MAY 16, 2012

Who Should Need the Government's Permission to Work?

What's more dangerous, an incompetent barber or incompetent emergency medical worker? Most people would say and EMT, but a barber has to undergo almost nine times the hours of training as an EMT before they can get a license to practice in Pennsylvania.

The Institute for Justice this week released a new report looking at occupational licensing requirements across the 50 states for mid- and low-income jobs. They discovered dramatic occupational licensing inconsistencies that undermine the public safety argument used by licensing proponents. For instance, only three states license interior designers and only five states license shampooers.

In Pennsylvania, 44 of the 102 occupations surveyed required licenses, including manicurist and upholsterers. Overall, Pennsylvania's occupational licensing burden is lighter than many states—ranking 38th among the states in licensing burden on residents, due to relatively low fees and education requirements.

As we've pointed out before, these regulations are often not about protecting consumers, but preventing competitors to existing businesses. For those truly worried about ugly living rooms from unlicensed interior designers or a bad hairdo from an unlicensed hair braider, there are less costly ways to protect consumers.

posted by ELIZABETH STELLE | 03:52 PM | 0 comment

MAY 15, 2012

New Healthcare Regs Would Cost PA Taxpayers $50 Million

A bill on the floor of the state House would circumvent consumer freedom when it comes to prescription drugs. Many employers, including the state, encourage employees to buy less costly prescription drugs through mail order pharmacies.

HB 511 would prohibit companies from offering incentives to employees to utilize mail order pharmacies.

Prohibiting incentives to use mail order drugs would cost state taxpayers nearly $50 million in the first year, according to a Pennsylvania Office of the Budget analysis. HB 511's fiscal note states:

As a cost-savings measure, OA [Office of Administration] and PEBTF [Pennsylvania Employee Benefit Trust Fund] have encouraged the use of a mail order pharmacy. HB 511 would eliminate these savings, increasing overall costs by decreasing the effective discount rate and guaranteed minimum formulary rebate and increasing the dispensing fee. . . Although HB 511 allows for the possibility of an exemption for PEBTF, the process for evaluating and determining such an exemption is unclear. Assuming that the PEBTF is not exempt from the requirements of HB 511, we anticipate an increase of more than $47.5 million in the first year alone.

Even with an exemption for state employees, is it fair to enact one set of rules for government and another for private business? HB 511 is an anti-competitive bill that takes away choices from consumers in order to enact a one-size-fits-all system that will increase health insurance costs.

posted by ELIZABETH STELLE | 02:40 PM | 2 comments

MAY 3, 2012

Reform Bills Would Begin to Reduce Fiscal Fire

While the fiscal fire is raging across Pennsylvania, Rep. Eli Evankovich's pension reform proposal begins to extinguish the flames that threaten to consume the commonwealth. We've been on record for years with a five-step solution to the pension crisis. 

Rep. Evankovich's bill would place all future lawmakers and their staff into a defined contribution plan similar to the 401(k) plans common in the private sector. Currently, state teachers and government employees are under a defined-benefit plan that guarantees benefits based on salary and years of service.

Currently, taxpayer contributions for our two statewide pension plans, PSERS and SERS, are projected to increase from $1.7 billion in 2011-12 to more than $6.1 billion in 2016-17— a 257% increase. Evankovich's bill, along with bills introduced by Rep. Krieger, Rep. Petri and Rep. Boyd are a step in the right direction, as are Gov. Corbett's now numerous statements of concern about pensions.

EDITORS NOTE: This post originally implied Rep. Evankovich's bill would require public school teachers and state employees to enroll in a defined contribution plan.

posted by ELIZABETH STELLE | 06:05 PM | 0 comment

MAY 2, 2012

Fighting Fraud is the Beginning of True Welfare Reform

Monday the Pennsylvania House continued its efforts to reform the state's welfare system by passing HB 1948 out of committee. The legislation, sponsored by Tim Krieger, would establish the Electronic Benefit Transfer (EBT) Card Management Program to develop controls and procedures to identify EBT card fraud and abuse.

EBT cards are used like ATM cards to distribute monthly benefits, including cash assistance for low-income families (TANF), food stamps (SNAP), and general assistance. EBT cards were the subject of a 2011 report by Auditor General Jack Wagner that found $5.2 million in out-of-state purchases or withdrawals.

Continued efforts to fight fraud and abuse in the welfare system are critical to reining in welfare spending that is outpacing our economy—growing faster than personal income and state tax revenue—and squeezing every other area of the state budget, including education.

There's no question every effort should be made to protect benefits for the truly needy. But we must also work to solve the greater problem underlying welfare spending. The welfare system includes countless rules and guidelines which, in effect, discourage marriage, employment, and accountability. In the video below Milton Friedman explains why this system fails to lift people out of poverty.

