State- & locally run ‘rackets’

State- & locally run ‘rackets’

Pennsylvania taxpayers will pony up more than $9.6 million to help a wholesale distributor of pharmaceuticals to consolidate two offices into one in eastern Pennsylvania.

Why?

Well, the state says the “investment” in AmerisourceBergen is expected to retain 1,902 jobs across the commonwealth and create 550 jobs over the next five years.

The involuntary taxpayer contribution comes in the form of a $1.6 million job-creation tax credit from the state Department of Community and Economic Development and an $8 million grant from the state’s Redevelopment Assistance Capital Program that, according to the state, will “assist with facility development and construction costs.”

The company will combine two of its offices – in Conshohocken and Chesterbrook – into one new headquarters building.

But why should taxpayers underwrite such a thing? “The State,” of course, argues that the “investment” will retain jobs, create new jobs and “is also expected to spur further redevelopment and job creation.”

But the proper role of government is not to subsidize private business – in fact, Article VIII, Section 8, of the Pennsylvania Constitution expressly bars such activity – but to facilitate economic growth through the least onerous and odoriferous regimen of taxes and regulations possible.

For all – not just those “The State” deems to be a “winner.”

“But, but but…,” counter the purveyors of turning taxpayers into venture capitalists to cover capital costs that should be borne solely by these private enterprises, if not for this public “investment,” there would be no retention, no expansion and no growth.

Really?

In an environment of reasonable taxation and regulation, the private investment no doubt still would be made and, in this case, the public kitty would be richer by, oh, say, $9.6 million.

An annual report by the Pennsylvania Association of School Business Officials and the Pennsylvania Association of School Administrators says that many of the state’s 500 school districts expect to hike taxes next year because of, as the Tribune-Review puts it, a “grim” financial outlook.

Forty-eight percent of the responding districts say they expect their 2018-19 financial condition to be worse than the just concluding school year. And 77 percent of the districts say they expect to include tax hikes in their 2018-19 budgets.

But then there’s this:

A Commonwealth Foundation study found that statewide school district reserves for the 2016-17 school year increased by $139 million – to $4.5 billion.

Indeed, some reserves are prudent. But the same analysis concludes that the commonwealth’s public school districts hold enough in reserves to cut every student a check for $2,860.

The state Auditor General’s Office says school district reserves should not exceed 20 percent of total spending. But nearly half of Pennsylvania’s district exceed that amount.

And as Eric Heyl notes at Patch.com, Pittsburgh Public Schools’ surplus of $187 million for the 2016-17 school year was more than thrice its total spending.

Philadelphia Inquirer columnist John Baer has been railing against this surplus mania for years. Why do these aggregate surpluses continue to rise?

“Well, most districts are happy to have reserves,” he wrote in May 2015, “most lawmakers don’t want their districts unhappy and many lawmakers enjoy lots of campaign contributions from education-related donors.”

But as Baer reminds, “districts can amass money in three accounts, one of which is ‘unassigned,’ a/k/a sitting there.”

“Accounts are interchangeable in ways that allow districts to also raise local taxes to get more money,” he says.

What a racket, eh? And with so many of this commonwealth’s 500 districts saying they expect to raise taxes in the next school year, it looks like the racket will continue, unabated.

Colin McNickle is a senior fellow and media specialist at the Allegheny Institute for Public Policy (cmcnickle@alleghenyinstitute.org).