PA “Middling”

Two alarm bells on Pennsylvania’s spending trends have been rung in the past week. First, a press release from the Auditor General’s office noted that a potential $5 billion gap is looming with stimulus funds drying up, pension costs increasing, and unemployment costs rising. Noting that spending has increased faster than inflation (33.5% vs 18.5% from FY04-FY11) the projected state budget of $28 billion would have to be closer to $24 billion if spending followed the change in the CPI.

An additional report covered in an editorial in the Washington Examiner shows that of the 15 largest states (based on GDP) Pennsylvania is in the "middling" group when measured on economy, fiscal health, housing, and taxes (these variables are quite broad and not defined in the op-ed piece). That means not as healthy as Texas or Virginia, but not as bad as New York or Michigan. The piece, like the Auditor General’s release, points out that the "…stimulus package gave states a reprieve in FY10 by making up roughly 1/3 of their budget shortfall. But that money will dry up in FY11".

So what’s to be done? While some might point to generating a bonanza of revenue from natural gas extraction or the like, it might be worthwhile for the state to seriously consider tying spending growth to an objective measure like inflation.