NEWS RELEASE
For Immediate Release
Contact: Steve Halvonik 717 787-1381

Auditor General Jack Wagner Urges Round-the-Clock Negotiations to Resolve State’s Budget Impasse

HARRISBURG, PA, Sept. 1, 2009 – Auditor General Jack Wagner today called on Gov. Rendell’s budget advisers and leaders of the General Assembly to meet around the clock until an agreement is reached on a budget for the 2009-10 fiscal year.

Noting that Pennsylvania is the only state besides Connecticut without a budget, Wagner said, “I am concerned that this two-month impasse is casting a negative image on the Pennsylvania economy and has reduced the ability of the state government to deal with other important issues. It’s time to compromise.”

The state’s independent fiscal watchdog said he was gratified that certain elements of his seven-point plan for raising $1.3 billion are being discussed as potential ideas for bridging the financial chasm between Gov. Rendell and the General Assembly. Wagner’s seven-point plan, unveiled July 9, called for:

• 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 $320 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 for Pennsylvania taxpayers: $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. “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,” Wagner said. He added that uncollected tax revenues could be obtained with the assistance of private-sector collection firms 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 reported that its amnesty program netted at least $600 million this year. 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 the 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.

“Hard-working Pennsylvanians want to see the commonwealth resolve the budget crisis as soon as possible – without a tax increase.” Wagner said. “Suggestions made by me and others, including many Pennsylvania newspapers, show that there is a way to reach a budget agreement without the need either for severe spending cuts or an increase in broad-based taxes.”

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.

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