February 2012 Whip Report - Fiscal Reality Demands Debt Reform
2/27/2012
As the House and Senate appropriations committees work on developing a state budget for the 2012-13 fiscal year, the Commonwealth finds itself in the same situation many Pennsylvania households are in – making the difficult choices needed to live within our means.

In this vein, prior to breaking for budget hearings, House members advanced legislation aimed at bringing debt accrued under the Redevelopment Assistance Capital Program (RACP) in line with the fiscal realities of today.

Just as families must watch their spending as they pay off their credit cards, so too must the Commonwealth become serious about not incurring more debt just to make payments on that which we already owe.

There is no doubt that the RACP program over its 13-year existence has been instrumental in helping spur economic development. But its rapid expansion in that time – the debt ceiling more than tripled from $1.2 billion to $4.05 billion – has made the program unsustainable in today’s economic reality.

The legislation that awaits a floor vote when the House returns in March would immediately decrease the debt limit to $3.5 billion. And in each subsequent year until 2020 it would be reduced incrementally by $50 million. Thereafter, it would be ratcheted back by $150 million per year until it reaches $1.5 billion.

As the House Republican Caucus examined the fiscal facts that generated this reform, it became apparent that oversight and review would need to be key components.

The bill requires the governor to submit legislation to the General Assembly that contains an itemized list of all capital projects at least once each legislative session.

And, to prevent spending from being quickly pushed through by a lame-duck administration, the measure would prohibit approval of RACP projects between the general election and the date a new governor is sworn into office if the sitting governor is not re-elected either because of an election defeat or due to term limits.

With approximately 8,000 RACP items on the "wish list" – most of which have not been authorized – this measure establishes parameters under which the projects will have a shelf life and eventually lapse. This does not mean a project would have to start from scratch to receive future consideration, but it would have to be resubmitted under the new provisions in the legislation.

Earlier this month, Gov. Tom Corbett presented his 2012-13 budget proposal to the General Assembly. At this point in the fiscal year, revenue collections are nearly $500 million below what was originally estimated. And debt service – interest payments on credit the state has taken out – is a mandatory spending item in the state budget.

As we enter our second difficult budget this legislative session, it has become even more apparent that major reforms are needed to bring this portion of our state spending under control.

While excessive debt is certainly not going to be solved overnight, for the sake of our future generations we cannot keep kicking this can down the road.

By making a strong stand now and enacting these reforms, the debt ceiling can be lowered to a level consistent with fiscal reality, and the projects funded by this program will better reflect today’s economic development needs.
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