For Immediate Release
Contact: Steve Halvonik 717 787-1381
Auditor General Jack Wagner Offers Gov. Rendell,
General Assembly $1.3 Billion of Budget Suggestions
Says all cost-saving options should be considered before tax increases
HARRISBURG, July 9, 2009 – Auditor General Jack Wagner today suggested $1.3 billion in fiscal savings to Gov. Rendell and the General Assembly in an effort to help end the commonwealth’s budget impasse.
“Pennsylvania is facing its greatest economic crisis since the Great Depression,” Wagner said. “Hard-working Pennsylvanians want to see the commonwealth resolve the budget crisis as soon as possible – without a tax increase. These suggestions show that there is a third way to reach a budget agreement without the need either for severe spending cuts or an increase in the Personal Income Tax.”
Pennsylvania has been without a state budget since June 30. Gov. Rendell and the General Assembly are about $1.3 billion apart in bridging a gap that prevents passage of a budget for the 2009-10 fiscal year.
Wagner said he hoped that his suggestions would inspire the two sides to forge a budget agreement without raising the Personal Income Tax.
“It’s never a good idea to raise taxes during a recession,” Wagner said. “For the sake of all Pennsylvanians, every area of state government should be carefully scrutinized to make sure they are operating efficiently and effectively, and that every tax dollar is being maximized.”
Wagner’s suggestions today build on several proposals he offered during a recent appearance on the Pennsylvania Cable Network. They include:
- Reducing eligibility errors in the state’s Medicaid program, which provides medical assistance to needy citizens. The Department of the Auditor General reported in January that it had found an error rate of 14 percent in a review of nearly 12,000 Medicaid applications in 53 of 67 counties. Medicaid is a $16-billion-a-year program, with approximately 50 percent of the funding provided by the state. “Even if the error rate were only 4 percent, as DPW has recently asserted, eliminating this amount of waste would save Pennsylvania taxpayers $640 million a year,” said Wagner, who emphasized that his goal was to save money by eliminating ineligible individuals from the program, not by cutting the program for those who are truly needy and eligible. Estimated minimum revenue gain: $320 million.
- Increasing efforts to recoup $3.2 billion in uncollected taxes owed to the commonwealth by individual and corporate scofflaws. In a May 17, 2009 article in the Pittsburgh Tribune-Review, the state Department of Revenue confirmed that figure and indicated that it considers about half, or $1.6 billion, to be collectible. Noting that the scofflaw total is equal to the size of the state’s current estimated budget deficit of $3.2 billion, Wagner said, “The commonwealth should make sure that it collects all that it can from tax scofflaws before it asks honest, hard-working taxpayers and struggling businesses to pay one cent more in higher taxes.” He explained that uncollected tax revenues could be obtained with the assistance of private-sector collection firms and/or through a tax amnesty program of the type instituted 14 years ago. Pennsylvania collected more than $93 million through a limited 90-day amnesty program from October 1995 through January 1996, when uncollected taxes were estimated at $1 billion, according to Department of Revenue and media reports. New Jersey recently reported that its program collected at least $600 million through its tax amnesty program, far exceeding all expectations. Estimated minimum revenue gain: $160 million.
- Reviewing all tax credits and tax exemptions and closing tax loopholes provided to select individuals and organizations, which deprive the commonwealth of hundreds of millions of dollars in revenue each year. “The Pennsylvania tax code is filled with tax breaks for special interests, and they should be thoroughly reviewed and either suspended, reduced or eliminated for the duration of this crisis,” Wagner said. Estimated minimum revenue gain: $100 million.
- Offering an early retirement incentive to state employees. “All agencies of state government, including my department, have employees who would be eligible and might be interested in accepting early retirement,” Wagner said. Although such a program would require some upfront expenses, it nevertheless would reduce the long-term cost of state government. A similar proposal should also be considered for all public school employees. Estimated net revenue gain for 2009-10 fiscal year: $50 million.
- Tapping into the state’s Rainy Day Fund by applying half of the state’s $750 million emergency account to next year’s budget deficit. “The Rainy Day Fund was created for just this type of situation,” Wagner said. “If it can’t be used during the state’s biggest economic crisis since the Great Depression, when would it ever be used?” Estimated revenue gain: $375 million.
- Adding table games to Pennsylvania’s slots casinos: Estimated revenue gain: $200 million.
- Asking the General Assembly to return half of its own $200 million budget surplus. Estimated revenue gain: $100 million.
Wagner said his revenue estimates were conservative and that there were several other good ideas still remaining to close the budget gap, such as an extraction tax on Marcellus Shale natural gas. Noting that Marcellus Shale production could lead to the creation of 100,000 or more new jobs in Pennsylvania, Wagner said he was cautious about taxing a new industry because “you don’t want to kill the goose before it’s laid a golden egg.”
Wagner said his suggestions would improve the operating efficiencies of government and add up to a good down payment on the state’s budget deficit. Enacting them would be a good-faith gesture showing state taxpayers that all alternatives are under consideration to avert a need for new taxes.
“I strongly urge the governor, the General Assembly, and their negotiators, to take a look at my suggestions, and others, as part of a comprehensive, bipartisan budget solution,” Wagner said. “I pledge to provide whatever assistance I can to find a resolution that elected officials can live with and that taxpayers can afford. In the meantime, my department will continue to identify ways to improve the performance of state government and reduce operation costs during these difficult economic times.”
Auditor General Jack Wagner is responsible for ensuring that all state money is spent legally and properly. He is the Commonwealth’s elected independent fiscal watchdog, conducting financial audits, performance audits and special investigations. The Department of the Auditor General conducts more than 5,000 audits per year. To learn more about the Department of the Auditor General, taxpayers are encouraged to visit the department’s Web site at www.auditorgen.state.pa.us.