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Lawmakers in Harrisburg Take Aim at Special Funds

HARRISBURG, PA--To Eileen Norcross, special funds in state budgets have the effect of disguising spending, concealing from the public what state government is actually doing with public dollars, which she calls “fiscal evasion.”

Norcross is vice president of policy research at the Mercatus Center, a free-market oriented public policy research center at George Mason University. She spoke late last week at a news conference in Harrisburg focused on a package of legislation designed to rein in spending.

“The proliferation of special funds are not unique to Pennsylvania, but their growth may be a sign of weak spending discipline,” she said. “The effect is to diminish budget transparency and to give both policymakers and the public a false sense of the true amount of spending, public policy priorities and the taxes necessary to support those programs.”

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She noted that Pennsylvania’s total budget spending has grown from $56 billion in 2006 to $84 billion today, a rate of growth that she blamed on special funds.

“The practice of off-budget accounting or the creation of special funds can be problematic, effectively creating a shadow budget that isn't subject to the same legislative oversight, debate or rules that apply to the general fund,” she said. “The outcome is a two track general fund budget in which the general fund appears to be flat or declining, while the overall budget grows.”

Rep. Dawn Keefer, R-Dillsburg, is introducing a piece of legislation that would begin to address Norcross’s concerns. House Bill 1991 would ban the creation of new special funds within the budget, which Keefer said is timely because there are currently efforts ongoing to continue creating new special funds.

“The way we have our budget layered with all of these different shenanigans of how to shift money around from one fund to another, or from the general fund to offline spending, is a false sense of our financial picture, and we have completely evaded any kind of accountability that our taxpayers deserve,” Keefer said. “We need to get our fiscal house in order.”

Also introduced at the news conference was Rep. Andrew Lewis’s House Bill 1990, which would establish a Council on State Finances made up of administration officials and lawmakers of both parties to work on the annual state budget process in the open, instead of the current process that takes place behind close doors.


Rep. Tim O’Neal’s House Bill 1989, meanwhile, would dictate that surplus funds at the end of each fiscal year would automatically be deposited into the state’s rainy day fund. O’Neal noted that Pennsylvania lawmakers have received praise for adding $300 million to the rainy day fund this year, but he said that amount was nowhere near sufficient.

“The reality is, with the current budget in the rainy day fund, the Commonwealth can only operate for 3½ days,” O’Neal said. “We are on the verge of financial peril. And this is in one of the best economies that any of us have seen in our lifetime.”

Acting as emcee at the news conference was Rep. Seth Grove, R-York, the chairman of the House’s new Government Oversight Committee. He introduced House Bill 1988 to return 17 special funds with $2.08 billion back to the general fund, and he said that the four bills were key to the state becoming more responsible with taxpayer dollars.

“This financial reform package of legislation will reduce the state borrowing, improve our credit rating and strengthen the commonwealth rainy day fund,” he said. “These four common sense reforms are smart and innovative solutions House Republicans have been championing.”


published here with permission of The Center Square