Subscribe to this feedPension Reform Bill on the Move
We applaud the Senate Finance Committee for moving meaningful pension reform legislation. The Committee advanced SB 922 to put all new state and school district employees into a defined contribution plan, similar to a 401(k).
This is a critical first step to addressing our public pension crisis. Our current pension system is like a sinking ship, and we need to stop adding more passengers. Placing new employees in a defined contribution does just that, plugging the hole in the hill first, so that we can start bailing out the water.
Defined contribution plans provide a sound retirement for workers while also being affordable and predictable for taxpayers. Moreover, this reform will get politics out of pensions and prevent manipulation of pension benefits and payments that created the $47 billion and growing crisis.
Despite the many myths surrounding the pension crisis, there is a way forward. To find out how we can stop the pension crisis from dragging down Pennsylvania's economy, please visit CF's Principles for Public Pension Reform.
Podcast: Fixing Public Pensions
Two new BOX Program podcasts offer illuminating insight into our public pension crisis and how lawmakers can help fix the broken system.
First, Matt talks with former Utah State Senator Dan Liljenquist about pension reforms enacted in Utah. Liljenquist likened the pension system to a chemical spill—the first step to addressing the problem is cap the spill, then work overtime to clean it up. Likewise, the first step to fixing the pension crisis is moving away from a defined-benefit plan to a defined-contribution plan, where taxpayer commitments are limited. Listen here.
In the second podcast, Matt talks with Mercatus Center senior research fellow Eileen Norcross about how the pension crisis affects both state and local government finances. Norcross talks about principles for reform including accurate accounting to show the true costs of pensions, and moving from defined benefit plans which have been overpromised and underfunded. Listen here.
Senate Liquor "Reform" Falls Short
This afternoon, Sen. Chuck McIlhinney introduced his liquor "reform" plan which falls short in delivering the convenience, selection, and pricing that Pennsylvanians demand. His proposal, which keeps the state-owned and operated liquor stores as well as the government-run wholesale monopoly of wine and spirits cannot be considered privatization.
With the government continuing as the wholesale middleman—in charge of supplying all wine and spirits to retail outlets—consumers will not see greater selection or lower prices in wine and spirits and would cost taxpayers an estimated $700 million.
But the battle for liquor liberty is not over.
We agree with Senate Majority Leader Pileggi that this proposal is only a starting point in the liquor privatization debate in the Senate, and that more work needs to be done to get government out of the booze business.
Click here to email your Senator and let Harrisburg know that Pennsylvanians want real privatization, not liquor sales "reform." Click here for contact information for Senate leadership and Law & Justice Committee members.
Red Carpets Trip Up Real Tax Reform
When Rocky Balboa triumphantly climbed the steps of the Philadelphia Art Museum in the 1976 blockbuster film Rocky, he did it without a special government handout. But now Hollywood lobbyists are climbing the steps of the Capitol Building in Harrisburg to ask for just that, and top lawmakers are rolling out the red carpet.
While some lawmakers are talking about keeping an onerous business tax scheduled to end in 2014, others are talking about increasing the state Film Tax Credit (FTC), giving an even greater tax break to Hollywood studios. While bringing movie stars to Pennsylvania is good for headlines, special tax breaks for targeted industries hurt average Pennsylvanians.
The FTC attempts to entice movie production companies to film in Pennsylvania by giving them a tax credit equal to 25 percent of their total production costs. As a bonus, if the tax credit is greater than the taxes they owe (meaning they paid zero taxes) the company can sell their excess credits for a profit.
Supporters of the FTC argue that these tax breaks will bring jobs and economic activity to Pennsylvania. This is only partially true, and comes at expense to Pennsylvania taxpayers. According to an Independent Fiscal Office report, the uncapped tax credits will cost taxpayers $108 million per year, with the state recouping only 14 cents in tax revenue for every dollar given away.
