Legislature Should Enact Budget that Saves Jobs, Keeps Recovery on Track

June 28, 2010

A state budget coalition called on Pennsylvania lawmakers today to enact a budget that preserves jobs and protects the fragile economic recovery.

Speaking at a Capitol press conference, members of the Better Choices for Pennsylvania coalition warned of potential job losses from a combination of state budget cuts and the loss of $850 million in FMAP funds for Pennsylvania.

Human service providers, educators and policy experts urged lawmakers to protect jobs and keep the recovery on track by raising revenue as part of a balanced approach to the budget.

Economist Stephen Herzenberg, Ph.D., the Executive Director of the Keystone Research Center, said that a $1 billion cut in the budget would cost nearly 25,000 jobs statewide, including 10,000 in the private sector, since much state and local government spending is on goods and services produced by businesses.

“That’s like 10 large factories across Pennsylvania closing their doors,” said Dr. Herzenberg. “Imagine what lengths state and local officials would go to avert such an economic disaster. Yet that is what we’re facing here.”

The coalition called on Congress to extend FMAP funding after the bill stalled in the U.S. Senate last week. Without that extension, Pennsylvania will lose $850 million in public health care funding that state officials were expecting for the 2010-11 fiscal year.

In an April letter to U.S. Senators, Governor Ed Rendell outlined health and human service cuts that would occur without the extended FMAP funding:

• All state supplemental payments to hospitals would be eliminated.
• Child protection services would see 25% less state funding.
• Funding for domestic violence, rape crisis and related services would be cut in half.
• There would also be cuts to behavioral health, Medical Assistance reimbursements to health care providers and nursing home payments.

Nationally, deep state budget cuts threaten the economic recovery. Economist Mark Zandi of Moody’s Analytics wrote this week that a half million teachers, policemen, and other government workers nationally will be laid off as a result of Congress’ inaction on FMAP - with a ripple effect of job losses in the private sector.

Dr. Herzenberg and other members of the coalition echoed national experts who have said that denying fiscal aid to states over concerns about the federal deficit is short-sighted. Shoring up state budgets will ensure that economic growth continues, allowing the government to address the federal deficit after the economy recovers.

Short of federal action, state lawmakers must step in to fill the void and enact a responsible budget, the coalition said.

“We cannot turn our back on women and children in crisis during the worst economic downturn in a generation,” said Peg Dierkers, Executive Director of the Pennsylvania Coalition Against Domestic Violence and co-chair of the Better Choices for Pennsylvania coalition.

“The question for lawmakers is should we be giving special tax breaks for natural gas drilling, cigars and smokeless tobacco while cutting services to kids, victims of domestic violence and people with disabilities?” Dierkers asked.

Lawmakers should also close corporate tax loopholes and end the sales tax vendor discount, which gives retailers an unlimited 1% cut of sales tax collections, advocates said.

“Cutting back on education funding will not only set our kids back but it will result in teacher layoffs, hurting Pennsylvania’s economy,” said Jim Buckheit, Executive Director of the Pennsylvania Association of School Administrators. “To keep the recovery on track, Pennsylvania should invest in education, health care, infrastructure and other areas key to a strong economy.”

Dr. Herzenberg added: “Lawmakers should close tax loopholes and end special tax breaks before making deep service cuts that will hurt families, drive up unemployment and set back the fragile economic recovery.”