Next week Gov. Tom Wolf will unveil a “new” budget, with all expectations that it will be just like his first proposal—calling for new taxes on working families. In fact, you can participate in a new contest and guess just how high Wolf’s proposed taxes will be.
But while he’s claiming to need more of your money, Wolf's been busy giving away handouts in the form of corporate welfare.
- In late January, Wolf announced $612,000 in state grants would be given to a company with $5.5 billion in annual revenue.
- Last week, Wolf announced $174,000 in handouts for a corporation with $5 billion in sales—touting “job creation.”
- Yesterday, the state revealed Netflix—valued at $50 billion—would get $18.7 million in subsidies via the film tax credit.
Politicians enjoy issuing press releases when they use taxpayers money to fund projects. We refer to this as “press release economics.” In reality, these corporate welfare programs undermine economic growth—driving up taxes on everyone else, and hindering real jobs creation.
The real question is this: Do we need to ask working families to fork over more of their income while we are doling out hundreds of millions of dollars in corporate welfare?
Groundhog Day has come and gone, but Gov. Wolf hasn’t stopped celebrating Punxsutawney Phil’s big day. Paying homage to the theme of the Groundhog Day movie, Wolf has trapped Pennsylvanians in a time loop similar to the one that imprisoned Bill Murray's weatherman character–only this time loop is budget-related.
CF’s Matt Brouillette was on the Gary Sutton Show discussing his recent op-ed on PennLive, which asks if Gov. Wolf's second budget address will give taxpayers déjà vu all over again.
Matt notes that despite his pledge to be a “different kind of governor”, Wolf is “doubling down on the same rhetoric, the same approach that, frankly, failed in 2015”. He plans to propose the same historic, broad-based tax hikes on Pennsylvania families–proposals that have failed a total of five times.
What's more, in true Groundhog Day fashion, Wolf is repeating the myths that Pennsylvania’s education funding has been cut and the system is underfunded. Matt dispels this myth, noting Gov. Wolf is the one who “vetoed over $3 billion going to education” which would have “increased [education] spending by over $400 million."
Gov. Wolf also plans to re-propose hitting the flailing drilling industry with a severance tax to “fund education." Not only would this drive out more businesses from Pennsylvania but it would also add $180 million to taxpayers' utility bills.
Instead of repeating past mistakes, Gov. Wolf should break the budget time loop by focusing on resolutions that benefit all Pennsylvanians–such as limiting the unconstrained growth of government spending and cutting corporate welfare subsidies.
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RELATED : TAXES & SPENDING, PENNSYLVANIA STATE BUDGET
How fitting that Wolf chose Groundhog Day to demand another $577 million in basic education funding—$377 million for the rest of FY 2015-16 and an addition $200 million in the next fiscal year. The governor’s demands are rooted in the “framework budget” from last November, which was rumored to include $350 million in new basic education funding.
“I believe they may be the only party that does not believe the framework is dead,” said Senate GOP spokeswoman Jenn Kocher of the Wolf administration. “I'm sorry but it died the day that pensions did.”
The administration provided no explanation for why the $350 million figure increased to $377 million. Perhaps this was intended to offset the $50 million in borrowing costs incurred by school districts as a direct result of Wolf’s budget vetoes. Nonetheless, the administration seeks to distribute the 2015-16 funding through a hyper-political “formula” that ignores the recommendation of the state’s Basic Education Funding Commission.
Wolf continues to demand more spending while placing little value on smarter spending, which is exactly what the Funding Commission was created to ensure. The governor is not demonstrating a willingness to compromise, either: his education spending requests are not much different than his original proposal last March.
Rather than a $377 million windfall, what schools really need is the $3.1 billion that Wolf vetoed in December.
Of course, Pennsylvania revenue per-student already exceeds the national average by $3,400. Even when looking solely at state funding, Pennsylvania schools are better-funded than average.
RELATED : EDUCATION, EDUCATION SPENDING, TAXES & SPENDING, TAXATION
Gov. Wolf has a history of trying to fire individuals who won’t kowtow to his agenda. He tried to remove Erik Arneson as head of the independent Office of Open Records—a move the state Supreme Court ruled illegal; he replaced David Meckley as the chief recovery officer in York; and he demoted Bill Green as chair of the School Reform Commission in Philadelphia.
