Lawmaker Pushes for TABOR-Style Spending Cap

By Melissa Daniels | PA Independent

HARRISBURG — If there’s one thing governments seem to love, it’s spending other people’s money, state Sen. Mike Folmer, R-Lebanon, says.

That’s why he said he wants the state to put a limit on how much it’s allowed to spend.

For the second year in a row, Folmer introduced the Taxpayer Protection Act, which would create a budgetary cap linked to population growth and inflation.

“If you want to get taxes under control, you have to get spending under control,” Folmer said.

The concept is modeled after the Taxpayer Bill of Rights, a controversial state spending cap policy known as TABOR. It’s only been enacted in Colorado, where it was later suspended.

Folmer points out that Pennsylvania is in the minority of states that has no formal controls on budget growth. The only requirement is that a balanced budget be passed before July 1.

Folmer said his legislation would create a spending ceiling, helping to manage the tax climate and improve business growth.

“I believe you can either grow government or grow business, the two don’t seem to match,” he said.

Pennsylvania’s overall tax climate is middle-of-the-road when compared to other states, according to the Tax Foundation. But for businesses, it’s one of the least competitive, due largely a nearly 10-percent corporate income tax rate.

Folmer said Pennsylvania already is on the path to reigning in its state spending. In the previous two budgets, the state kept growth under the rate of inflation, while in years past it was two or three times that, according to Folmer.

A spokesman for Gov. Tom Corbett said the governor had not taken a position on the proposal.

In the event that the state had a surplus past the ceiling, Folmer’s legislation would require 75 percent of it to be placed in a new fund used to lower taxes. The other 25 percent would be placed in an emergency-use reserve fund, which is different than Colorado’s version of TABOR , Folmer said.

Not that there’s many signs to indicate Pennsylvania’s budget stands to grow drastically in the near future. Earlier this year, Budget Secretary Charles Zogby said the state will have to come up with at least $500 million in planning next year’s budget due to increased costs.

Should Folmer continue his quest to give Pennsylvania a budget ceiling, the road could be long. Though he had some 20 co-sponsors for the bill last session, it was never voted out of committee.

Elsewhere, history shows TABOR-style laws aren’t easy to pass. This year, Florida voters rejected a TABOR referendum. Voters in Nebraska, Maine and Oregon have done so in the past.

The example all parties point to in Colorado, where TABOR laws were passed in 1992.

Jon Caldara, president of the free-market think tank Independence Institute in Denver, said that calling TABOR-style laws inflexible is a misconception. The laws dictate that lawmakers have to ask permission from voters before spending excess revenue or raising taxes — something politicians on the left or right don’t necessarily like, Caldara said.

Caldara said that Colorado’s problems with TABOR only happened when the law was suspended to allow lawmakers to spend revenue freely, which ratcheted up budgets before the recession hit in 2008.

Caldara said TABOR laws force efficiencies by controlling spending.

“When the cost of government goes up higher than the economy grows, you’re draining the economy to feed a government. And when economic hard times hit, the state has to fall from a much higher perch,” Caldara said. ‘The better plan is it keeps it from going up there.”

When times are tough, passing a ceiling is a good idea, Caldara said, because it locks in spending.

But this, to some, is the problem. Opponents of TABOR say its formula doesn’t accurately reflect the annual growth of the cost of state services, forcing cuts to services.

Erica Williams is a senior policy analyst at the Center on Budget and Policy Priorities, a progressive research organization that aims to improve public policies towards low- and middle-income Americans.

“If you put that formula in place, you’re essentially locking in the recession,” Williams said of TABOR-style laws. “You’re locking in the depressed level of spending and leaving the state unable to regain the ground that they lost.”

The formula of using population and inflation to control growth is inaccurate, Williams said, because it doesn’t take into account the climbing cost of services.

For example, in a state with a growing aging population, using a broader population growth indicator would not accurately reflect the growth in costs for providing services to that subset, Williams said.

Williams said that creating a spending ceiling tied to other indicators, like economic growth, is a smarter way for states to keep budgets under control. That way if the state is doing well or poorly, it is reflected in government spending, she said.

“What TABOR does is it puts the budget process on autopilot,” Williams said. “It really eradicates the power and responsibility of legislators to come together and make thoughtful decisions about how to spend taxpayer dollars and how much to spend.”

Contact Melissa Daniels at melissa@paindependent.com