For Immediate Release

2/28/07

CONTACT:
PA Senate Republican Communications
(717) 787-6725

Senate Appropriations Committee
Senator Gib Armstrong, Chairman

In his 2007 budget address, Governor Rendell put much of the blame on the federal government for the sizable gap between anticipated state revenue and the amount of money the Governor is pushing to spend.

Ten paragraphs chock-full of numbers laid out his argument about federal cutbacks and unfunded mandates. The most direct passage put it this way: “But the point is clear: to meet the combined impact of these federal cuts and under-funded federal mandates, Pennsylvania taxpayers have been required to shoulder over $2 billion in costs since 2003. This is an extraordinarily heavily (sic) load for us to bear, and it is the direct result of decisions made in Washington, which is trying to balance the federal budget – and the projected $319 billion federal deficit – by foisting on the states the difficult choice between cutting services to citizens or raising state revenues, while at the same time taking credit for cutting federal taxes.”

Budget Secretary Masch carried this argument at today’s hearing in front of the Senate Appropriations Committee. Masch again contended that federal cuts amounted to $2 billion over the past three years, and that the impact in the upcoming budget would be $718 million.

There is considerable irony in the Governor’s complaints about the federal government mirroring what countless local officials say about the proclivities of the Rendell Administration for passing along unfunded state mandates and creating expensive new programs.

That aside, a fair look at the overall numbers suggests that the federal funding impact on the state budget appears far less dire than depicted. The Governor’s own budget book (page C1.9) (PDF) shows the potential reduction in federal funding for fiscal year 2007-2008 to be less severe than the boxcar-sized numbers featured in the Governor’s speech would suggest.

And there is what Paul Harvey calls the rest of the story. As the attached chart (PDF) depicts, the actual amount of federal funding received in Pennsylvania has been substantially larger than what has been conjectured in the budget proposals. Over the last nine fiscal years, only once has federal funding come in at a lesser amount than anticipated. During the Rendell years, the positive differential between what the Governor projects and what the feds provide is particularly pronounced.

Blaming the feds is not a theme original to this year. In his February 2006 budget address, Governor Rendell said: “This budget takes into account enormous federal cuts totaling nearly one billion dollars. Of these cuts, $150 million are due to changes in federal formulas for Medical Assistance and the phase out of Intergovernmental Transfer Funds. And for the first time in the history of this Commonwealth, the budget must include close to $350 million to pay the federal government for the federal Medicare Part D program.* Think about it, Washington has the audacity to charge us for a major new initiative that they enacted, into which we had no input, and which they will manage. The federal government is balancing its budget by shifting its costs onto state budgets. But Budget Secretary Mike Masch and I are determined to ensure that these irresponsible federal budget actions do not deter us from doing what needs to be done to move this state forward.”

Contrary to this rather grim fiscal recitation, the Commonwealth ended up receiving nearly $900 million more in federal funding than Governor Rendell projected in his budget. The source of that information? The Administration’s budget book. So where did the gap go? The answer is that it only existed as an artificial budget ploy.

The unavoidable conclusion – it is the Governor’s spending impulses, rather than alleged federal tightfistedness, largely responsible for the revenue hole in the state budget.

(* Editorial footnote: This transaction reflects that the federal government is now paying for drug costs the states no longer are incurring by virtue of the national legislation.)
 

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