What happens when a confirmed shopaholic marries a notorious cheapskate?
For a hint, let’s turn to the unhappy union that is the Pennsylvania Legislature, where Democrats and Republicans can’t get on the same page concerning what to do with an estimated $7.3 billion in federal pandemic-related stimulus money.
Senate Democrats called it a “once-in-a-lifetime” infusion of cash and, in May, rolled out a proposed “New Deal for Pennsylvania” that’d spend more than $6 billion of it on water and stormwater infrastructure as well as roads and bridges, childcare improvements, business assistance, workforce development, utility assistance, job training, economic development and public health programs and expenditures.
Republicans argued that the commonwealth’s “Rainy Day Fund” – officially called a Budget Stabilization Reserve Fund – wouldn’t keep the commonwealth afloat during a true fiscal crisis. With looming budget deficits that could total up to about $8 billion over the coming years, the smarter play, they say, would be to bank it as a hedge against future tax increases.
As Republicans control the Legislature, what they say goes. After dedicating a portion of the money to human services spending, some highway construction projects and aid for nursing homes and the state system of higher education, more than $5 billion of the total was held in reserve.
If you thought the furor over the money would die down with June’s final adoption of Pennsylvania’s $40.8 billion 2021-22 budget, consider that the 2022 election will see all House seats, all Senate seats from even-numbered districts, and the governorship up for grabs. Chances are good that candidates from both parties will make political hay of the disposition of federal stimulus funds next year.
Since the Democrats and Republicans in Harrisburg are stuck with each other, we’ll give them some free marital advice – learn to compromise. Your “kids” back home are tired of the constant bickering over money.
Here’s where the Republicans are right. In 2020, according to The Pew Charitable Trusts, Pennsylvania’s Rainy Day Fund was just $243 million – 2.7% of that year’s spending. At the time that was the second smallest state reserve account in the country, based on the number of days of state government spending the fund could cover.
In September, the legislature added $2.6 billion to the Rainy Day Fund, boosting the total to almost $2.9 billion – about 7% of the current $40.8-billion budget.
According to an analysis of states’ financial reserves that The Pew Charitable Trusts published last month, states’ reserves represented a median of 15% of operating costs. In Pennsylvania, 15% would equate to about $6 billion.
The median Rainy Day Fund is actually less than 15% since Pew’s analysis also included leftover general fund budget dollars. Still, we believe the Republicans are right to argue that Pennsylvania’s Rainy Day Fund isn’t where it needs to be.
Meanwhile, Senate Democratic Leader Jay Costa forecast that, with Pennsylvania’s economy emerging from the pandemic, the surplus could grow to nearly $7 billion by the end of the fiscal year.
“By no means do we need to be hoarding $7 billion by June 30,” Costa told the newspaper.
We agree, particularly when the federal stimulus money was intended to relieve the pandemic’s negative economic impacts by providing assistance to households, small businesses, nonprofits and heavily impacted industries such as the tourism and hospitality sectors. It is also suggested that it be used to provide additional pay to “essential” workers, invest in water, sewer and broadband infrastructure and replace lost tax revenue.
To us, socking the money away to prevent a possible future tax increase doesn’t align with any of those recommendations.
We believe that Senate Democrats’ “New Deal for Pennsylvania” doesn’t leave enough capital to adequately address the health of the Rainy Day Fund. But the Republicans’ plan largely wastes the opportunity to put the money to good use now, when so many Pennsylvanians need it.
So, in the spirit of compromise, we urge both to look at the House Democrats’ plan to use about $3.2 billion of the stimulus – half of what the Senate Democrats wanted – to train and pay direct care workers, create jobs in local communities, support businesses that are unable to stay open due to COVID, connect everyone to high-speed internet, repair or replace toxic school buildings, provide property tax and rent relief, promote affordable housing, give hazard pay to essential workers and create a Paid Sick and Family Leave program.
Those initiatives would make a real difference in the lives of Pennsylvanians. And there’d be billions left over to provide the Rainy Day Fund with a needed infusion of capital with storm clouds on the horizon.