Breaking the welfare cycle will take much more than fighting fraud and abuse. It will require changing program incentives to restore the dignity of work. By instilling effective time limits, real work requirements, and opportunities for low-income individuals to control their own health care, we can reward independence and promote a bridge to self-sufficiency rather than a life of dependence.

posted by ELIZABETH STELLE | 02:58 PM | 0 comment

APRIL 30, 2012

Big Government and the Higher Education Bubble

This past weekend I participated with some middleschoolers in a 30 hour famine to raise money for starving families. As we discussed poverty and debt the leader motioned to me saying, "After you graduate from college you will have to pay off a lot of student loan debt, like Elizabeth and I." I then, somewhat sheepishly, admitted I didn't have any college debt and the leader exclaimed, "What! How?"

Today, the average Pennsylvania college graduate leaves school with a bachelors degree and $28,599 in debt. So how did I get by without a penny of debt?

I went to Grove City College, a western Pennsylvania school featured in Sunday's Pittsburgh Tribune-Review. The four-year private school, which refuses to participate in government aid programs, charges $13,598 in tuition. This compares to the average posted private school tuition of $28,500, and it's less than the in-state tuition at taxpayer-subsidized Penn State.

How do they do it? Grove City refuses to participate in the government-driven higher education bubble that rewards schools for raising their tuition by increasing the amount of federal student aid.

Some may say it is just a coincidence that higher education costs skyrocketed when the government started handing out more grants and loans, but consider this astute point from Daniel Horowitz:

Since the DOE was created, the cost of college tuition has increased over 439% adjusted for inflation! The rate of increase is almost exactly commensurate with the rate of growth of DOE subsidization.

The higher education bubble is just one more example of how big government distorts the market and turns a good thing into an overwhelming burden. Sadly, it will probably get worse before it gets better. Remember that housing bubble that threw us into the grips of the Great Recession? The higher education bubble pales in comparison:

It is no coincidence; whenever you subsidize something you get more of it. In this case, subsidizing college tuition means more universities have a reason to raise tuition.

So what have colleges done with this extra cash? They've spent it on expansive building projects and additional administrative staff while four year graduation rates decline. In contrast, Grove City undertook one major construction project in the four years I was there, while 78 percent of its students graduate in four years.

posted by ELIZABETH STELLE | 01:44 PM | 0 comment

APRIL 27, 2012

States Tap Public-Private Partnerships in 2011

Public-private partnerships aren't just for roads anymore. Reason's Annual Privatization Report, released this week, is packed with diverse examples of states leveraging the private sector to stretch tax dollars.  In California, officials are looking to the private sector to keep state parks open, Ohio privatized its economic development agency, and Puerto Rico is in the process of leasing the San Juan International Airport.

In fact, many of the government functions successfully privatized in full or in part last year are the same functions under consideration for privatization in Pennsylvania.

Liquor Privatization: Nearly 70 percent of Pennsylvanians want to end the antiquated government wine and liquor monopoly. In late 2011, Washington state moved to fully privatize the sale and distribution of liquor via voter initiative. One-time state revenues from auctioning off distributions centers totaled $28.4 million, and the state will reap an estimated $216 million in additional revenues from the new license fee structure.

Lottery Management: The Corbett administration recently announced it is exploring private management of the Pennsylvania Lottery. Illinois' groundbreaking lottery privatization program got underway in 2011. The intiative is designed to generate an additional $1 billion in revenues to the state over the next five years. The contract also includes incentives for extra profits; however the contractor must pay penalties if the company fails to hit revenue targets. The state will continue to control all significant business decisions and the contractor retained all state employees. In fact, Northstar plans to hire an additional 100 private sector workers.

Highway Maintenance: Pennsylvania's transportation crisis stems from poor management, not a lack of revenue. In New Jersey, Gov. Christie is looking to get the biggest bang for taxpayers' buck by bidding out three-year highway maintenance contracts. The contract is designed to give private companies the same flexibility as NJDOT crews, but unlike public crews, they must meet performance standards or risk losing their contract. These include removing hazardous roadkill and debris immediately upon notification, repair potholes within 48 business hours, and arrive at emergencies within two hours.

While Pennsylvania has largely failed to implement any signifanct privatization initiative, it still gets recognition in the report for contemplating opportunities in a section called Corbett Administration Embracing the "Yellow Pages Test" in Pennsylvania.

Using the best practices and lessons learned from other states, Pennsylvania can utilize private sector practices and reap significant savings while providing better service. Now that's a win-win.

