by Lowman S. Henry | January 05, 2009

The beginning of a new year provides us all with the opportunity to get a fresh start. Along with the resolutions to lose weight, exercise more and stop compulsively watching the Fox News Channel, the onset of 2009 also gives we the people of Penn’s woods a new legislature and yet another chance to change the way state government does business.

You may recall that two years ago a General Assembly was seated that supposedly would end business as usual in Harrisburg. New leadership in the Senate and a historically large class of freshmen in the House gave rise to optimism that state government would indeed be changed for the better. But, when the gavel came down on the 2007-2008 session last November, disappointment hung heavy in the air.

The session was not a complete bust. It did yield the first significant revisions in the state’s Right to Know law in decades. There were some laudable changes in the way the legislature does business. Middle-of-the-night voting was eliminated, and the senate refused to hold a lame duck session after the General Election. The General Assembly, thanks largely to the senate, held the line on taxes. But, legislators of both parties allowed spending to increase more rapidly than the rate of inflation, and added significantly to the state’s debt load.

As the new legislature takes office this week a number of serious issues held over from the last session await action. The most pressing is the state’s growing budget deficit. The national economic slowdown has taken a bite out of state tax revenues. At the half-way point in the fiscal year the commonwealth faces a projected budget deficit of between $1.5 and $3 billion, depending on the optimism (pessimism) level of who is doing the estimating.

It is clear the spending plan adopted last July is unrealistic. Some steps have been taken to curtail spending, but not enough to have any meaningful impact. Governor Ed Rendell is hoping for a bail-out from Washington, and it is likely the new Obama Administration will provide some aid to states. How much is unknown, and with uncertainty surrounding the issue it would be imprudent to count on federal financial assistance at this point in time.

The state’s deepening fiscal crisis will dramatically impact the remaining elements of the governor’s legislative agenda. With the state treasury empty, no big new spending programs for such things as health care and highways are likely to win legislative approval. That does not change the fact that the commonwealth’s roads and bridges are crumbling, or that a lack of health care for all will continue to be a problem.

Add all this together and what you get is a giant opportunity for adopting conservative, free market solutions which rely on less government spending and more on the private sector rather than expansion of expensive government programs. For example, conservatives have long argued that the state budget is bloated and spending has gotten out of control. Now, the legislature has political cover for cutting unproductive programs and saying no to the spending interests because the dollars just are not there. The situation also provides new impetus for the adoption of the Taxpayer Protection Act, which would constitutionally limit annual spending increases to the rate of inflation plus population growth.

The governor’s big spending plans for health care could be shelved in favor of actually addressing the root causes of the health care crisis, such as the uncapped medical malpractice awards routinely handed out by state juries. As for highways, inefficiencies could be wrung out of the state’s mass transit agencies and federal funding designated for highways actually spent on highways. A new look could be given to privatizing more of the Pennsylvania Turnpike’s operations.

As well, the fiscal crisis should also prompt a complete overhaul of the state’s antiquated tax and regulatory policies which have destroyed our business climate. If Pennsylvania were more competitive in its ability to attract businesses and the jobs they create state revenues would raise dramatically even if tax rates remained the same. In fact, history has proven that cutting tax rates actually increases revenue because lower taxes encourage more economic activity. Therefore, cutting taxes on businesses to encouraging business growth and development would be the foundation upon which a state economic resurgence could be built.

The question now is whether the new General Assembly has the fortitude to move away from the failed policies of the past and move forward with a bold, new approach. Given the situation we now find ourselves in, we have little to lose by trying.

(Lowman S. Henry is Chairman & CEO of the Lincoln Institute and host of the weekly Lincoln Radio Journal. His e-mail address is [email protected])

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