Now, Wolf is targeting the Public Employee Retirement Commission (PERC), trying to shut down the entire agency. What’s PERC’s great ‘crime’? Apparently, evaluating pension legislation before lawmakers vote on it. In other words, if Wolf can eliminate PERC, he can effectively roadblock pension reform.
But there’s a problem. The law establishes PERC as an independent agency to evaluate state pension systems and legislation and offer cost and benefit assessments. While PERC members are appointed by legislative leaders and the governor, Wolf has no legal authority to unilaterally disband PERC. But Wolf seems focused on retribution against PERC for refusing to bow to his dictates.
As Capitolwire (paywall) reported last month, when Wolf line-item vetoed PERC’s funding:
According to the aforementioned sources, the Wolf administration wanted PERC to hold a meeting early in December, well before the commission could have an actuarial analysis done on the pension reform proposal…
In the absence of an analysis done by Milliman, PERC’s contracted actuarial firm, the commission was supposed to accept the figures offered by the pension systems and the Wolf administration.
[PERC Executive Director Jim] McAneny refused to do that – allowing Milliman to subsequently find a few errors within the legislation, including one that erased an estimated $630 million in long-term savings – instead pushing for his agency to do one of its many important jobs. However, his decision appears to have put in jeopardy PERC’s ability to do much of anything going forward.
PERC’s function as an independent arbiter serves—and protects—taxpayers. Relying solely on actuaries who are on the payroll of the same system they’re charged with evaluating is hardly a winning strategy for government accountability.
Wolf’s dictatorial actions clearly undermine the prospect for future pension reform, while sending the clear message: If you don’t do the governor’s bidding, he will simply eliminate your job.
RELATED : ACCOUNTABLE GOVERNMENT, PUBLIC EMPLOYEE PENSIONS AND BENEFITS
As yesterday's deadline to enroll in an Obamacare marketplace insurance plan quietly passed, Gov. Wolf is boasting about Medicaid expansion—a major component of the federal government's health care overhaul. Unfortunately, the first year of full-blown Medicaid expansion will not result in better outcomes for the most vulnerable Pennsylvanians.
The administration is celebrating 500,000 new Medicaid beneficiaries—many of whom are childless adults earning up to 138% of the federal poverty line—and a modest decline in the state's uninsured population. Fewer uninsured Pennsylvanians is a good thing, but too often Medicaid coverage doesn’t translate into accessible health care. If past experience is any guide, these new Medicaid patients will face long wait times and poor quality care thanks to low provider reimbursement and a maze of red tape.
Worse, Obamacare's perverse incentives make the neediest Medicaid patients (children, pregnant women, the blind, and the disabled) most vulnerable to benefit cuts. While states receive roughly half of their funding for traditional Medicaid patients from the federal government, newly-enrolled beneficiaries are entirely funded by the federal government until 2017. This means that traditional Medicaid patients will be squeezed out in the event of state-level program cuts.
Consider the experience of Arizona, a state that expanded Medicaid to able-bodied, childless adults in 2000.
The state quickly discovered its Medicaid expansion would cost taxpayers four times what was initially expected, forcing policymakers to cut other areas in order to maintain the expansion.
In 2010, Arizona eliminated Medicaid coverage for heart, liver, lung, pancreas and bone marrow transplants in order to pay for the growing costs of its Medicaid expansion. As a result, truly vulnerable Medicaid patients in desperate need of life-saving organ transplants died so able-bodied adults with no disabilities keeping them from employment could keep receiving free, taxpayer-funded Medicaid coverage.
Advocates of Medicaid expansion also claim budget savings, such as when Gov. Wolf estimated more than $500 million in savings in his 2015-16 state budget. The administration is expected to tout more Medicaid cost savings in next week’s 2016-17 budget address.
There are two problems with counting Medicaid expansion as “a savings to the taxpayers.” First, the money “saved” by Medicaid expansion is better described as money “shifted” from state to federal taxpayers. One way or another, Pennsylvanians are footing the bill for expansion.
Secondly, short-term savings will likely be eclipsed by long-term cost increases. A recent report from the Independent Fiscal Office projects a 7.2 percent growth in Human Services in 2016-17, largely due to Medicaid cost growth—despite the federal government picking up 100% of the cost of new Medicaid enrollees. Starting in 2017, a portion of these costs will be shifted back to Pennsylvania—with state taxpayers assuming 5 percent of the burden in fiscal year 2017-18 and 10 percent by 2020.
