Jan. 04, 2016

By Rep. Todd Stephens
(R-Montgomery, 151st District)

While I am pleased Gov. Tom Wolf finally signed a partial budget that released funds for our schools and social service agencies, we still have outstanding budget issues to resolve.

For the past six months the budget conversation in Pennsylvania has been riddled with rhetoric, finger-pointing and name calling. While the tone has often overshadowed the substance of the debate, the primary focus of the discussions has been whether and by how much to raise the sales tax and/or Personal Income Tax to provide more funding for education.

After six months of attacks and negotiations, it’s time to change the budget conversation.

The governor’s priority is to increase funding for education; for many of us in the Legislature, preventing broad-based tax increases is the priority. These goals are not mutually exclusive.

Instead of seeking additional revenue from taxpayers, we should repurpose some of our existing spending and consider new innovative financing tools. By thinking outside the box we can fund increases in education and avoid tax increases on working Pennsylvanians.

Corporate welfare

The state budget is awash in corporate welfare – giveaways to hand-picked industries, businesses or geographic areas designed, in theory, to create jobs. Estimates are that corporate welfare costs Pennsylvania taxpayers more than $700 million a year. Unfortunately, this crony capitalism allows the government to pick winners and losers by diverting taxpayer dollars to businesses with the best political connections instead of allowing those who earn it to spend it as they wish.

Statistics examined by the Commonwealth Foundation, found that Pennsylvania was a leader in corporate handouts, but its job growth lagged behind states with less corporate welfare. Overall, 10 states with the highest total subsidies saw slower growth than states with the lowest amount of handouts.

Consider the Race Horse Development Fund (RHDF). Since 2004 we’ve provided up to $250 million per year to the race horse industry. Supporters claim the subsidy helps spur economic growth by providing incentives to breed race horses in Pennsylvania. But for the last five years the number of mares bred in Pennsylvania has declined. As a matter of fact, in 2015, after $2.1 billion in subsidies over 10 years, the number of mares bred was the lowest since 1995 according to an industry publication!

Eliminating or reducing these giveaways could provide funding for education and allow businesses to thrive by using the sound business practices, hard work and innovation most businesses must rely on to succeed.

Social Impact Financing

Across the country, states have tackled these same issues with an innovative tool to help finance qualified government programs. Social Impact Financing allows private investors to finance government programs like high-quality early childhood education that save taxpayer dollars in the long run.

Salt Lake City and Chicago have already used this approach to expand access to high-quality early childhood education. For the past year, following my application, a fellow from Harvard’s Kennedy School has been working in the Pennsylvania Budget Office to develop a social impact financing program for Pennsylvania. I introduced and worked with the administration to develop legislation to allow private sector investors to finance early learning opportunities resulting in taxpayer savings.

This approach can reduce government spending in other budget areas as well. This concept was developed in the U.K. and has been used across the country to reduce government spending on corrections – one of our most expensive budget areas.

Raise funding without raising taxes

It’s time we changed the budget conversation in Harrisburg and closed the books on the 2015-16 budget. Wolf deserves credit for releasing the schools and social service agencies held hostage during this debate, but it’s time we end the acrimony and demonstrate the wisdom to think outside the box, embracing an alternative approach to reach our goals.

By repurposing our existing expenditures and utilizing innovative new financing solutions we can address the governor’s priority of more funding for education, while avoiding the broad-based tax increases that have been the roadblock to finalizing this year’s budget.

Representative Todd Stephens
151st District
Pennsylvania House of Representatives
Media Contact: David Foster
RepToddStephens.com/ Facebook.com/RepToddStephens