2013 Budget Shortfall Blamed on Fiscal Discipline

It was just announced by the state Budget Secretary that the Commonwealth will need to find $750 million in spending cuts to balance the 2012-2013 fiscal year budget. Revenues are continuing to fall short owing to the lingering high unemployment rate and despite some reasonably good private sector job gains.

Predictably, some members of the Legislature were quick to criticize the Governor for not doing enough to stimulate job growth and generate more revenue. Of course, what they mean by stimulate job growth is to borrow money and spend it on public sector projects that will use union labor. And of course, he should have spent any remaining rainy day fund to make sure fewer teachers got laid off. All unionized workers. Notice a pattern?

The problem is that borrowing comes at a cost. Raising taxes is not an option during a recession and balancing the budget is a Constitutional requirement. Thus, when the rainy day fund is inadequate to close a budget gap, spending cuts have to be made. If the previous administration had not insisted on increasing spending at rates well above inflation for two terms, the budget deficit would never have reached the $4 billion mark and the spending cuts would not have been so painful in the current fiscal year.

But for some, spending taxpayers ‘money, whether from taxes or borrowed and paid back out of taxes, is always the answer to budget problems and job creation. Apparently they have not noticed that all the Federal stimulus and deficit spending a long with extraordinarily easy monetary policy has had precious little impact on the rate of job growth nationally, especially in view of the gargantuan amounts of money being spent and created.

Here We Go Again

Once again the Port Authority (PAT) has approved a budget with a funding hole wide enough to drive a bus through. Today they approved a budget with a $47 million deficit. Obviously they are hoping that someone else, namely taxpayers, will bail them out. They have every reason to act this way. Time and time again over the last decade they have stared at a deficit only to see help come fromthe Governor who diverted federal road and bridge money. Meanwhile they have not engaged in any meaningful reforms on their own.

The only difference this time is that the State is facing its own debt problem and bailing out the troubled transit system this time will be very difficult to do. Of course that is not stopping PAT from threatening to cut service by 30 percent and laying off 500 employees. It will be interesting to see if state lawmakers break this cycle and force real reforms or if Harrisburg once again throws more taxpayer money at PAT only to see the problem repeat itself in the future.

Are “Draconian” Cuts Ahead for Port Authority?

The CEO of the Port Authority will go before the board of directors to inform them that the transportation agency is facing a $50.6 million budget deficit for 2010-2011. He claims that unless more revenue comes from the state level, the agency faces "draconian" and "damaging" changes. He claims "the Port Authority that serves us today will not be the Port Authority that exists afterward." Will his fears be realized or is this yet another empty threat at the heads of taxpayers?

Recall that when the state passed Act 44 in 2007, the Port Authority was afforded two new streams of revenues-a poured alcoholic drink tax in Allegheny County and funds from the tolling of Interstate 80. Since then the Federal government denied the application to toll I-80 and the money available for mass transit across the state has been cut in half.

The Port Authority CEO claims that unless more state money is found, weekend and evening services would be cut, routes would be eliminated, and maintenance and service garages would be shuttered.

But this scenario may not have happened had they listened to the Governor’s task force on transportation (2006) and implemented some of their recommendations such as engaging in competitive contracting and moving at least 20 percent of operations to the private sector. Furthermore the task force recognized the high cost of the Port Authority’s labor when compared to other transit agencies around the country and noted that in future contracts concessions would be required from the agency’s labor force. However when time came for a new contract (2008), immediate short-term concessions were not part of the deal and any long-term concessions were minimal at best.

And what does the union have to say on this matter? The transit union chief notes that he agrees the situation is dire and something needs to be done. However don’t count on the union to offer up concessions. Instead he recommends waiting until the state comes up with a fix rather than making cuts.

How nice. Instead of offering to help the bloated agency, he suggests finding new ways to bleed the taxpayers.

Port Authority Facing Deficits


News reports tell us the Port Authority is staring at a $25 million deficit in the current fiscal year, and possibly another $25 million next year. They complain that revenues are down and fringe benefits, especially health care, are rising quickly.


Is anyone surprised?  Back in 2008, the Port Authority Board caved to union demands and agreed to a contract with no savings in it other than far distant pension and health care payments. A savings that could be reversed in future contracts.


The union was threatening a strike that could have savaged the local economy and brought massive hardships to transit users and produced highway traffic tie-ups. And as usual, the Authority blinked.


Thus, the Port Authority will now be forced to (a) go hat in hand to Harrisburg to ask for more money (b) raise fares again and/or (c) reduce service and layoff drivers and mechanics. This is what happens when a financially strapped entity fails to do its duty and stand up to unions. But wait. The management is hamstrung because it dares not take a strike for fear of what happens to the economy and the fact that it might end up losing some of its already slim user base.


So the problem really goes back to Harrisburg and the state government where there is no real effort to take away the transit workers’ right to strike.  Consequently, severe financial problems will continue.  As we have recommended many times, the Port Authority must stop filling vacancies and when 20 positions open up due to attrition and retirements, it should outsource routes those jobs supported.  Over time, the Authority could make a significant dent in the ability of the transit union to overpower the Board in contact negotiations.  We will know the Authority is serious when they announce a complete hiring freeze.