Survey: Pennsylvania Unfriendly to Small Business

JULY 25, 2014  | by JAMES PAUL

You're probably aware that Pennsylvania’s tax burden is among the most oppressive in the country. But the tax code is just the tip of the iceberg when it comes to the state’s stifling regulatory policy. Entrepreneurs and innovators are also weighed down by complex regulations and onerous licensure requirements.

According to a recent survey of thousands of firms, Pennsylvania is one of the least friendly states for small business—receiving a "D" grade for its overall business climate, a lower mark than each of its bordering neighbors. Only 5 states scored worse with an "F".

Small Business Rankings Map

The survey estimates a whopping 43 percent of low-income occupations in Pennsylvania require a state license. Starting a new business in the Commonwealth has never been more challenging.

The hidden cost of regulatory compliance is staggering. Every afternoon spent toiling away with confusing paperwork is an afternoon that could be spent providing goods or services. Every trip to City Hall to renew a permit, every hour wasted on a government phone tree, every day spent waiting for the bureaucratic stamp of approval to arrive in the mailbox—each of these is a lost opportunity for sustainable, long-term economic growth.

And let’s not forget the cynical reason behind many regulations: to protect established firms from facing new competition. The unfortunate victims of these regulations are consumers, who suffer with higher prices and fewer choices.

Making life simpler for families and job creators may sound like a minor reform, but it would go a long way toward improving Pennsylvania’s economic outlook. 


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Audio: The Beginning of the End for Obamacare?

JULY 24, 2014  | by JOHN BOUDER

This week, a federal court ruling shook the foundations of Obamacare by prohibiting tax credits and subsidies for health insurance policies purchased on the federal exchange. As Elizabeth Stelle says, "The law is crystal clear: In the section where it talks about the subsidies, there is no mention of a federally-facilitated exchange."

To muddy the waters further, another court ruled the opposite way on the very same day.

Elizabeth explained how serious the ramifications for Pennsylvania and other states could be on The David Madeira Show yesterday: "The Affordable Care Act is like a big Jenga tower—if you take out the wrong piece, the whole thing collapses."

Listen to the conversation here:

The David Madeira Show can be streamed live daily at http://thedavidmadeirashow.com/


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Union Dues Fund SuperPAC Spending Binge

JULY 23, 2014  | by NATHAN BENEFIELD

A new $2 million political TV ad campaign represents the first foray of "SuperPAC" spending into Pennsylvania. And taxpayers are forced to pay for this political spending.

As we've noted before, SuperPACs—officially designated as "independent expenditure committees"—were authorized to operate in Pennsylvania by a court order. The organizations can accept an unlimited amount of union dues to spend on independent campaign ads for or against a candidate (but they cannot give directly to a candidate).

PA Families First, the SuperPAC behind the new ad—highlighted by Tom Fitzgerald—is indeed backed by union dues. State campaign finance records show that PA Families First received $500,000 from the national arm of SEIU and $550,000 from the national arm of AFSCME. Both are unions representing government workers.

The Democratic Governors Association is responsible for setting up PA Families First, and contributed another $695,000 from its coffers to PA Families First last reporting cycle.

The DGA made news itself this week for a major fundraising haul, again with much of the funding coming from union dues. Indeed, their last report shows more than $4 million received from the NEA, AFT, AFSCME, UFCW, and SEIU—all unions which represent government workers and public school teachers.

And as EAG News adds, which is worth repeating—this funding comes from union dues:

Someone will ask, so let’s be clear that this is dues money being used, since it is not a direct contribution to a candidate for office. Traditionally these funds are spent on media buys to promote a particular stance on an issue, which tend to appear in battleground states and coincide with the position of a recommended candidate.

The NEA contribution came from the NEA Advocacy Fund, which is a Super PAC. As we all know, “Super PACs’ corrosive influence undermines our system of democracy and threatens to make elections a commodity to be purchased by the highest bidder,” unless, of course, it belongs to you. Then it’s pretty cool.

The troubling aspect of all this is that taxpayers are forced to subsidize this political spending.  Government union leaders of the NEA, AFSCME and others get to use public resources to collect their political money. Union dues, SuperPAC money, and even direct campaign contributions are taken out of teachers’ and government workers’ paychecks using taxpayers-funded resources.

