was needed for state employee pensions.  The total taxpayer contributions for public pensions now tops $5.8 billion each year, which increasingly limits our ability to fund other needed programs, particularly those K-12 initiatives that would benefit Pennsylvania students.

And for years we have avoided having a substantive discussion on seriously identifying waste, fraud and abuse in state government spending, programs and services.  Pennsylvania can no longer – nor could it ever – afford to pay or financially reward cheaters.  That must end.

In the end, I believe that there is a better way.

The goals of having a responsible spending plan as well as consistent revenues are not mutually exclusive.  However, how we accomplish those goals makes all the difference.

I intend to promote pro-growth ideas that will help ensure that Pennsylvania will be a place where everyone has opportunity.

Sen. Aument Votes Against Budget Revenue Package

 

http://av.pasenategop.com/aument/2016/0716/budget.mp3

HARRISBURG – Senator Ryan Aument (R-Landisville) today voted against a $1.3 billion legislative revenue package that is intended to fully fund the 2016-17 state budget, which became law on July 12, 2016, without Governor Wolf’s signature.

“After careful consideration, I simply could not support today’s effort to raise more money for government through imposing additional taxes,” said Sen. Aument.  “I believe that there are other sources of revenue that would have been more appropriate to consider.”

Under the revenue package considered by the Senate, cigarette taxes were increased by $1 per pack, a new tobacco products tax was levied on smokeless tobacco, roll-you-own tobacco and electronic cigarettes, the state sales and use tax is now applied to digital downloads, the personal income tax will now be imposed on lottery winnings, and the rate of the bank shares tax was increased.

“These new taxes might help state government pay its bills, but they only further harm our Commonwealth’s already challenged economy and will disproportionately hurt Lancaster County’s agriculture industries and farmers,” said Sen. Aument.

Sen. Aument noted that one of the primary reasons that the new revenue was necessary was because spending increased by 4.7 percent over 2015-16 levels, largely due to mandated costs associated with public sector pensions, human services and corrections.

“For too many years lawmakers have lacked the political courage to tackle the difficult, but necessary reforms to finally address the cost-drivers in our budget that are demanding more and more taxpayer monies,” said Sen. Aument.  “While today’s vote raises $1.3 billion, these new monies pale in comparison to what will be needed in the years to come without substantive changes to pensions, human services and how we manage our corrections system.”

As an example of uncontrolled mandated increases in spending, Sen. Aument cited the need for $345 million in new contributions to pay for teacher pensions and $140 million more for state employee pensions.  The total state government contributions for public pensions now tops $5.8 billion each year.

Sen. Aument also expressed frustration with the process by which the new revenue was derived.

“Pennsylvania has both a spending and revenue problem, and we absolutely have to get better at managing both,” said Sen. Aument.  “I believe that the best way to fund government is to have a strong economy, low unemployment and be a state that welcomes entrepreneurs, business and industry.  We can naturally grow our way to prosperity by promoting good economic policies, which benefits everyone,” said the Senator.

Additionally, in the development of the new revenue plan, Sen. Aument pointed out that there was little effort to further identify waste, fraud and abuse in state government programs and services, which could have alleviated the necessity to impose as many additional taxes.  “Lawmakers should not ask people to pay more until we make every effort to stop cheaters and reclaim the monies they have taken,” said Sen. Aument.

Finally, Sen. Aument suggested that the General Assembly take a serious look at various budget reform proposals that have been introduced, including the use of a biennial budget, a zero-based or performance based budget, and a default budget.

“The fact that the Governor allowed an annual spending plan to become law without the requisite revenue to fully fund it, which violates the state’s constitution, is just another prime example of why we desperately need to change how we budget,” said the Senator.

CONTACT:  Jake Smeltz, (717) 787-4420

 

Sen. Aument Supports 2016-17 State Budget

HARRISBURG – Senator Ryan Aument (R-Landisville) today praised the General Assembly who overwhelmingly approved the 2016-17 state budget, sending it to Governor Wolf to sign into law.

“I am pleased to stand with the overwhelming majority of Republicans and Democrats to deliver an on-time, fiscally responsible state spending plan to Governor Wolf,” said Sen. Aument.  “My goal is to continue to promote opportunity for all people, and I believe that this budget moves our Commonwealth in that direction.”

