Analysis: Have You Thought About How State Government Spends Your Money?

We live in a political environment today that rewards cutting government budgets at all levels, reducing the size of government, managing public dollars more efficiently and effectively and relying more on competition to reduce the strain on taxpayers.

But have you ever taken a look at what actually happens?

Film Tax Credit - $60 Million/Year, Proposed: Unlimited

This week the Senate Finance Committee reported out Senate Bill 1035 (Pileggi-R- Delaware), legislation that would uncap and expand a tax credit program for the film and television production industry which, up until now, had a $60 million per year limit.

This program allows film and television production companies to forego paying taxes they would ordinarily pay to the state for individual movies and television shows they shoot in Pennsylvania.  An amendment added in Committee would also expand the credit to producing games and other individual digital productions.

State taxpayers have helped pay for such memorable movies like Zack & Miri Make A Porno and TV programs like the QVC home shopping network.  The most recent Batman movie filmed in Pittsburgh, interestingly, was not supported by the credit.

More interesting, the tax credit is not for actual production facilities, bricks and mortar. It’s for the individual productions themselves, temporary jobs that last months at most.

While it is true the $10 million/year Resource Enhancement and Protection (REAP) farm conservation tax credit-- which funds permanent projects-- would not have been passed without the film tax credit in 2007, should legislators really be considering a blank check?

Manure Management System Subsidy- Tens Of Millions/Year

Another proposal now before the Senate in Senate Bill 994 (Vogel-R-Beaver), which on the surface injects more competition in meeting Chesapeake Bay cleanup requirements, would actually rig the system to require taxpayers to fund only expensive manure management technologies to meet the requirements.. 

The kicker?  Any pollution reductions made after investing all those taxpayers dollars in the manure technology would not count toward meeting federal Chesapeake Bay cleanup milestones.  It would also force taxpayers to buy these reductions, that will not count, at three times what anyone else would pay in the free market.

The proposal could potentially involve tens of millions of taxpayer dollars and many more.  Although technically not funded, when have you seen a program created by the state which wasn’t later funded?

Ethane Manufacturing Tax Credit- $66 Million/Year For 30+ Years

In 2012 the General Assembly adopted the Resource Manufacturing Tax Credit for ethane manufacturing which would provide up to $66 million a year over 30 years-- nearly $2 billion if the facility is up and in the next three years or so.

While there are certainly tight restrictions on what a company must do to qualify for the credit, the company looking at setting up an ethane manufacturing facility in Western Pennsylvania said it did not ask for the tax credit, Pennsylvania offered.

Prevailing Wage- Up to $2 Billion/Year

Also consider another state program: prevailing wage.

Taxpayers may not know it, but the state’s Prevailing Wage law requires most projects undertaken by the state or local government and, importantly most grant recipients, to pay prevailing wages to construct those projects.

That includes roads, bridges, buildings, mine reclamation and stream restoration projects, schools and most any other bricks and mortar-type project funded by the state.

According to some estimates, requiring the use of artificially-set  prevailing wages increase the cost of construction projects by 10 to 17 percent over what they would cost if real bidding and competition were used for these projects.

Some estimates say state taxpayers would save up to $2 billion a year if prevailing wage was reformed.

To put this in perspective, the state’s General Fund budget is about $28.4 billion a year and the Senate-proposed transportation funding package would raise an additional $2.3 billion annually.

Again, the politics of prevailing wage are difficult, but the math on potential savings is not.

Vehicle Fuel Subsidies- $13.9 Million/Year

There are bills now on the House Calendar that would help fund vehicle conversions to cleaner fuels and provide a 10 cent per gallon subsidy to biofuel producers which total $13.9 million or so.

The bills are: House Bill 302 (Moul-R-Adams), House Bill 303 (Moul-R-Adams), House Bill 304 (Marshall-R-Beaver), House Bill 306 (Pickett-R-Bradford) and House Bill 308 (Saylor-R-York).

Yes, there good political reasons for spending these dollars in these ways-- “They help create jobs,” but that’s true of most government spending, directly or indirectly.  It’s no coincidence they are heavily promoted by the interests involved and backed up by reams of economic studies.

The other curious fact is all these large spending proposals are Republican initiatives, the only exception being prevailing wage, although prevailing wage reform is having a difficult time getting enough traction in the Republican-controlled House and Senate to actually pass.

Meanwhile, of course,  $1.9 billion has been cut or diverted from environmental programs alone over the last 11 years and just about 20 percent of the staff positions at the Department of Environmental Protection have been eliminated.

The question is, in this era of smaller is better, is money used to make a movie like Zack & Miri Make A Porno or paying inflated prevailing wages the best use of scarce state taxpayer dollars?

What these items clearly illustrate is this-- don’t believe anyone that says there’s no money.  If they can spend it on movies like Zack & Miri Make A Porno and to support manure technology that doesn’t count, they could also do things that might make a real, lasting difference.

So far, though, things have come down on the side of Zack & Miri.


Fork Looms For Transportation Funding

Bumsted: Gas Tax Hike Still Iffy

Lawmakers Hope Bill Lures Film Producers

House, Senate Pays $4.2 Million To Cut Future Personnel Costs

PA Share Of Tobacco Settlement Shrinks By $180 Million

PA National Guard: Shutdown Will Harm Emergency Response


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