APRIL 22, 2010

Economic Development Funding - A Legacy of Waste

Earlier this month the State House passed a bill establishing the Industry Partnerships Program. Yet another Department of Community and Economic Development (DCED) program will be instituted, and as all the other programs will aim to create jobs.

A report by Triad Strategies, titled, 'Changing of the Guard: Economic Development in PA', documents how the state has been using taxpayer money for economic development activities even before the 1980s. However, the 1980s in many ways solidified a greater role for the state in fostering everything from a failing steel and manufacturing industry to infrastructure development to technology-based economic development to direct subsidies and grants to woo favored companies into the state.

In 1983 the Governor Thornburgh and the General Assembly created Ben Franklin Technology Partners, which today accounts for 16 percent of the DCED's budget. In the 1990s Governor Casey started the Governor's Response Team, which is now known as the Governor's Action Team. Its sole purpose is to provide incentive packages to companies that the Governor deems appropriate. Governor Ridge's administration, then, created the DCED by merging the Departments of Commerce and Community Affairs. This marked the beginning of a thoroughly entrenched government sponsored economic development projects, the most prolific being the Opportunity Grant Program.

Governor Rendell only reinforced Pennsylvania's devotion to economic development projects, making Pennsylvania the second highest spender in the nation on economic development projects. The Rendell administration authorized the prevalence of some of the most egregious programs such as the Film Tax Credits.

Pennsylvania's attempt to attract and foster businesses has only turned into a massive corporate welfare scheme, where companies are financed by tax dollars will little return for the taxpayer.

posted by ABHILASH SAMUEL | 08:33 AM | 1 comment

APRIL 14, 2010

PA Public School Staff Grows As Enrollment Declines

Despite stagnation in qualitative measures of school performance, cries for additional spending in public schools have not subsided. In fact, Gov. Rendell says he will continue to increase funding for school districts in the coming school year despite a ballooning state budget deficit. The governor is seeking passage of a 2010-11 budget that includes a $355 million boost to its basic education subsidy to districts.

One of the drivers of higher spending is an increase in staff sizes while enrollment has declined. Data from the PA Department of Education indicates that from 1999-2000 to 2008-09 the state has seen a 12 percent increase in public school staff and a 1 percent decline in enrollment. Pennsylvania schools added 17,345 professional staff and 15,582 support staff over this time, while enrollment declined by 26,960.

Some of the highest declines in student bodies occured in Allegheny and Philadelphia counties, as enrollment fell by 16,883 and 14,072 in each county, respectively.

posted by ABHILASH SAMUEL | 09:33 AM | 0 comment

APRIL 7, 2010

FCC's Net Neutrality Gets Shot Down... For Now!

The Federal Communications Commission's (FCC) effort to regulate companies that provide Internet access came to halt yesterday. In 2008 FCC sanctioned Comcast for slowing Internet trafic on its network for those that use peer-to-peer file sharing services (like BitTorrent) to download large files.

Although, BitTorrent and Comcast settled the dispute, FCC fined Comcast for violating the its network neutrality guidelines against content discrimination. The issue at hand was how far FCC could go to dictate the way other Internet providers such as AT&T and Verizon manage traffic on their networks.

FCC argued that it had "ancillary authority" to regulate internet service providers, which the court overturned. The court judged that under the current law, FCC's reach does not extend to the Internet. Any change would have to come via congressional legislation.

In fact, the courts have consistently pushed by FCC's attempts to overstep its domain. The courts recognize that net neutrality is a property rights issue.

This is good news, not only for Internet users but for taxpayers as a whole. Policies of net neutrality would inevitably result in a slower and more congested Internet. Worse yet, the Internet's expansion will falter as new investment will be less inviting.

posted by ABHILASH SAMUEL | 05:28 PM | 1 comment

MARCH 30, 2010

PA Gives Shyamalan $35 Million Tax Break

Despite the reduction in the Film Tax Credit (which does little to generate economic growth) M. Night Shyamalan's latest production, The Last Airbender received over $35 million (over multiple years) in film tax credits.

Shyamalan has repeatedly leached off taxpayers for many of his productions. His most recent production, The Happening received $12 million in tax credits, and Lady in the Water receive a film production grant. The only good news is that taxpayers are only forced to subsidize these movies, not to watch them.

Film tax credits are just corporate welfare for wealthy Hollywood producers and directors with a significant cost to taxpayers. Yet, what is more disconcerting are statements by legislators such as Stephen Barrar, who had been against film tax credits. He said, after visiting one of Shyamalan's sets, "I am coming around. I was not aware of the advantages of the film tax credit that accrued in my own backyard."

posted by ABHILASH SAMUEL | 02:36 PM | 0 comment

MARCH 26, 2010

Another Film Tax Credit Report Ignores Economics

In its analysis of Pennsylvania's motion picture and television industry the Three Rivers Workforce Investment Board pins down the creation of jobs and increased wages in the film industry to the Film Tax Credit (FTC). The report adds, "the key element driving producers to the Commonwealth is the Film Tax Credit."