The 2016-17 budget increases spending by $1.4 billion, a 4.7 percent increase over 2015-16 levels.  In February, Governor Wolf requested $3.2 billion more in spending.

Increases in the budget focused on investments in education.  An additional $200 million was included for basic education, as well as a $25 million increase for pre-K, a $5 million increase for Head Start and $20 million more for special education.

“I am hopeful that the people of Pennsylvania will recognize that the General Assembly continues to make education a priority,” said Sen. Aument.  “While I am happy to support increased funding, we must not forget that money alone is not the answer.  Substantive educational reforms must continue to be pursued so that the large investments we are making will produce results consistent with those contributions.”

Another area of the budget that received increases was the Department of Agriculture.  Overall, the department’s budget was increased by 5 percent.  The General Assembly restored and expanded funding for Agricultural Excellence, Agricultural Research, Farmers’ Market Food Coupons, Agricultural Promotion, Education and Exports, Hardwoods Research and Promotion, Livestock Show and Open Dairy Show.

“Pennsylvania’s economy cannot work properly without a strong agricultural sector,” said Sen. Aument.  “These modest investments today will pay big economic dividends tomorrow.  Our farmers and those in production agriculture which are the backbone of Lancaster County’s economy need to know that we support them.”

In response to the opioid crisis that is spreading across Pennsylvania, the General Assembly included a $15 million appropriation in the 2016-17 budget.

“I have heard from many people in the 36th Senatorial District who are seeing heroin and prescription drug abuse more often, and we have to get out in front of this terrible disease now, before it becomes an epidemic,” said Sen. Aument.  “I am hopeful that these monies will be used to assist those who need it the most and help eradicate this plague that is destroying individuals, families and communities.”

Sen. Aument noted that one of the primary reasons that spending increased by 4.7 percent over last year was due to mandated costs associated with public sector pensions, human services and corrections.

“I cannot stress enough the need to take affirmative and strong action to address our Commonwealth’s crippling pension crisis,” said Sen. Aument, citing that $345 million in new spending was being directed to pay for teacher pensions and $140 million more was required for state employee pensions.

“We absolutely must finally resolve to reform these costly systems.  Overly generous public sector pensions are threatening the economic wellbeing of our state and school districts and without intervention, they will continue to drain scarce tax dollars away from services and programs that our citizens need.”

Finally, Sen. Aument applauded the fact that the 2016-17 budget was crafted in a bipartisan manner and did not increase any broad-based taxes, including the state sales tax or the personal income tax.

“The best way to manage and fund government is to have a strong economy, low unemployment and be a state that welcomes entrepreneurs, business and industry,” said Sen. Aument.  “We can naturally grow our way to prosperity by promoting good economic policies, which benefits everyone,” said the Senator.

CONTACT:  Jake Smeltz, (717) 787-4420

 

 

State Budget Gridlock Necessitates Process Reforms

Senator Ryan P. Aument

As the spring season quickly approaches us, the bleakness of winter will hopefully soon be fading away as we welcome warmer weather that will usher in the annual rite of renewal.

Farmers will return to the beautiful fields in Lancaster County, gardens will again be planted, flowers will begin to bloom and children will again play outside under the brilliance of sunny days that quietly move us toward summertime.

Unfortunately, while we greet the ending of the cold, dark days of wintertime, we cannot yet celebrate the end of the ongoing state budget issues facing our Commonwealth.

While the 2015-16 state budget has been signed into law, Governor Wolf’s line-item vetoes of approximately $6 billion in spending, including 65% of the Department of Agriculture’s funding, $3 billion in education funding, $1 billion in funding to keep our state prisons operating, and a host of other services and programs, leaves work to be done on this spending plan.

Now, the General Assembly begins work on the 2016-17 state budget, and for the first time in modern Pennsylvania history, we do so without the benefit of a completed current fiscal year’s budget.

The people of Pennsylvania are rightfully concerned about the prospects of another budget stalemate. As our Governor continues to advocate for his priorities – which include additional taxes and increased spending – the members of the General Assembly will likely continue to be advocates for the positions their constituents support.

