When Governor Shapiro delivered his second Budget Address on February 6, 2024, he sought to admonish the Republicans in the General Assembly for insisting on maintaining a General Fund surplus and robust Rainy Day Fund.
He also claimed his spending proposal will have “$11 billion in surplus,” if adopted, at the end of Fiscal Year 2024-25. We must talk about the facts, not the facade, of the Governor’s outrageous $48.34 billion proposal.
When Republicans controlled the General Assembly, we fought hard against Governor Wolf’s impulse to spend the revenues almost as quickly as they came in. Rather than needlessly expanding government because we could, House Republicans had the foresight to save portions of those one-time dollars. As a result, Pennsylvania has a healthy surplus of $6.4 billion in the General Fund and a robust Rainy Day Fund balance of $6.12 billion.
Governor Shapiro would have you think the Commonwealth is abounding in riches and the cash is burning a hole in our pockets, but this is very misleading when the Commonwealth has a structural deficit, and the Governor’s proposed budget does nothing to address it.
Currently, Pennsylvania has money in our checking, overdraft, and savings accounts, like most Pennsylvania families strive to do every month. The checking account is the General Fund, the overdraft account is the General Fund surplus, and the Rainy Day Fund is the savings account.
The role of the overdraft account is to protect you from unforeseen bills and keep up cash flow – it’s not designed to pay your monthly mortgage. Your savings account protects you from economic disaster – it’s not designed to pay your monthly mortgage.
This proposed budget treats all three like your checking account, which is designed to pay your monthly mortgage. We all know that emptying your savings account on monthly mortgage payments will ultimately lead to financial disaster. This is precisely what the Governor is proposing.
Any claims this spending will not negatively impact Pennsylvania’s fiscal health is disingenuous and misleading, at best. The three major credit rating agencies warned Pennsylvania policymakers that spending our General Fund surplus and Rainy Day Funds on recurring costs will result in a credit downgrade. For example, S&P said, “We could lower our rating on Pennsylvania if we felt the commonwealth’s use of one-time money for ongoing expenditures would exacerbate long-term structural imbalance to a degree no longer commensurate with the current rating.”
Understanding the difference between the General Fund surplus and the Rainy Day Fund is important. Governor Shapiro treats these funds the same way for a political talking point. In reality, this proposal would leave $3.45 billion in the General Fund surplus and $7.55 billion in the Rainy Day Fund.
As I explained, the Rainy Day Fund is our state savings account, and state law dictates that those funds not be used for recurring expenses. Of the new spending proposed by Governor Shapiro, $2.5 billion is creating new or expanding current government programs. These aren’t one-time costs, but programs you can be assured Shapiro will seek to fund year after year.
President Ronald Reagan said, “Government programs, once launched, never disappear. Actually, a government bureau is the nearest thing to eternal life we’ll ever see on this earth!” Yet, Governor Shapiro would have us think that if his proposal is adopted, his subsequent four budgets would only increase spending by two percent annually. We all know this isn’t realistic.
In response to his taunts, yes, Governor, House Republicans are proud to have saved money. We will continue advocating for a healthy surplus and Rainy Day Fund. We also have an idea on how to control spending, an idea championed by House Republicans and one you have used in your own political career.
As a Montgomery County Commissioner, Josh Shapiro implemented zero-based budgeting. In fact, in a 2016 article, Shapiro said, “I believe zero-based budgeting is the most important thing governments can do.” He added, “From Harrisburg to D.C., the debate is always about taxes and spending, when what we should be doing is starting our budgets at zero, defining our core mission, and then funding it.”
The article reported the process worked like this: “Instead of submitting their usual request for a percentage raise in their budgets, each had to write a paragraph detailing their core mission. Then Shapiro and Monson worked backwards with them from there, essentially starting at zero and figuring out how much it would take to meet the mission.”
Let’s do it, Governor. In Montgomery County, with the assistance of your now Budget Secretary, Uri Monson, you went from deficit spending to a balanced budget and created a real surplus. The question is, why can’t we do that here? The answer is we can, but it will take leadership from the Governor to make it happen, leadership we have not seen so far.
Seth Grove represents Pennsylvania’s 196th Legislative District in York County. He is Chairman of the House Republican Appropriations Committee and has a master’s degree in Public Financial Management from the University of Kentucky.