Yet, in the study they list competitive advantages to filming in Pennsylvania, such as proximity to New York, the lower cost of production and a large number of temporary workers - indicating that producers will come to the state regardless of the tax credit. To be sure, an overwhelming majority of the films produced in the state do not receive the tax credit.

Although the authors say that 9,785 jobs were created due to the tax credit, their own report outlines a decline in film employment since the creation of the FTC.

Most importantly, they fail to consider how the money could have been used otherwise. The FTC could have been used instead to lower taxes across the board, rather than a carve-out for one industry. Yes, lower taxes might attract businesses, but there is no reason to think that the film industry is unique, or even more responsive to a tax break. Hence, there is no economic justification for imposing higher taxes on everyone else while favoring Hollywood.

More on the Film Tax Credit

posted by ABHILASH SAMUEL | 02:56 PM | 2 comments

MARCH 24, 2010

Podcast: Obese City Governments Seek Soda Tax

Following humbly in the footsteps of Philadelphia mayor, Michael Nutter, mayor Luke Ravensthal of Pittsburgh is proposing a soda tax.

Justin Higginbottom from the Tax Foundation, in this podcast with Nathan Benefield, talks about the ineffectiveness of such taxes to cover up bloated deficits, and their detrimental effect on local economies.

Soda Taxes

posted by ABHILASH SAMUEL | 05:18 PM | 0 comment

MARCH 11, 2010

Reckless Driving With Taxpayer Dollars

Pennsylvania's move towards big government is many ways mirrored by the fleet of cars it has amassed over the last three decades. The number of cars increased from 5,700 in 1980 to 16,186. The Senate "cost cutting commission" recently discussed primarily the increase in the number of vehicles for the state.

The misuse of taxpayer money does not stop there. Numerous state employees have been in car wrecks due to drunk driving. Former Pennsylvania Turnpike Commissioner Timothy Carson wrecked his turnpike-issued car not once but twice while drunk. But he never told the commission about either incident for at least four years, until his resignation on Feb. 8.

The General Services Department relies on self-reporting and is "dependent on the honesty of the vehicle operator." Auditor General Jack Wagner, who released an audit last year calling for stricter oversight of state vehicles says, "If an individual alone is the only one that is aware of what happened with the use of the state vehicle, there's something wrong that needs to be fixed." The General Services Department received 149 phone calls from the public about misuse of state vehicles, and to this date, not one vehicle has been taken away as a result of the calls. Sen. Mike Folmer has legislation to do away with this practice.

posted by ABHILASH SAMUEL | 08:40 AM | 1 comment

MARCH 10, 2010

Is Minimum Wage the Panacea or the Disease

A new report by the Bureau of Business Research at Ball State University found that the recent minimum wage increases account for 550,000 fewer part-time jobs. According to the analysis of Bureau of Labor Statistics data, most these losses are among workers between the age of 16 and 19. (HT: Americans for Tax Reform)

The minimum wage hike during a downturn had a significant impact, especially on part-time workers, because it as business could no longer afford the additional costs. As a result, jobs losses among younger workers were especially pronounced.

Federal and state governments legislate minimum wage to help the poor and unskilled. Yet, studies and consensus among economists have found that minimum wage laws have a negative effect on employment. Indeed countless studies of minimum wage laws have found that they reduce employment, primarily among the low-skill workers and disproportionately affect the young.

posted by ABHILASH SAMUEL | 10:38 AM | 0 comment

MARCH 8, 2010

Pennsylvania's EITC Highlighted in School Choice Yearbook

PA was among those states in which educational opportunity was jeopardized, according to Alliance for School Choice's yearbook for 2009-10. The report indicates that 2009 brought setbacks, particularly in Washington DC and Pennsylvania.

Pennsylvania-another state with strong bipartisan support-suffered one of the most significant setbacks of 2009 because of the Keystone State's desperate financial situation. The program, which served nearly 45,000 children in 2008, was targeted for complete elimination by some legislators who sought to close "budget gaps." The support of Democratic Governor Ed Rendell, State Senator Anthony A. Williams (D-Philadelphia, and State Representative Dwight Evans (D-Philadelphia), however, paid off-as the program escaped complete elimination and survived with what school choice supporters hope will be a temporary funding reduction.

The report also highlights the saving to taxpayers brought about by the EITC program:

Taxpayers directly saved $144 million over six years because of the Educational Improvement Tax Credit (EITC) program, according to a study by the Indiana-based Foundation for Educational Choice. In addition, the Commonwealth Foundation for Public Policy Alternatives estimates that if all the children receiving scholarships between the 2001-02 school year and the 2006-07 school year attended public schools instead, it would have cost the state an additional $1.5 billion dollars over those years.

posted by ABHILASH SAMUEL | 08:47 AM | 0 comment