What has become increasingly clear is that our Commonwealth needs to seriously consider ways to improve our budget process to prevent what occurred in 2015, which included the unnecessary disruptions of state funding to our human services providers who help the most vulnerable in our communities, our schools who have the important task of educating our children, as well as other critical programs and services.

Simply put, we need to find a way to allow the important debates over taxes and spending to occur without harming the people we swore an oath to protect and defend.

This is why I have joined with some of my colleagues in the Senate to propose various budget process reforms. Fortunately, legislators have the power to fix the current broken process, and I am committed to working toward that end.

An idea I have advanced is a biennial, or two-year budget cycle.

Through a constitutional amendment, this proposal would require the enactment of a budget covering a two-year period.  The goal is to increase efficiency and productivity in state government, and encourage long-range planning among state agencies and other entities receiving state appropriations.

In the last ten years, Pennsylvania has only seen an on-time, enacted budget three times.  As we have seen, consistently ignoring the statutory deadline only hurts our state and its people – change is necessary.

A two-year budget cycle would help to facilitate comprehensive planning by incorporating a long-term perspective and allow for increased predictability in the budget process which would reduce the costs of both time and resources.  Such a process would also allow for in-depth review and evaluation of state programs and encourage outcome-focused budgeting.

Our current annual budget process is time-consuming, repetitive, and inefficient.  Repeating this fight every year only contributes to the complexity of the budget process and encourages delay.

Another idea being sponsored in the Senate is the use of a default budget, which would take effect if a spending plan is not approved by July 1.

Under this proposal, funding would continue to flow without interruption at 80% of the spending levels approved from the prior year, leaving room for negotiators to work out their differences without severe program or service disruptions.

A third budget reform concept is moving Pennsylvania towards a zero-based, or performance based budget. This would require all departments and agencies to justify their budget requests beginning with dollar one, for all existing as well as proposed programs for each fiscal year.

Common in the private sector, this type of budgeting would allow us to better keep control of expenses and outcomes, and be another critical check on the growth of state government services and programs.

The goal would be to highlight those programs that are exceptional and to identify those areas of our government that are ineffective. Zero-based budgets help manage existing resources better and help make the case when addition resources are necessary. Like individuals, families and businesses do every day, we should be supporting programs and services that work and reform or eliminate ones that do not.

I am proud to offer my ideas and to work with other reform-minded Senators on their ideas.

It is my hope that, like a breath of fresh spring air, maybe these proposals will promote a renewal in our ability to effectively govern – together.

Sen. Aument Says It’s Time to Fully Fund Agriculture

 

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HARRISBURG – Senator Ryan Aument (R-Landisville) today joined colleagues from the Agriculture and Rural Affairs Committees of the House of Representatives and Senate to discuss the impact that Governor Wolf’s line-item vetoes of agriculture services and programs are having on Pennsylvania farmers and allied agriculture industries.

“It’s shameful that we even have to have a discussion about not funding agriculture,” said Sen. Aument, who noted that Lancaster County’s and Pennsylvania’s economy is driven by the agriculture industry. “Since Governor Wolf vetoed 65 percent of the Department of Agriculture’s budget, I have not stopped fielding calls from concerned students, individuals and businesses,” said Sen. Aument.

On December 23, 2015, the General Assembly passed House Bill 1460, a General Appropriations Act that provided $151.5 million in funding to the Department of Agriculture’s programs and services for the 2015-16 fiscal year. On December 27, 2015, Governor Wolf signed House Bill 1460 into law, but exercised his line-item veto authority to reduce the department’s funding to $52.9 million.

The Governor fully eliminated funding for the following line items: agricultural excellence, agricultural research, agricultural promotion, education and exports, hardwood research and promotion, livestock show, open dairy show, youth shows, the transfer to the Agricultural College Land Script Fund, the animal health and diagnostic commission, the Pennsylvania veterinary lab, payments to Pennsylvania fairs, and funding for veterinary activities and the center for infectious disease provided by the University of Pennsylvania.

“I cannot understand why these critical programs and services were victim to the Governor’s veto pen,” said Sen. Aument. “At no time during the 2015 budget impasse were there ever any disagreements over funding agriculture, so these devastating cuts make no sense at all.”