And what do Pennsylvanians get in return for the state’s losing investment? Supporters claim it will bring jobs to Pennsylvania, but the IFO report shows that 70 percent of wages (which make up the majority of production expenses) will go to non-residents transplanted from out-of-state. When shooting ends and the film crews go home, their earnings leave with them
Furthermore, the money could be better spent reducing the tax burden for all Pennsylvanians, making Pennsylvania more competitive and leaving us with more of our hard earned money
The FTC is an example of why Pennsylvania needs real tax reform. Special tax breaks for some are paid for by the rest of us, and primarily serve to benefit politicians. We should leave the FTC and all other special tax breaks on the cutting room floor, and instead bring real tax relief to all Pennsylvanians.
Pa's Economy Improves, But Far from the Best
Things are looking somewhat up for Pennsylvania’s economy, according to the annual Rich States, Poor States published by ALEC. The 2013 edition ranks Pennsylvania 34th in economic outlook, up from 40th last year and the highest economic ranking since the index’s creation.
Rich States, Poor States considers 15 factors heavily influenced by state policies to predict how a state’s economy will perform. While the commonwealth’s high tax burden and lack of worker freedom continue to hinder growth, a slowdown in state spending and continued phase-out of the capital stock and franchise tax have helped the state move from the bottom third to the middle-of-the pack.
But middle-of-the-pack isn’t good enough. To continue to attract jobs and investment, Pennsylvania will have to tackle big cost drivers like Medicaid and the pension tsunami. Continued tax reforms will help too, such as Governor Corbett’s latest proposal, which we estimate will create more than 2,500 new jobs by 2018 if enacted.
We're Not There Yet!
We've all fought long and hard for Pennsylvania to finally enter the 21st century and end government control of alcohol sales. We've never been closer, but we're not there yet.
Liquor privatization now rests with the Senate, and we must let them know that we want full privatization, not half measures. Time is running out and alternatives have been raised that would fail to end the government monopoly on alcohol sales.
Pennsylvanians want real privatization—in a poll released this week 52 percent of likely voters said that privatizing retail alcohol sales but keeping the government wholesale monopoly is insufficient (only 18 percent said it was sufficient).
The time is now. Tell Harrisburg you support full privatization of alcohol sales!
- Click here to send your Senator a quick message.
- Call and email Senate leaders and members of the Law & Justice Committee. Contact information below:
Senate leaders:
Sen. Joseph Scarnati, III
Sen. Dominic Pileggi
Sen. Patrick Browne
Senate Law and Justice Committee:
I urge you to pick up the phone, send messages, and share this alert with your friends today.
Pension Cost Conundrum: Cut Teachers or Raise Taxes?
A recent report released by the Thomas B. Fordham Institute estimates Philadelphia School District (SDP) pension payments will total $349 million by 2020, which is a 378 percent increase from what the state and school district had to pay in 2011. That's a rise of about $1,900 per student. And this pension spike doesn’t just threaten the SDP but school districts all across the Commonwealth.
The report lays out the worst case scenario for the SDP, which serves as a warning to the rest of the state:
When the figures are compared to the district’s likely revenues in 2020, we find that supporting this rise in retirement costs could require SDP to cut as much as $283.9 million—13.0 percent of its spending—on other items. If SDP chose to meet the burden of rising retirement costs by raising the student-to-teacher ratio, it would require eliminating 3,077 (out of 9,227) teacher positions, effectively adding eight students per teacher, from sixteen to twenty-four. If SDP chose, instead, to meet the rise in retirement costs by reducing other components of teachers’ compensation, that drop would need to exceed $30,000 by 2020.
The Commonwealth Foundation estimates that under current law, annual taxpayer contibutions will increase by nearly $1,000 per household to fund pension liabilities for both public school employees and state employees.
The report also touches on Act 120 of 2010. One myth (and there are many) surrounding the public pension crisis is Act 120 solved our problems, but the Fordham Institute puts this myth to rest:
Pennsylvania enacted significant pension reform in 2010, cutting benefit accruals for new hires by 25 percent. However, unlike the other two states we examine (Ohio and Wisconsin), the cuts did not make a dent in Pennsylvania’s rising retirement costs. This is because that rise—coming over the next few years—is due to the deferred funding of benefits previously earned, not the cost of benefits for new hires (which take many years to phase in).
For Pennsylvania to avoid school program cuts and higher taxes on working families, we need real pension reform now. For solutions to our pension crisis, visit Principles for Public Pension Reform.
