Good news: Pennsylvania will no longer spend 40 percent of the general fund budget on public welfare.
Instead, we'll spend it on "human services."
Yesterday, the general assembly approved HB 993 to rename the Department of Public Welfare the Department of Human Services.
The stigma associated with the department has nothing to do with branding but everything to do with its failure to lift people out of poverty—despite ever-growing budgets. New census numbers reveal the poverty rate in Pennsylvania is 13.7 percent, which is a 30 percent increase since 2003.
Meanwhile, welfare spending continues to grow faster than taxpayers’ ability to pay, consuming 40 cents of every dollar spent by state government.
Lawmakers should be concerned with reforming the safety net—not renaming it.
Their first priority should be to address the welfare cliff, in which families are punished for earning higher wages. Because safety net benefits decline more quickly than earned income increases, the system encourages families to settle for less. That's wrong. Fixing the cliff should be the primary focus for advocates of low-income Pennsylvanians.
RELATED : JOBS & ECONOMY, WELFARE
We at the Commonwealth Foundation are pleased to welcome State Treasurer Rob McCord to the fight for fiscal restraint.
McCord, along with Auditor General Eugene DePasquale, held a press conference today to raise concerns about state finances. While DePasquale in his role as Auditor General is regularly fighting waste and abuse, such as his audit of Scranton's failing pension plan, this seems to be a first for McCord. The impetus is the state needs to borrow money from the Treasury to pay its bills until taxes roll in.
This is a real concern, but this is far from the first time the state has been in this fix. In 2009 and 2010, Pennsylvania issued "tax anticipation notes"—borrowing funds with interest until enough tax revenue comes in to pay them off. But McCord issued no warning shot then. He simply signed onto the bond issue.
In contrast, the Commonwealth Foundation has been sounding the alarm for years about the state's fiscal health, noting the "Four Alarm Fire" facing our commonwealth, and the frequent bond downgrades we are experiencing thanks to a pension crisis and excessive debt. As we've noted, this problem has been caused by seven consecutive years of spending more than revenue.
Nonetheless, we welcome Treasurer McCord in the fight for fiscal restraint. The treasurer noted, "the state's true financial condition is even worse than it appears because Pennsylvania has papered over its problems by draining other funds to balance the last several budgets."
In other words, this is a long-standing problem caused by decades of excessive spending. We have to put our fiscal house in order.
One good start is the Taxpayer Protection Act, which passed the Senate Finance Committee today. Click here for our fact sheet on that important issue.
Lawmakers should also tackle the critical issue of pension reform. And recent House efforts to reduce the "debt ceiling" on the RACP program—which is essentially borrowing for corporate welfare projects—would be a major step towards fiscal sanity.
RELATED : TAXES & SPENDING, PENNSYLVANIA STATE BUDGET, SPENDING LIMITS
Most workers are shortchanged by Pennsylvania’s public employee pension programs, according to two recent studies.
The Urban Institute gives Pennsylvania's State Employees' Retirement System (SERS) an "F" grade, ranking it third worst in the nation—better than only Massachusetts and New Jersey.
The September 2014 report says:.
The plan scores poorly because it is inadequately funded, it penalizes work at older ages by reducing lifetime benefits for older employees, and it provides few retirement benefits to short-term employees"...
One in five employees with at least five years of completed service lose money by participating in the plan because pensions they earn are worth less than their required plan contributions.
SERS gives 76 percent of the benefits to 25 percent of employees, according to the Urban Institute.
A similar disparity is found in a Bellweather Education Partners study of the nation’s pension funds for public school teachers, including the state’s Public School Employees' Retirement System (PSERS).
Generous benefits for long-term teachers are partly paid at the expense of those who leave teaching earlier or move from place to place within the profession, according to the study, Friends without Benefits: How States Systematically Shortchange Teachers’ Retirement and Threaten Their Retirement Security.
Less than 25 percent of Pennsylvania’s teachers ever become vested in the pension system, compared to a national median of approximately 45 percent, says Bellweather.
In contrast, defined contribution plans like the 401(k), offer many features better for younger workers. In addition to portability and better benefits for short-term employees, our recent pension study outlines several reason why transitioning to a defined contribution retirement system is an improvement for many employees.
- Ownership. Workers with higher risk preferences can pursue their own investment strategies without restrictions.