Testifying at the public hearing today were Secretary of Agriculture, Russell Redding, Nicholas Jones and Dr. Richard Roush from Penn State University, Dr. Vincent Prince and Dr. Joan Hendricks from the University of Pennsylvania, Karoline Kent, former President of the Pennsylvania 4-H, Joel Rotz of the Pennsylvania Farm Bureau and a representative from the PennAg Industries Association.

“I applaud these testifiers who came to speak up for agriculture and all that it means to Lancaster County and Pennsylvania,” said Sen. Aument. “They are right – we need to fully fund these essential programs and services. I am particularly troubled by the needless elimination of monies for the Animal Health and Diagnostic Commission, the Pennsylvania Veterinary Lab and the University of Pennsylvania.”

Sen. Aument noted that the $50.5 million appropriation for the Transfer to the Agricultural College Land Scrip Fund that was zeroed out by Governor Wolf has pushed Pennsylvania’s agriculture extension services to the brink of closure.

“I have to question whether Governor Wolf understands how important this funding is to agriculture extension services, which are now on the verge of shutting down,” said Sen. Aument. “Just this week it was reported in Lancaster Newspapers that the local Penn State Extension office, a 100-year old educational agency that serves farmers, 4-H clubs and the public will close if these monies are not restored.”

During the hearing, Sen. Aument highlighted the concerns he has received from people all across the 36th Senatorial District by reading a letter written by a concerned student who participates in FFA school programs and who is a member of the local 4-H club.

“I have heard from countless constituents who question the priorities of Governor Wolf’s administration,” said Sen. Aument. “I think the young people who have reached out to me on this issue have a better grasp on the reality of this situation than some of the professionals making decisions in our state government.”

Sen. Aument is a co-prime sponsor of Senate Bill 1120, a supplemental appropriations bill that would restore many of the funding cuts made to the Department of Agriculture. “I stand ready to vote and vote again to support our agriculture industry,” said Sen. Aument. “I will not allow this important component to our economy and way of life to be victimized by a political fight that has nothing to do with agriculture programs and services.”

 

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CONTACT: Jake Smeltz, (717) 787-4420

Sen. Aument Reacts to Governor Wolf’s Second Budget Proposal

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HARRISBURG – Senator Ryan Aument (R-Landisville) today issued the following statement on Governor Wolf’s second budget proposal, which was submitted to the General Assembly in a Joint Session of the House of Representatives and Senate:

One year ago we welcomed a new and ‘different kind of’ Governor. He promised the people of Lancaster County and all Pennsylvanians that he would promote schools that teach, government that works and jobs that pay.

To achieve those goals, his first budget proposed $4.7 billion in spending increases, which required a 20.5% increase in the personal income tax, 10% increase (and expansion) of the sales and use tax, and increases in other taxes and as well as the imposition of new taxes.

Throughout 2015, the General Assembly considered the Governor’s requests, and time and again those increases failed to receive a majority vote in both the House and Senate. I also personally heard from many constituents, business owners and others that were adamant that state government is already big and expensive enough.

Instead, an affordable spending plan was adopted in December, which Governor Wolf subsequently signed into law, while also line-item vetoing approximately $6 billion. This has left the important work of the 2015-16 budget unfinished.

Today, Governor Wolf has offered his second budget address, which again calls for unaffordable, unsustainable increases in spending. To be sure, if the Governor’s proposal were to become law, it would absolutely require additional taxes.

This may be what Governor Wolf would like, but it is not what the people of the 36th Senatorial District believe is best. Further, this is approach completely fails the goals that Governor Wolf set forward when he first assumed office.

For the first time in modern Pennsylvania history, our Governor has now offered a second budget without completing the first one, and for an entire year, critical human service programs and other programs were denied state funding. Certainly that is not government that works.

By vetoing billions in funding for our schools, the Governor failed to fully fund them for the 2015-16 year. How does that promote schools that teach, especially when many had to borrow money to operate or were nearly forced to close due to lack of state funding support?

And taking more money from a person’s paycheck through higher personal income higher taxes means jobs will pay less, not more.

Some have argued that the disagreements between Governor Wolf and the General Assembly are partisan. This is not true at all. The debates we are having about the future of our state are too important to be left to petty politics.