Districts Save What Cybers Spend
How much of Pennsylvania’s education spending goes to public cyber schools? Just 1 percent, or $319 million. Keep this in mind when reading about new data on school district reserve funds.
A common complaint we hear about public cyber and charter schools is that they cost school districts too much money. Indeed, along with pension payments and lack of public support for tax increases, the “cost” of charter school students is one of the main budget problems cited by some school districts. Of course this ignores the fact that public cyber schools receive less funding than traditional schools—only 80 percent funding per student. The school districts keep the extra 20 percent without having to educate a child.
But did you know that Pennsylvania’s school districts also maintain generous reserve funds? These “rainy day” funds are supposed to fill budget gaps and compensate for tax revenue shortfalls. Given recent complaints of education funding cuts, these funds must surely be running dry, right? Not quite.
Updated Department of Education data shows that districts across the state hold more than $3.8 billion in reserve fund balances. That’s nearly a $300 million increase from last year.
That number sounds familiar, doesn’t it? $300 million is just about the yearly cost of public cyber schools for the entire state of Pennsylvania, and schools districts sock that amount away in just one year.
For even more perspective, the current $3.8 billion in school district reserves by themselves would pay for all the state’s cyber schools for more than a decade.
The next time you hear complaints about cyber schools taking funds from school districts, remember that districts are saving every year what cyber schools spend.
Help us defend cyber schools from funding cuts at www.CyberSchoolsSave.org and protect choice in public education for more than 32,000 Pennsylvania students.
Government Middleman Bad for Consumers
The Scranton Times Tribune has an excellent editorial explaining that the state government monopoly over liquor wholesale is just a bad as its monopoly over wine and spirits retail sales.
Currently the Pennsylvania Liquor Control Board determines what wines and liquors can be sold in the state. Moreover, restaurants and bars have to get their wine and spirits from the government—and they have to pick it up themselves, because the PLCB doesn't deliver.
The Times-Tribune writes:
As demonstrated in recent hearings by the state Senate Law and Justice Committee, the alcohol politburo's centralized control of the wholesale booze business is just as harmful to consumers' interests.
In the capitalist world, private sector retailers such as wine shops and restaurants buy directly from many wholesalers, who compete for customers by offering selection and price. Wholesale prices go a long way towards determining competitive, rather than standardized shelf prices.
In Pennsylvania, there is but one 800-pound gorilla of a wholesaler - the politburo itself, the Pennsylvania Liquor Control Board. It determines what the only retailer - also the Pennsylvania Liquor Control Board - can sell at retail, and at what price.
Some have suggested "modernizing" by expanding retail options, but keeping the government monopoly over wholesale. But if taverns and grocery stores still have to buy their wine from the government, Pennsylvanians won't get any greater selection or lower prices than they have now.
For more on this issue, check out recent posts on the cost of "modernizing" the PLCB's wholesale monopoly and why this issue matters to you and listen to our latest podcast in which Katrina Anderson talks with Marcia Lampman, Executive Director of the House Liquor Control Committee, on why ending the government's wholesale monopoly is critical to Pennsylvania consumers.
Podcast: Why Does Wholesale Privatization Matter?
For most of us, liquor privatization means making liquor more convenient and affordable by getting rid of Prohibition era, state-run stores and unleashing the power of the private sector. But the state’s current retail system is supported by a wholesale network that’s also run by the government. For lawmakers to give Pennsylvania consumers the choice and convenience they deserve, the monopoly over wholesale and retail operations must end.
Marcia Lampman, Executive Director of the House Liquor Control Committee, says, "The PLCB is acting as a middleman, because you still have the 'big guys'—the wholesalers—operating in Pennsylvania as well. They are simply called importers and are only allowed to sell to the PLCB."
This adds a layer of cost and inconvenience that does not exist in other states. In fact, restaurants and taverns actually have to pick up their liquor orders from state outlets—the PLCB doesn’t deliver.
So, what is wholesale privatization and why does it matter? (Boondoggles aside.)
Marcia answers these questions and much more in our latest podcast. Listen here.
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Who are We?
The Commonwealth Foundation is Pennsylvania's free-market think tank. The Commonwealth Foundation crafts free-market policies, convinces Pennsylvanians of their benefits, and counters attacks on liberty.
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