State Budget Spending Caps

Proponents of TABOR claim that reasonable spending limits are needed to keep taxes down, to protect working Pennsylvanians from tax increases that exceed their ability to pay, and to improve Pennsylvania's economic future. State spending has increased by nearly 28% over the past four years, but Pennsylvania is consistently near the bottom of the rankings for job growth, personal income growth, and population growth. They feel that this is the solution to Pennsylvania’s problems.

Opponents of TABOR believe that Spending Caps will result in the severe disinvestment and dismantling of social services in the State including education, libraries, and job training programs. TABOR is also likely to cause increased property taxes to cover services that the state will no long have resources to sustain. Furthermore, it abdicates legislators’ authority to a formula that fails to take into account costs that exceed the rate of inflation such as healthcare.

Whether TABOR has the support necessary to pass in the State House, State Senate and survive the threat of a gubernatorial veto remains uncertain. What is certain though is that if TABOR becomes law, it will have a profound impact on the charitable nonprofit sector and on those we serve.

Information opposing TABOR
Information supporting TABOR 

6/14/07 State Senate Poised to Vote on Two TABOR Bills. SB7 and SB707 have been placed on the Senate Calendar for Monday June 18. TABOR spending caps like SB7 would provide constitutional limits on state spending, while SB707 would provide statutory limits.

By the end of next week, Pennsylvanians may be watching its State Senate abdicate decision making authority to formula. This formula limits state spending to the sum of inflation plus population growth. The irony of these bills according to Doug Hill, Executive Director of the County Commissioners Association of Pennsylvania, is that in the name of decreasing state taxes, the Legislature is now poised to take action that will force increased property taxes. Spending Cap legislation will inevitably result in the state balancing its budget on the backs of local government, and on the backs of local property owners. 80% of county spending funds state mandated services.

Artificial limits on state funding will require those mandated programs to be funded by diverting money from education and social programs for children, the elderly or the needy. Counties are forced to rely on adequate state and federal funding to meet these needs. When that funding is inadequate, counties pass along the burden to the property owner in the form of increased property taxes. Government fulfills the crucial role of providing services that the market place cannot provide and serving those who the market place cannot serve. Spending priorities cannot be made in a vacuum and spending decisions have consequences. For more information on TABOR go to the Coalition for Common Sense Priorities at http://www.papriorities.org/index.html or Pennsylvania Budget and Policy Center http://www.pennbpc.org. 

6/5/07 TABOR originally called the “Taxpayer Bill of Rights” (in Pennsylvania the “Taxpayer Protection Act”) is any state or local tax and expenditure limiting legislation that may include the following elements:

(1) Legislation, or resolution calling for a constitutional amendment;

(2) restricting government revenue and or expenditure growth

(3) based on some formula (typically the sum of inflation plus population change); and

(4) requiring voter approval to override the revenue or spending limits.

FORMULA: The sum of inflation plus population change

While using a formula such as the sum of inflation plus population change sounds reasonable, but results in significant cuts to domestic discretionary programs and services.

The formula can not adjust for business expenses such as healthcare costs that rise at a rate faster than inflation.

Compound the revenue cap, with reduced revenue from Pennsylvania’s aging population, and it becomes clear that TABOR will severely under-fund important functions of State government. Artificial spending caps undermine existing services for children, youth, and families such as basic education or healthcare for low-income families, and make new initiatives virtually impossible. Once TABOR is embedded in a state constitution, it becomes unlikely that it will be removed or changed. Pennsylvania need only look to Colorado for the results of TABOR. For nearly two hundred years Pennsylvania’s elected officials have been sent to Harrisburg to lead, to make decisions, and to exercise sound judgment for the benefit of all Pennsylvanians. TABOR abdicates your legislator’s authority to a formula.