Our Medicaid program fails patients and taxpayers alike. Giving patients more control over their care, regularly reviewing eligibility, and making it easier for mid-level providers to serve low-income patients are a few responsible ways to give more Pennsylvanians access to high quality health care.
RELATED : JOBS & ECONOMY, HEALTH CARE, WELFARE
Jon Brennan’s Audi S4 was impounded by Philadelphia police because he’s an UberX driver.
Emails uncovered by the Philadelphia Inquirer reveal that the Philadelphia Parking Authority (PPA) has thrown significant funds and manpower behind efforts to prevent companies like Lyft and Uber from operating in the city. Officials have actively conducted “sting” operations to discourage ridesharing, and sent out messages to approved Uber Black drivers asking them to report UberX drivers.
Moreover, the emails show that the PPA has been conspiring with the taxi industry to protect them from competition—at the expense of consumers.
While PPA officials claim their concerns revolve around safety, one can’t ignore the enormous financial stake the authority has in the traditional taxicab industry. Taxi cabs pay a slew of fees and tariffs along with a yearly $1,000-plus assessment per cab. In contrast, most ride sharing drivers pay nothing.
The emails between PPA and taxi medallion owners reveal a lobbying campaign costing at least $565,000 to protect the lucrative traditional taxi cab business.
In other words, Philadelphians' tax dollars are being spent to stall legislation that the majority of Philadelphians support!
Talk about a conflict of interest. Government authorities that are captured by the industries they are supposed to regulate are robbing the public of better service, and present ethical questions.
The PPA's arbitrary rule over ridesharing companies needs to come to an end. As James previously noted, ridesharing services provide greater convenience, more service, and more safety for riders.
Beyond allowing ridesharing companies the freedom to service consumers in Pennsylvania and statewide, lawmakers should look at dismantling the Philadelphia Parking Authority itself—long a haven for corruption and patronage—and turning parking facilities over to private operators
RELATED : JOBS & ECONOMY, REGULATION, TRANSPORTATION
They are similar in size, resources and population, but the past few years have brought prosperity to Susquehanna County, Pennsylvania and stagnation to Delaware County, New York.
The big difference? Fracking is allowed in one county and banned in the other.
Residents in Susquehanna County, where fracking for natural gas is allowed, are enjoying a robust economy while Delaware County—just across state lines—is suffering, according to the online newsletter Natural Gas NOW. On the Pennsylvania side, local companies like Diaz Manufacturing and Andre & Son are expanding. Meanwhile, New York's ban on natural gas drilling, "has condemned Upstate New Yorkers to the ‘pastoral poverty’ so typical of the region north of Orange County and west of the Hudson."
Referencing sources such as the Federal Deposit Insurance Corporation and U.S Bureau of Economic Analysis, the newsletter paints a sharp contrast between otherwise similar communities.
- Bank deposits:
- Susquehanna saw a 38% increase between 2008-2015
- Delaware increased by 19% in the same time period
- Income from dividends, interest and rents:
- Susquehanna saw a 44% increase between 2008-2014
- Delaware increased by 22% in the same time period. (The newsletter notes that this figure is heavily influenced by royalty payments from gas wells.)
- Wages and salaries:
- Susquehanna saw a 47% increase between 2008-2014
- Delaware increased by 4% in the same time period
- Average wages and salaries:
- Susquehanna saw a 41% increase between 2008-2014
- Delaware increased by 14% in the same time period
The evidence should give pause to policymakers who take Pennsylvania’s gas resources for granted or who seek to exploit them with burdensome taxes and regulations.
RELATED : NATURAL GAS, ENERGY & ENVIRONMENT
Last year, Pennsylvania lost one person to another state every 12.5 minutes. In total, the state’s net domestic migration rate was negative: 41,607 more people moved out of Pennsylvania than moved into the commonwealth.
This exodus is nothing new. The state’s net migration rate has been negative since at least 2011.
While Pennsylvania's total population rose last year, growth has been historically slow. The tepid growth is driven by a “natural increase” (more births than deaths) and international migration.
The chart below illustrates this dynamic.
As we've pointed out in the past, Pennsylvania’s projected demographic trends could exacerbate the state’s fiscal problems. Over the next decade, the population will grow older, which could lead to a demand for more government services, with fewer taxpayers to support such demands.
To avoid this fiscal calamity, the state needs to create an environment conducive for strong economic growth. Economic growth fosters self-sufficiency, thereby reducing the need for government assistance (while higher incomes mean greater tax collections too).
