Work both sides: Besides budget cuts, Corbett must focus on revenue
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The big question in Harrisburg now is what cuts will Gov. Tom Corbett make to fill a budget hole of $4 billion to $5 billion, but that shouldn't be the only question. Mr. Corbett also needs to find new revenue.
So far, the cost-cutting specified by the new governor would add up to millions -- nothing to scoff at, but nothing approaching billions -- and it won't be easy to carve deeply into the two biggest categories of state spending: education ($11 billion) and public welfare ($8.3 billion).
On education, Mr. Corbett is a proponent of vouchers that would permit parents to use state dollars to pay for private school tuition. However, the proposal in the Legislature, Senate Bill 1, would start small and thus is not likely to dramatically change the $8 billion price tag for local school district funding in the short term. Mr. Corbett's task will be complicated by his stated desire to fund early childhood education, programs that received increases during the administration of his predecessor, Ed Rendell.
Welfare funding is equally problematic. Medicaid, which provides health care for Americans with low incomes and those who are disabled, is an expensive program whose costs are shared with the federal government. It's the third-largest domestic program in the federal budget, representing 8 percent of all such spending behind Social Security (20 percent) and Medicare (15 percent), according to a report published last week by the Kaiser Family Foundation.
In Pennsylvania, 24 percent of the General Fund is spent on Medicaid. Because a little more than half of the program's expenses are paid by Uncle Sam, that means every state dollar cut out of Medicaid actually requires $2 worth of service cuts. Also, there are tight regulations that restrict what coverage can and cannot be altered.
Not to say it cannot be done. Governors in other states, Republicans and Democrats alike, are proposing some dramatic changes, including limiting coverage for doctor visits and prescription drugs or eliminating dental, vision, podiatry or hospice care.
The bulk of Medicaid coverage goes to children and parents, but 75 percent of the spending is on behalf of elderly and disabled participants, according to the Kaiser report. It's important to remember who is likely to suffer the consequences if the budget ax falls. Do Pennsylvanians really want budgetary changes that fall hardest on the state's most vulnerable citizens?
What Pennsylvanians have said, in survey after survey, is that they support additional taxes on tobacco. Yet this state is the only one that doesn't impose a levy on the smokeless varieties. Likewise, Pennsylvania stands alone among Marcellus Shale gas-producing states because it doesn't charge an extraction tax.
Mr. Corbett pledged to avoid tax increases during his campaign for governor, and he is correct that this is no time for a hike in broad-based levies. However, he shouldn't be afraid to establish taxes on tobacco and gas extraction that residents say are both necessary and fair, measures that together could raise hundreds of millions.
Likewise, Mr. Corbett should move forward with his stated intention to privatize state liquor stores, a business the state has no business being in. Proponents estimate that a selloff could bring in $2 billion or more.
If he wants a state that keeps taxes in check while preserving essential services, Mr. Corbett must be prepared to operate on both sides of the budget ledger -- making judicious cuts while creating new revenue.
First Published February 2, 2011 12:00 am