For more information:
The Pennsylvania Budget and Policy Center- http://pennbpc.org/pdf/TABORBWFinal.pdf.
The Center for Budget and Policy Priorities-  http://www.cbpp.org/ssl-series.htm

5/31/07  State Senate to hold Public Hearing on TABOR Spending Caps. The State Senate Republican Policy Committee held a public hearing on TABOR spending cap legislation on May 31, 2007 hearing testimony on the proposed TABOR spending cap legislation SB7 and SB707.  The hearing was held at the Lebanon Valley College, in Annville. 

TABOR advocates assert that tax and expenditure limits would prevent tax increases by setting spending limits for state government, but TABOR opponents claim that the reality is quite different.  Opponents claim that spending cap legislation limits state spending to a formula based on current levels and adjusted by the rate of inflation and population growth.  Over time, State tax revenue would shrink, making it difficult to adequately fund essential programs.  Funding would have to be diverted from “discretionary” social programs to cover mandatory or essential state functions.  Eventually, TABOR’s reduced state spending for seniors, public education, health care, and higher education would result in reductions of services, exacerbation of poverty, and increases in local property taxes.  For more information on the impact of TABOR legislation go to http://pennbpc.org/TABORfigs1.php. 

SB7 http://capwiz.com/pano/issues/bills/?bill=9827846 

SB707 http://capwiz.com/pano/issues/bills/?bill=9827906

5/9/07 New State TABOR Bills Cap Spending, but underfund education and social programs. Two new TABOR type spending cap bills were introduced in the State Senate SB7 would amend the State Constitution by limiting state spending to a formula based on current levels and adjusted by the rate of inflation and population growth. SB707 on the other hand, introduces TABOR as legislation rather than as a Constitutional Amendment. Over time, government tax revenue is so depleted that funds must be diverted from “discretionary” social programs to essential mandatory or essential state functions.

TABOR: a patch looking for hole. While TABOR may sound reasonable, it actually ties the hands of legislators to respond to the growing needs of the states' schools, roads, healthcare and many other services. If TABOR is allowed to become law in Pennsylvania, the effects of reduced federal and state spending, for seniors, public education, health care, and higher education institutions will likely result in reductions of services, exacerbation of poverty, and local property tax increases.

Pennsylvania spending growth for FY 2006-07 was actually less than the national average. According to the National Conference of State Legislatures, Pennsylvania General Fund spending is below the national average. For more information go to http://www.pennbpc.org/budgetwatch/budgetwatch3.php.

4/25/07 New TABOR bill calls for Constitutional Amendment to limiting State Spending. On April 17, HB 1100 was introduced as part of a conservative tax package. This TABOR type spending cap bill calls for a constitutional amendment to permanently limit state spending. While TABOR bills look good on paper, over time, they substantially reduce funding for education and human service programs

2/06  TABOR Update. Taxpayers Bill of Rights (TABOR), also known as spending cap legislation, is not dead yet, it is alive and well in committee in the legislature. PANO is a member of Coalition For Common Sense Priorities http://www.papriorities.org.  PANO opposes TABOR because it would limit funding for human service programs and reduce allocation for Pennsylvania’s citizens who most need governmental assistance.

Spending Caps May Prove Harmful to Nonprofits. On November 2, the Pennsylvania Senate passed the Taxpayer Fairness Act or Taxpayer Bill of Rights (TABOR) legislation [Senate Bill 4] that would hold state spending increased to inflation by statute. A similar bill [HB 2082] was passed by the House on October 26. A companion bill [SB 884] would make spending limits part of the state constitution. The bills would set aside half of surplus revenues in the state's Rainy Day Fund for use in times of economic necessity and half in a new Taxpayer Fairness Fund to reduce the PIT.  The proposed bills which would change the constitution are HR 2067 and SJR 884. SJR 884 was passed by the Senate, while HR 2067 will likely be taken up by the House on Monday, November 14.  The General Assembly will attempt to reconcile the House and Senate versions of the bills.  On November 2, Colorado voters rejected its 13-year-old TABOR statute, claiming that it hampered economic growth.  Unfortunately, Pennsylvania's TABOR statute has been fast-tracked and is seen as a popular solution to legislative excess in the wake of the pay increase.  For more information, please contact David Ross, PANO policy analyst, at david@pano.org.