This raises an important question: How do policymakers create economic growth and attract more people to Pennsylvania?
It starts with reducing the tax burden on working people. Over the last five years, the states with the largest migration losses had a higher average tax burden (10.93 percent) than the states with the biggest migration gains (8.84 percent).
|State Domestic Migration|
|Ten States with the Lowest Rate of Domestic Migration|
|States||Domestic Migration (2010-2015)||State-Local Tax Burden as a Share of State Income|
|Total pop./Avg. tax burden||-2,304,021||10.93%|
|Ten States with the Highest Rate of Domestic Migration|
|States||Domestic Migration (2010-2015)||State-Local Tax Burden as a Share of State Income|
|Total pop./Avg. tax burden||2,484,218||8.84%|
|Sources: Tax Foundation, U.S. Census Bureau|
Skeptics who dismiss low taxes as a driver of population migration point to another magnet: weather. More people are certainly moving from the Northeast to warmer climates in the South. But this doesn't hold true everywhere. From 2010-2015, Hawaii (14th highest tax burden) and California (6th highest tax burden) collectively lost more than 284,000 people. Meanwhile, North Dakota (33rd highest tax burden), which isn't exactly known for its hospitable climate, gained 53,048 people over the same time frame.
I'd wager most people would prioritize a decent living for their families over the climate in any given state. If they make the former a higher priority, low tax states will, more often than not, be their destination.
RELATED : TAXES & SPENDING, PENNSYLVANIA STATE BUDGET, SPENDING LIMITS, TAXATION
In 2015, several states took action to improve the functionality of their public charter school laws. Unfortunately for Pennsylvania’s 130,000 charter students—as well as the thousands of students on currently on charter waitlists—progress in the commonwealth remained elusive.
According to an analysis by The National Alliance for Public Charter Schools, Pennsylvania’s charters are losing ground to schools other states. The 2015 report compares Pennsylvania law to the National Alliance’s model legislation. Pennsylvania’s national ranking slipped from 25th to 27th. Lawmakers can do more to ensure healthy growth in the charter sector, especially given that charters were among those hardest hit by the governor’s refusal to sign a responsible state budget until late December.
Findings from the National Alliance suggest that Pennsylvania’s charter laws, despite meeting standards in some categories, need improvement in several critical areas. The most notable failings were related to enrollment caps, authorizer accountability, and fair funding. The commonwealth also has room to grow in terms of access to capital funding and facilities. On the other hand, Pennsylvania received high marks for its transparent application and review processes, as well as for exemptions from local school district collective bargaining units.
What better way to celebrate National School Choice Week (NSCW)—which kicks off today—than to take action strengthening Pennsylvania’s charter school law? NSCW is the country’s largest annual celebration of educational opportunity. A more robust charter sector will empower families to chose from a larger group of high-quality schooling options.
RELATED : EDUCATION, SCHOOL CHOICE, TEACHER UNIONS
The Wolf administration continues to deny basic facts about their original proposed tax hike. Instead of responding with facts, the governor's staff relies on name-calling and personal attacks. The Altoona Mirror published my response (paywall) to the administration's latest attack on CF.
In a recent story about the state budget, Jeff Sheridan, a spokesman for Gov. Tom Wolf, launched personal attacks against the Commonwealth Foundation, while calling factual information we produced “completely false.”
What is Mr. Sheridan disputing? According to the nonpartisan National Association of State Budget Officers (see Table 21 of their Spring 2015 survey of the states), Gov. Wolf’s original proposal for a $4.6 billion tax increase is the largest proposed tax increase in the country—eight times larger than the next-highest increase in Connecticut.
In fact, Wolf’s plan represented a larger tax hike than every other state’s tax increase combined.
Unfortunately for Pennsylvania, Wolf’s press office has a long history of attacking their critics, but a poor record of providing honest information about their harmful tax proposals.
After all, the $4.6 billion tax hike—which would have come to $1,400 per family of four—came straight from the governor’s original budget. All Pennsylvanians benefited when the General Assembly stood firmly against this record-breaking tax increase, which helped earn Wolf the title of most liberal governor in America.
For the governor’s spokesman to deny easily verifiable information and attack the messenger smacks of desperation. What Pennsylvania needs amidst this seven-month budget impasse is honest leadership, not partisanship and petty name-calling.
RELATED : PENNSYLVANIA STATE BUDGET, TAXATION
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