This should not be. Public resources should not be used for partisan politics. It is time to pass paycheck protection.


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House Majority Leader Moves to Reduce Debt Burden

JULY 23, 2014  | by BOB DICK

On the heels of Pennsylvania’s bond rating downgrade, House Majority Leader Mike Turzai has declared his intention to ease Pennsylvanians’ debt burden. This represents a necessary step towards restoring Pennsylvania’s fiscal health and credit rating.

According to the Standard Speaker, Rep. Turzai proposes capping annual spending on public improvement and flood control projects with the goal of reducing annual interest payments made on the state's debt obligations. This proposal should be applauded, as the state and local debt burden exceeds $10,000 per resident and debt payments have been one of the fast growing areas of state spending. Debt payments from the General Fund Budget exceed $1 billion per year, nearly triple what it was 12 years ago.

The move is both pro-taxpayer and pro-economic growth. By easing the debt burden, lawmakers can avoid increasing taxes to pay for mounting debt obligations. Equally important, investors and businesses will be more willing to invest and grow in the state, leading to more jobs.

Last October, the General Assembly lowered the state’s debt ceiling for the RACP program by $600 million during a time when politicians in Washington were voting to raise the national debt ceiling.  At that time, we noted how refreshing it was to see lawmakers move to protect taxpayers; the same can be said again with Rep. Turzai’s current proposal. 


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Court Ruling Guts Obamacare Subsidies in PA

JULY 22, 2014  | by ELIZABETH STELLE

Back in 2012, many laughed at the idea of challenging Obamacare’s individual and employer mandates by arguing that the law as written allows subsidies for insurance in state exchanges only. Laugh no more: Today the U.S. Court of Appeals for the D.C. Circuit ruled the IRS could not provide tax credits or subsidies to individuals with insurance policies purchased on a federal exchange.

The prohibitions would apply to Pennsylvania and 35 other states that do not have state exchanges under Obamacare. 

If the case reaches the Supreme Court and court rules in Halbig’s favor, subsidies on federal exchanges will be illegal.

What does that mean in practice? It means an estimated 357,000 Pennsylvania residents will be free from the individual mandate tax. In addition, 15,000 employers with 3.9 million workers will be free of the employer mandate.

The reasoning is a little complicated. Under the employer mandate, employers can only be fined when their employee gets a subsidy from the exchange. Similarly, an individual can only be fined if the cost of their insurance would be less than 8 percent of their income after subsidies. Without subsidies, more people qualify for the affordability exemption and employers have no penalty.  

If the ruling is upheld, many will argue that the court is taking away tax credits, but in reality the blame lies with the Obama administration and the IRS which moved forward with doling out taxpayer funds in violation of the Affordable Care Act. Effectively the ruling means that the cost of insurance will no longer be shifted onto taxpayers, and the more than 20 new taxes created as part of Obamacare.

The fact is the Obama administration has been violating its own health care law to impose new burdens on Pennsylvania residents and a new tax on employers. It’s time for the administration to start implementing the law as written.  


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Downgrade Detrimental to Taxpayers

JULY 22, 2014  | by BOB DICK, NATHAN BENEFIELD

For the third time in two years, a major bond rating agency gave Pennsylvania a downgrade.

The most recent downgrade, courtesy of Moody’s, has real implications for taxpayers. Moody's points to "one-time measures", a "structural impalance," and "large and growing pension liabilities" as reasons for their downgrade.

This has been a long time coming. For seven straight years—dating back to the Rendell administration and reliance on temporary stimulus funds—Pennsylvania has spent more than revenue. The most recent state budget, while avoiding raising taxes and doing well to keep spending under the rate of inflation and population growth, did not fully fix this structural deficit.

In addition, past decision combined with poor investment performance have resulted in a massive, and still growing, unfunded pension liability. This pension liability and lack of meaningful reform was the primary impetus for Moody’s downgrade.

This should serve as a wake-up call to those who have either denied the pension crisis or claimed the solution has been to just "let Act 120 work." Ignoring our problems won't make them disappear.

