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Jerry Shenk


PA: Best of the Worst

by Jerry Shenk
 

Researchers and economists at George Mason University’s Mercatus Center have released a financial solvency study ranking America’s fifty states in descending order. Pennsylvania didn’t appear in the top or among the bottom five.

Pennsylvania came in forty-fifth ďż˝" least-broke of the six worst-run, least fiscally-sound states, but still effectively broke.

Based on audited 2015 financial statements, Mercatus rated each states' ability to fund operations, avoid budget deficits and meet long-term spending requirements and pension liabilities.

The Mercatus study combined with the Tax Foundation’s 2017 report and party control data reveal that the best performing states are low-tax, Republican-run states �" Florida, North and South Dakota, Utah, Wyoming and Nebraska �" and the worst are all high-tax, heavily-Democratic jurisdictions �" New Jersey, Illinois, Massachusetts, Kentucky and Maryland �" just under Pennsylvania, whose finances have worsened in two years.

Investor’s Business Daily observed that, of the bottom twenty-five states, all but five are strongly Democratic; twenty-one of the twenty-five most-solvent states are solidly Republican.

Not only does Pennsylvania risk insolvency, the Tax Foundation’s index ranks Pennsylvania forty-fourth for corporate taxes, seventeenth for individual income taxes, twentieth for sales taxes, forty-fourth for its unemployment insurance tax rate and thirty-second for property taxes. Pennsylvania’s corporate tax rate, unemployment insurance taxes and union-friendly labor regulations rank the Commonwealth among America’s less-business-friendly states, too. State policies discourage new investment, new jobs and robust economic development.

How are those dismal rankings possible? Pennsylvania’s legislature is Republican-dominated, and, until Democrat Tom Wolf’s 2014 election, a Republican was governor, too.

Here’s how: In 2001, Republicans, including Governor Tom Ridge, controlled Pennsylvania’s government when state pensions were increased by 10 percent (25 percent for legislators); Republican Senate majorities helped raise personal income taxes and pass all but one of two-term Democratic Governor Ed Rendell’s profligate budgets; and new Republican majorities in both chambers failed to enact a single major 2010 campaign promise on which they and Republican Governor Tom Corbett ran, but raised Pennsylvania’s gasoline tax, assuring Corbett’s 2014 defeat.

Pennsylvania politicos -- both parties �" tend to share lousy habits. Like irresponsible teenagers flashing dad’s Gold Visa card, both have overspent and over-committed, placing Pennsylvania in fiscal jeopardy. Inevitably, the invoice and the reckoning are coming due.

To relieve Pennsylvania’s pension crisis, in June, the legislature passed a plan mandating changes for future employees but didn’t address current unfunded pension liabilities. Resolving those will require tough choices: negotiated changes to benefits for current employees and/or changing the funding formula.

But, so far, the legislature lacks the political will to act. Both chambers have too many long-serving career Democrats and Republicans who voted to inflate pensions, raise gasoline and personal income taxes, authorize borrowing and pass unrealistic, even unbalanced budgets. Count Pennsylvania in the top six among American jurisdictions that would benefit from term limits.

The Mercatus Center report suggests that, in general, Republican governance is better than the alternative, but Republicans have helped place Pennsyvania in their study’s bottom six.

The certainty that Democratic majorities would have done even worse is small comfort.

http://www.pottsmerc.com/opinion/20170717/jerry-shenk-pa-proud-best-of-the-worst


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