By Christopher Harper
Pennsylvania Gov. Josh Shapiro, a Democrat, faces a fundamental problem: the state doesn’t have enough money to pay for programs he promised in his campaign.
The choice is obvious, either reduce the budget or raise taxes. But he wants to avoid making the tough calls. Instead, he wants to spend $3.5 billion to stabilize transit systems, fund a K-12 education overhaul, and expand the state’s economic development programs.
Pennsylvania has what’s known as a structural deficit. The state’s annual costs, such as paying public servants and providing health care to people who can’t afford it, exceed its yearly tax revenue.
Unlike the federal government, Pennsylvania cannot go into debt to cover its operating expenses. The state constitution prohibits the commonwealth from taking on debt except in a few specific scenarios, such as disaster relief.
Spotlight, an independent news operation, notes that the conundrum will not go away soon. “If Pennsylvania had to rely solely on the tax revenue the Shapiro administration projects to bring in over the next few years, it wouldn’t be able to cover the tab,” the news organization said recently.
The issue affects Pennsylvania’s local governments, which would have to pick up much of the tab. Perhaps more important, the state, which hovers between Democrats and Republicans in presidential contests, may put the Democrats in a bad light in the 2024 election, particularly in the Trump-Biden contest and a U.S. Senate race.
“If you’re serving a larger population with the same number of workers, or if you have costs that are going up and your budget stays flat, often that means that effectively public services have been reduced,” said Josh Goodman, a researcher with the Pew Charitable Trusts.
When the state refuses to increase funding for education and other services, the costs are passed on to counties, school districts, and nonprofits that rely on state dollars, said William Glasgall, senior director of public finance at Volcker Alliance, a good-government group.
“Even without new initiatives, you have rising costs,” Glasgall said. “And if the projection of revenues does not match that, you have a structural deficit.”
Pennsylvania’s failure to address its structural deficit may also have severe consequences if it needs to borrow money. Glasgall said lenders could increase the cost. Even now, the state has one of the worst fiscal ratings in the nation.
Pennsylvania’s divided executive and legislative branches have used various techniques that experts say hide the real cost of government. These include accounting gimmicks, delaying payments to state contractors, leaving job openings unfilled, or flat funding key programs to make the numbers work.
If the Democrats can’t offer their constituencies the usual goodies, the party may face a significant backlash. Alternatively, a tax increase would also not sit well with both parties.
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