Due to the downgrade, creditors may require higher interest rates for state and local debt, leaving you to pick up the tab. This threatens taxpayers with future tax increases, and makes Pennsylvania a less attractive state for investment or new businesses.

Moreover, neglecting pension reform could result in the commonwealth, not to mention cities that have their own pension problems, facing Detroit-like insolvency. This month, Detroit workers and retirees voted to accept a 4.5 percent cut in their pension benefits. Such a cut—particularly for retirees—used to be unthinkable in the public sector. But today's pension crisis represents a triple threat to state and local governments, taxpayers, and employees.

But Detroit's fate need not be our destiny. By continuing to practice fiscal restraint and addressing long-term cost-drivers via meaningful reform, we can build a Prosperous Pennsylvania.


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Sherlock Investigates: Politics on the Public Dime

JULY 18, 2014  | by JOHN BOUDER

On Tuesday, former House Speakers Bill DeWeese and John Perzel were issued public demerits in the form of gold plaques hung beneath their Capitol portraits. That same day, a court filing specified charges in current state Senator Leanna Washington’s corruption trial. What do these seemingly unrelated events have in common?

In any investigation, one must first gather the facts:

  • Senior Deputy Attorney General Susan DiGiacomo said Sen. Washington’s crime was "using state paid employees to plan and organize her campaign fund-raiser during state workdays” and charged Washington with “theft of services” and “conflict of interest.”
  • John Perzel, released from prison in March after serving two years behind bars, “orchestrated an illegal scheme to spend millions of taxpayer dollars on developing massive voter databases and customized software that were designed to give Republican legislative candidates an electoral advantage.”
  • As for DeWeese, Karen Langley at the Pittsburgh Post-Gazette reports, “Prosecutors said he used public resources for political gain by compelling legislative workers to do campaign work.”

It doesn’t take Sherlock Holmes to sense the pattern: Each came under legal scrutiny for using taxpayer dollars for campaign politics—a clear-cut crime… at least for legislators.

Also this week, the Pennsylvania State Education Association (PSEA) released the latest edition of their magazine The Voice. In it, PSEA endorses Tom Wolf for governor and urges members to donate to PACE, their political action committee (PAC). That money is then donated to Wolf’s campaign. Indeed, he received more than $1.6 million in government union contributions in the month following the primary election.

Unrelated? Hardly. Let’s do some deduction.

The union dues money used to produce and distribute The Voice and the political campaign money it solicits is all collected using taxpayer resources. Worse, buried on page 24 is a notice telling members that 12 percent of their dues—which equals more than $7 million—will be spent on politics in just one year.

But a quick trip to my mind palace (AKA, Google) reveals that a few weeks ago, PSEA spokesman Wythe Keever told Scott Kraus at The Morning Call, “Dues aren’t used for political activity, other than to provide members with a list of supported candidates.”

Really? Something doesn’t add up.

How can government unions brazenly do what brings legislators public shaming and jail time?

Why can government union leaders get away with denying that dues are used for politics yet tell their members that $7 million will be spent on the same?

Are they Moriarty-like masterminds or are they simply not being held to the same standards everyone else—legislators and taxpayers alike—must live by?

The answer is… elementary. You’ll find it in our paycheck protection toolkit and you won’t need a magnifying glass.


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Is There a Pension Crisis?

JULY 18, 2014  | by NATHAN BENEFIELD

Public pensions

PolicyBlog readers will be well-familiar with the fact that Pennsyvlania state funding for public schools is at a record high. 

So why do government union leaders and some politicians still repeat a lie about multiple-billion dollars being cut from public education? Simply put, in some cases they refuse to count state funding to school districts for teachers' pension costs as part of education funding.

As the chart below shows, state aid to public schools for pensions has increased more than $1 billion since 2010-11 (this includes a $225 million transfer from the Tobacco Settlement Fund, not counted in the General Fund total).

State Pension Aid to Districts

Note that this $1 billion increase in state pension aid only covers about half of school employees' pension costs. School districts have had to match this increase with a billion dollar increase in payments from local property taxes.

It makes it easier to say that "there isn't a pension crisis" when you completely ignore a dramatic increase of more than $2 billion in public school pension costs. 