- Potentially higher returns. A growing body of evidence suggests that a lifetime of defined contribution retirement investments produce higher returns than individuals cashing out of a defined benefit program.
- Security. By definition, defined contribution plans are fully funded. All of the funds promised to an employee are paid up front and become the employee’s property. There is no risk of reduced benefits from municipal bankruptcy as in the case of Detroit.
The primary obstacle to a more equitable retirement system are teacher unions notes the Bellweather study, saying “the teachers who remain in the system long enough to maximize their benefits—an ever shrinking group—are the most organized politically, via teachers unions and other stakeholder groups."
Unfortunately, government unions' refusal to acknowledge the need for pension reform will hurt workers for years to come. Pension reform is essential to not only protecting taxpayers from enormous debt and rising property taxes, but to give workers a higher quality retirement system where benefits are better distributed.
RELATED : TEACHER UNIONS, TAXES & SPENDING, PUBLIC EMPLOYEE PENSIONS AND BENEFITS
An astounding 93 percent of union members had no role in choosing the union currently representing them, according to a new report authored by Dr. Daniel DiSalvo of the Manhattan Institute.
This really shouldn't come as a surprise given the rarity of union recertification elections, which deny union members the opportunity to vote for or against their union. Never mind that 77 percent of union households support periodic recertification elections.
Dr. DiSalvo's report exposes a pattern of antidemocratic behavior and rules within union organizations, finding unions to be democratic only on a superficial level. Here are just four of his findings supporting his contention:
Very few members vote in standard union-leadership elections (turnout is often below 20 percent; in one recent New York City public-sector union election, turnout was 4 percent).
Those who do vote are not representative of the membership as a whole (with older workers voting at higher rates, thus skewing, for example, union policies on the importance of pensions relative to wages).
Incumbent leaders often go unchallenged for long periods, sometimes “anointing” chosen successors (who then anoint another generation) instead of fostering genuine contests.
Unions, especially at the state and national level, often take political positions with which a substantial number of members disagree (thus forcing those members to pay, with their dues, for the advocacy of policies that they do not support).
This last point is one which CF has covered repeatedly. In Pennsylvania—a forced union state—union members can be required to subsidize organizations with political views antithetical to their beliefs. To make matters worse, these dues used for politics are collected with taxpayer resources, an unfair political privilege afforded only to government unions.
How democratic is an organization that forces you to become a member on condition of employment, refuses to give members the opportunity to vote on its legitimacy, and forces members to pay for political causes they may not support?
In an effort to make unions more democratic, Dr. DiSalvo suggests a number of reforms including publicizing electoral procedures and reporting election results, instituting online voting, and ending the practice of requiring union members to pay for political advocacy they don't support.
While the efficacy of these reforms and others is up for debate, one thing is clear: the current system of unionization is far from democratic.
RELATED : UNIONS & LABOR POLICY, UNION DUES AND POLITICS
Here is the full version:
Ed Rendell appears more interested in defending his tenure as governor than actually discussing the facts about Philadelphia. The Commonwealth Foundation’s analysis of school spending, enrollment, and staffing trends spanned several administrations. We present the facts—most notably that spending has dramatically increased—regardless of who resides in the governor’s mansion.
Despite that increased investment—more than $1 billion since 2002—Philadelphia public schools continue to leave children unprepared. Four in five students failed to meet proficiency in reading and math in 2013, according to the Nation’s Report Card.
These results shouldn’t be surprising, however. A study conducted by the 21st Century Partnership for STEM Education found “either no or very weak association between levels of education expenditures and student achievement” in Pennsylvania.
Rendell goes on to blame Republicans for slashing state education funding. This claim is false. The loss of funding was due to the expiration of temporary federal stimulus money Rendell used to balance the state budget. Today, state education funding in Pennsylvania is at a record high.
The reality facing Philadelphia, though, is that pension costs are consuming more and more of the increase in spending—the result of legislation signed by Rendell and backed by teachers’ union lobbyists to underfund pensions and delay those cost increases until after he left office.
In Philadelphia alone, contributions to the Public School Employees Retirement System (PSERS) increased by $133 million over the last 5 years, which is equivalent to the salary of 2,000 school teachers.
The pension crisis is real, and its impact is handcuffing Philadelphia and school districts across the state.