Instead, we’re engaged in a consequential discussion about the future of Lancaster County and Pennsylvania – about how best to create a society where everyone has the opportunity to succeed.

I believe that this happens through the promotion of the free enterprise system, excellent schools, strong families and vibrant communities and I look forward to working with my colleagues in the General Assembly and the Governor to accomplish those goals.

CONTACT: Jake Smeltz, (717) 787-4420

It’s Time to Reform Pennsylvania’s Budget Process

 

by Senator Ryan P. Aument

This week Governor Wolf will deliver his second budget address to the General Assembly to outline his priorities and ideas for the 2016-17 fiscal year.

Remarkably – and for the first time in modern Pennsylvania history – our Governor will address the General Assembly without the work for the current fiscal year’s spending plan being finalized.

Last year we experienced the longest budget stalemate ever, and for many, it remains unresolved. Today, our schools, agricultural programs, corrections department, hospitals, and many health care related programs remain either underfunded or not funded at all.

During the past several weeks, I traveled the 36th Senatorial District to meet with school Superintendents and other school district leaders to talk about the impact that the state budget impasse has had on their operations, to learn about the challenges they face in trying to adopt preliminary school budgets with so much left undone in Harrisburg, and to hear other issues of concern to them as they do the important work of educating our children.

I also spoke with many residents, business leaders and others who expressed to me that the ongoing budget dispute was not just disruptive – it was economically harmful, as nonprofits and others had to actually borrow money to continue to operate in the absence of state funding.

Certainly, we can all agree that in today’s economy, wasting money – for any reason, including failing to enact a timely state budget – is inappropriate and takes away from the core mission of our social service agencies, schools and other nonprofit partners who do critical work people depend on.

In response to some of these concerns, last Spring I introduced legislation that would guarantee basic education funding in the event a state budget is not enacted by August 15, which would give the General Assembly and the Governor 45 days after the June 30 budget deadline to resolve their issues. Had this measure been the law this year, no school district would have ever needed to consider closing their doors or not making timely payroll.

Now, given the extraordinary way the 2015-16 state budget has stalled and knowing that this week we will be asked to consider deliberating on the 2016-17 budget, I believe it is time to begin talking about larger reforms that could be offered to help alleviate the many negative results of the current situation.

For example, my predecessor, Senator Mike Brubaker, offered legislation that would establish a biennial (two-year) budget cycle in Pennsylvania.

The proposal would require the enactment of a budget covering a two-year period, which would coincide with the existing legislative session, which runs on a two year cycle.

There are many benefits to a biennial budget, including increasing efficiency and productivity in state government.

Executive agencies would be given an opportunity to engage in longer-range planning and we could more effectively incorporate a broader, long-term perspective in how, where and what the General Assembly invests in.

Another benefit would be that funding would be more predictable.

Schools and other programs could focus on their primary missions instead of waiting for spending numbers to be finalized and would be able to more effectively manage their resources as a whole instead of having to hedge against unpredictable state contributions. For example, school districts must adopt a preliminary budget now, yet they have no idea of how much state funding they will get until June 30, at the earliest.

Other advantages to biennial budgets would be the ability to negotiate more comprehensive agreements directing funding and state policy and reduce the costs associated with the current annual process, which can be time-consuming, repetitive and inefficient. Repeating this fight every year only contributes to the complexity of the budget process and encourages delay.

For me, one of the largest benefits of a two-year budget cycle would be that the General Assembly could finally invest the time that is necessary to exercise oversight over the executive departments and make sure that the monies we are spending are being put to good use.

One of my biggest frustrations in Harrisburg is the lack of accountability in programs and service delivery. Instead of arguing about how much money we should be spending on an annual basis, I think it would be much more beneficial to agree to a two-year spending figure, then manage the implementation of that spending so we can finally fix the underlying problems that prevent us from achieving our common goals.

Biennial budgeting is not new to Pennsylvania. Until November 3, 1959, the Commonwealth had a biennial budget.

I believe that it may be time to revisit the decision to move away from biennial budgets in favor of annual spending plans.

While this will not immediately resolve the very real disagreements that are occurring over the future of our state – debates including whether or not to raise taxes and drastically increase spending – we all need to promote reforms that offer ways to better manage state government to the benefit of the people of Pennsylvania.