Unfortunately, that pension crisis is only going to get worse. Costs will continue to rise over the next few years. The required increases under Act 120 of 2010 are equal to about $900 per household. The costs increase for school districts for required pension payments would be the equivalent of laying off one out of every three teachers in the state.

The fact is this: We are spending more on public education than ever before (see chart below as a reminder of that), but more and more education dollars are going to pay off pension debt created by past political decisions.

State Education Subsidy 2-Color


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Will Higher Taxes and Funding Save Students?

JULY 16, 2014  | by BOB DICK

Philadelphia is in the midst of a crisis. According to the National Center for Education Statistics, more than 80 percent of 4th and 8th grade students did not reach proficiency in math and reading in 2013.

For years, the School District of Philadelphia has been plagued by poor performance and budget challenges. And to address the most recent challenges, some have suggested higher cigarette taxes and more funding as the solution. But raising cigarette taxes, which would disproportionately affect the poor, is not real reform.

Just as a funding mechanism, increasing cigarette taxes proves to be inadequate, as it encourages smuggling, which would mean a loss of sales for businesses and decline in tax revenue for governments

There's also the issue of fairness. For example, say a family in Philadelphia is already sacrificing to put their son through private school. And because both parents are smokers, they would feel the painful effects of the proposed tax increase. Is it fair that they bear an even bigger tax burden due to years of bad public policy decisions? 

Still, don't Philadelphia schools need more funding? It has to come from somewhere, right?

The School District of Philadelphia already spends about $14,000 per student, which is also around the state’s average for per-pupil spending. At approximately $25 billion, overall spending on Pennsylvania public schools is at an all-time high.

Yet, we haven’t seen the results expected from such an enormous investment. In Pennsylvania, nearly three out of five 8th graders are not proficient in math and reading, and according to a Cato Institute analysis, since 1972, SAT scores have slipped, despite a 120 percent increase (adjusted for inflation) in education spending.

Education is the key to a better future for students. This is why it’s critical to push for meaningful education reforms that put parents and students in charge of education.

In Philadelphia, as students languish in violent and failing schools, their quest for a better life becomes much harder. As each year passes without a quality education, they fall further and further behind their peers.

Instead of unfairly taxing individuals to spend more on education, public officials should strongly consider a proven solution to the state’s education woes: school choice. In the end, Philadelphia's school crisis isn't about money. It's about allowing failed policies to continue—with kids paying the price.


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Hope and Success in Opportunity Scholarship Program

JULY 15, 2014  | by MICHAEL HOGG, ELIZABETH STELLE

James Cromartie is a 7th grader at the School of Church Farm in Exton, Pa. His mom, Lynne, is grateful for the school's challenging academics, art, music and athletic programs.

"Many of these 'extras' are unavailable at the middle schools in my neighborhood," she explains.

James is one of thousands helped by the Opportunity Scholarship Tax Credit (OSTC). Reserved for students in the lowest-performing public schools, the OSTC provides hope in largely hopeless situations. The program helped 1,318 students with $15.6 million in credits claimed in its first year. Fifty million dollars in scholarships will be available in the future, meaning the program can save almost three times as many kids from failing schools!

The OSTC, like the Educational Improvement Tax Credit (EITC), allows businesses to receive tax deductions for funding scholarships, so students like James can participate in groups that don’t exist in many public schools.

The quality of these programs is gaining national praise. A new report by the Center for Education Reform gives Pennsylvania a 'B' grade with the fourth best school choice options in the nation.

Plus, the OSTC is saving tax dollars. Each OSTC student that chooses to attend a private school instead of a public school saves taxpayers more than $11,000.

Cost per Student FY 2012-13

Public Public School Spending Per Student

$14,621

Average Opportunity Scholarship Tax Credit

$3,193

Savings Per Scholarship Student

$11,428

Lynne continues, "The effects of inferior education are devastating to families and communities. Parents should be able to select an educational setting which best fits the needs of their child and their families. The Opportunity Scholarship has enabled me to send my son to the school of his choice so that he can pursue his educational goals and dreams."

The OSTC, like the Educational Improvement Tax Credit, is a win for families, businesses and taxpayers. But most importantly, it's giving children trapped in violent and failing schools a second chance.


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