RELATED : ACADEMIC ACHIEVEMENT, EDUCATION SPENDING, PUBLIC EMPLOYEE PENSIONS AND BENEFITS, EDUCATION
Is it government's job to monopolize a service that private enterprise can easily provide? Matt Brouillette says no—and Pennsylvania's state-run liquor monopoly is a prime example of why government should stick to its core functions and allow free enterprise to flourish.
Matt points to a simple "yellow pages test"—if you can find a service in the yellow pages, government shouldn't be providing it.
Listen below to hear Matt on WSBA 910's The Gary Sutton Show as he justifies this stance and illustrates how government fails when it tries to assume the role of private businesses.
The Gary Sutton Show airs daily on WSBA 910AM in the York area.
Follow Commonwealth Foundation’s SoundCloud stream for more of our audio content.
RELATED : PRIVATIZATION, LIQUOR STORE PRIVATIZATION
Legislation to protect children from predators in the classroom has stalled in Harrisburg.
Union executives are standing in the way.
Currently, teachers who sexually abuse or have been otherwise accused of harming children are permitted to reach a "confidentiality agreement" with their district and quietly resign. If the same teacher applies for a position in a new district, they are not required to inform the new school of their alleged misconduct.
An in-depth report from PennLive explains the teacher unions' unpopular position:
Child welfare advocates blame teachers' unions for not backing transparency throughout the background check process. Union representatives refute that claim, saying they're generally neutral on the bill.
"We support efforts to keep schools safe, but we also support due process for teachers and other school employees," Pennsylvania State Education Association spokesman Wythe Keever said.
Due process is not the issue. The issue is an outrageous loophole in state law allowing accused teachers to resign and relocate without having to inform their new district of alleged abuse.
Far from denying due process, the legislation provides for more thorough background checks and allows employers to know if a potential hire was previously investigated.
We all know the vast majority of teachers are committed to the well-being of their students. But apparently union executives won't lift a finger to make classrooms more safe.
RELATED : TEACHER UNIONS, EDUCATION
Is it time to wave the white flag on liquor privatization? After all, the Pennsylvania Liquor Control Board (PLCB) reported record revenue and transfers to the state’s General Fund this past fiscal year. Why would lawmakers bother privatizing the state stores given their enormous success?
Okay, that question is admittedly tongue-in-cheek, and for those readers who have followed our work on liquor store privatization, you know the PLCB has been anything but successful. But does the PLCB deserve a little credit for its record year? Maybe, if it weren’t a monopoly.
The PLCB is the only game in town, which is the main reason for its "success." If you want to buy or sell wine and spirits in Pennsylvania, you must go through the PLCB. (Note: There are a few exceptions, such as limited wineries.) In fact, it’s against the law to bring booze from other states back to Pennsylvania, but that hasn’t stopped residents from seeking better deals in privately-owned stores. Imagine if the PLCB had to compete with private stores here in Pennsylvania. It's doubtful we would hear about record sales and revenue.
Unfortunately, this kind of private competition isn't an option in our state. And those that don’t live near a border state are stuck with the PLCB. So take the agency’s record year with a grain of salt. Their "success" is not the product of satisfying consumer demands, but rather the result of a government-granted privilege dating back to the Prohibition Era (or error, if you prefer).
Opponents of privatization claim that the state benefits from the revenue government-controlled liquor stores bring to the state. And it's true that the PLCB does transfer some of its “net income” or “profits” to the state, which was also a record high in 2013-2014. But the PLCB is about as profitable as the IRS. Its “profits” are nothing more than taxes paid by consumers in the form of higher wine and spirits prices. But even with its monopoly status, the PLCB is facing some financial challenges.
These challenges drew statewide media coverage last month when the agency floated the idea of increasing the price of its products as a way to make up for a projected 20% loss in its net income in future years. The agency is on track to transfer fewer dollars to state government due to its increasing costs, putting to rest the idea that the agency is an asset for the state.
The PLCB wants to tout their new record, but the only record Pennsylvania consumers care about is the record number of years that we continue to live and shop with complete government control of wine and liquor sales.
RELATED : PRIVATIZATION, LIQUOR STORE PRIVATIZATION
On Thursday, the Center for Medicare and Medicaid Services (CMS) announced approval of the Healthy PA waiver, including a new private coverage option. But the approved waiver severely limited the flexibility Governor Corbett sought. While the state was able to achieve rewards for work, rewards for healthy behaviors and some cost sharing, the federal government refused to allow fundamental changes that could truly improve access to quality care. Some of the key reforms granted are:
- Work requirements: The Governor fought tooth and nail to tie taxpayer-funded health care to work. In the end, enrollees can receive premium discounts for participating in work search activities.
