Remember when, in the movie Moonstruck, the character played by Nicholas Cage tells the character played by Cher that he loves her. And she slaps him in the face and says, “Snap out of it?”
Well that’s what the financial firm Standard and Poor’s just told the state of Pennsylvania yesterday. They, once again, threatened to downgrade our bonds – forcing up the interest rates we pay – if we don’t get our fiscal house in order. They are telling our General Assembly to:
Snap out of our reliance on one-year revenues, like licenses for gaming or liquor sales to “balance” our budget.
Snap out of our willingness to move money from one fund to another to “balance” our budget.
Snap out of our penchant for over-estimating revenues to “balance” our budget.
Snap out of our tendency to shift spending from one year to another to “balance” our budget.
And most of all, snap out of thinking that it’s a good idea to sell bonds backed by tobacco settlement revenues to “balance” our budget.
Last week I pointed out that this last idea is bad policy because it robs from the future, it is dishonest budgeting because it enables us to spend more than we tax, and it is unconstitutional because it violates the clear requirement that our budget be balanced not “balanced.” Standard and Poor’s adds another argument against the idea – that Pennsylvania risks its credit rating by borrowing heavily to finance our deficits.
We won’t be the first state to make that mistake. A bipartisan majority overrode a Republican Governor’s veto to substantially raise taxes in Illinois, in no small part because the state had discovered that the weight of persistent deficits and borrowing was sinking its credit rating.
We will see, very soon, whether S&P’s slap in the face forces our General Assembly to snap out of it and embrace the Governor’s plan, or some other plan, to raise recurring revenues this year. (We have some ideas about how to do that without raising taxes on working people or the middle class.)
The moment is coming, however, when our legislators will not have a choice, when we will have to raise taxes not to solve our persistent public investment deficit, but to make up for years of fiscal irresponsibility.