- Healthy behaviors: Enrollees can also reduce their premiums by attending yearly checkups and other healthy behaviors.
- Cost sharing: It’s important for enrollees to contribute to their health care costs. The waiver charges enrollees monthly premiums based on income and family size.
- However, there are few consequences for not paying. There is no waiting period if one fails to pay. If an enrollee misses three months of payments, they will be disenrolled. While that is a deterrent, it may not be enough to keep individuals from not paying when they are healthy and then begin payments again when they become sick and need medical care.
- Providers can refuse service to enrollees above the poverty line who do not make co-pays.
These are good reforms. However, they do not justify the expansion of a system that's still fundamentally broken.
There are much better ways to help low-income adults than placing them in a system that competes with our neediest citizens for limited taxpayer funding. The Governor can pursue state-based ways to improve low-income adults’ access quality and affordable care.
- State lawmakers can ease waiting times and improve the quality of care by encouraging more physicians to locate in Pennsylvania through House Bill 1760—which gives doctors liability protection if they volunteer to help the neediest among us at free clinics.
- State lawmakers can allow doctors licensed in other states to participate in temporary free clinics by organizations like Remote Area Medical (RAM), a volunteer corps that provides free quality health care. Currently, it is illegal for RAM to bring medical volunteers to Pennsylvania.
- Finally, Senate Bill 1063 would allow nurse practitioners to run their own practices, as they currently can in 17 other states, improving patient accessibility.
Pennsylvanians deserve real Medicaid reform that encourages work and provides patients with robust health care choices, no matter their income.
RELATED : TAXES & SPENDING, JOBS & ECONOMY, WELFARE, HEALTH CARE, MEDICAID
Repeating the same lie over and over does not make it magically come true. Yet this hasn’t stopped the Pennsylvania State Education Association (PSEA) leadership from an endless campaign of deception regarding education funding in the commonwealth.
A recent release from the PSEA claims that state funding cuts are causing disproportionately poor test scores for low-income students.
Unfortunately for the “research division” of the PSEA, the truth is state education spending has increased since 2010-2011 and is currently at a record high. What’s more, there is considerable evidence that increased spending has no relationship with improved academic performance.
When calculating education spending, the PSEA refuses to acknowledge rising pension costs, which are an enormous cost driver for districts across the state. You can’t have an honest discussion about education policy without talking about pension reform—unless you’ve buried your head in the sand. In fact, every governor since Milton Shapp in the early 1970s has included pension costs as funding for public schools.
Growing pension costs are directly responsible for layoffs and program cuts. By standing in the way of responsible pension reform, the PSEA holds much of the blame for the current pension crisis.
Since 2009, the state has seen a $1.9 billion increase in Public School Employees Retirement System (PSERS) payments. To put that increase in perspective: $1.9 billion is equivalent to the salary of 33,400 public school teachers.
The PSEA claims that Pennsylvania should “just let Act 120 work”—referring to legislation passed in 2010 that slightly reduced benefits for new employees and relied on unrealistic projections of future investment returns. But letting Act 120 "work" will result in pension costs continuing to skyrocket in coming years. School districts will thus have less money to spend in the classroom, and property taxes will sharply increase to keep pace with pensions.
Of course, higher property taxes are a desirable outcome for PSEA leaders. “Let Act 120 work” essentially means “let higher property taxes fund our retirement.” Between 2012-13 and 2016-17, the average Pennsylvania household will pay nearly $900 in new taxes as a result of pension obligations.
The PSEA doubles down on faulty arguments by pointing the finger at imaginary spending cuts for low scores on the Pennsylvania System of School Assessment (PSSA). A study conducted by The 21st Century Partnership for STEM Education, however, found “either no or very weak association between levels of education expenditures and student achievement.”
This is just another piece of the growing evidence that throwing more money at struggling schools will not improve student performance, but it will hurt property owners—particularly seniors on fixed incomes.
The PSEA is entitled to its own opinions, but not its own facts. Government union bosses should stop deliberately confusing Pennsylvanians with false and misleading claims.
RELATED : ACADEMIC ACHIEVEMENT, TEACHER UNIONS, PUBLIC EMPLOYEE PENSIONS AND BENEFITS, EDUCATION
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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.