Check out the full report for more examples in health care, welfare services, and corrections.

posted by ELIZABETH STELLE | 10:20 AM | 0 comment

APRIL 17, 2012

Why We Are Losing the War on Poverty

Michael Tanner, Director of Health and Welfare Studies at the Cato Institute, published a study that cuts to the heart of the poverty problem in the U.S. Tanner writes that the war on poverty has failed miserably despite the government spending nearly $1 trillion per year (for context our entire national defense budget is $685 billion).

In 1964, when the "War on Poverty" began, about 19 percent of Americans were below the poverty line. Nearly 50 years and $15 trillion later, 15.1 percent of Americans find themselves in poverty, and the rate is climbing. Pennsylvania is in the same boat, with poverty rising over the past ten years, despite a 52 percent increase in welfare spending.

It's safe to say more spending does not equal less poverty. In fact, Tanner argues more spending actually encourages dependency.

The nature of government is such that programs are al­most always implemented in a way to bene­fit those with a vested interest in them rath­er than to actually achieve the programs' stated goals. As economists Dwight Lee and Richard McKenzie among others point out, the political power necessary to transfer in­come to the poor is power that can be used to transfer income to the nonpoor, and the nonpoor are usually better organized po­litically and more capable of using political power to achieve their purposes. . . . Thus, anti-poverty programs are usually more concerned with protecting the prerogatives of the bureau­cracy than with actually fighting poverty.

This spring, the political power of providers and the welfare bureaucracy is on display in Pennsylvania as lawmakers consider relatively small welfare reductions—Gov. Corbett's proposed General Fund budget would reduce welfare spending by a scant 0.3 percent after decades of unsustainable growth.

A few of the welfare reforms include:

• Hospital Application Process Revisions (Savings $10 million): Keeps recipients enrolled through the fee-for-service program until redetermination. Often individuals are added to capitated plans but rarely use care. Instead an individual can apply for continual insurance, placing the responsibility with the person, not the state.
• High Cost Case Reviews (Savings $45 million): Intensive case management for high cost consumers enrolled in Medical Assistance programs that reimburse for services based on utilization and fee schedules.
• Child Care Reimbursement Reform (Savings $10 million): Requires rate reductions for unregulated relative and neighbor care and reduces the number of days of free childcare after a parent loses a job from 30 to 60.

Tanner's argument is that the best way to fight poverty is by reducing government programs that require high taxes and regulatory excess, which inhibit job and wealth creation.

But more important, the concept behind how we fight poverty is wrong. The vast majority of current programs are focused on making poverty more comfortable—giv­ing poor people more food, better shelter, health care, and so forth—rather than giving people the tools that will help them escape poverty.

posted by ELIZABETH STELLE | 00:41 PM | 0 comment

APRIL 17, 2012

Who are Teacher Unions Protecting?

The Patriot-News published my letter that questions whether teacher unions protect teachers.

Union lobbying to create an unsustainable pension program is directly connected to the Central Dauphin School Board's decision to let go more than 70 teachers and raise property taxes by more than 3 percent. Sadly, that's only the beginning of student, teacher and taxpayer pain.

Taxpayer contributions for school and state worker pensions will increase from $1.7 billion in 2011-12 to more than $6.1 billion in 2016-17 - a 257 percent increase. Next school year, the average homeowner will pay an additional $370 just for increases in required pension contributions.

Ultimately, the cause of this crisis is not an underfunding of education (education spending has doubled since 1995), but a failure of politicians to recognize they had surrendered to an unsustainable pension plan.

The union that had intended to protect teachers contributed to this crisis that threatens thousands of jobs. The PSEA not only lobbied for increases in pension benefits, but also for the 2003 and 2010 legislation to delay pension payments. That bill is now coming due. Teachers at Central Dauphin should be upset with their union for not only creating the crisis, but refusing to protect jobs.

Given the choice between teacher layoffs and forgoing a 3.75 percent raise next year, the union opted for layoffs. This makes one wonder, who are teacher unions really protecting? It was never kids or taxpayers, and it sure doesn't look like teachers, either.

posted by ELIZABETH STELLE | 10:50 AM | 0 comment

APRIL 13, 2012

Medicaid Flexibility: The Key to a Sustainable Safety Net

As we inch towards the state budget deadline, welfare spending reductions in Pennsylvania continue to be contentious. The reductions that are proposed concentrate on 20 percent of spending, since 80 percent is tied to Medicaid and state officials are barred by the feds from improving the quality or efficiency of the program.

Welfare spending is already outpacing personal income and state revenues; without changes, welfare spending is projected to grow 8 percent per year. How can we ensure sustainable welfare spending without harming those in need? By reforming the program driving the majority of the spending: Medicaid.

There is an effort to give states some control over Medicaid. Legislation recently introduced in the US House of Representatives, HR 4160, would create a Medicaid block grant, allowing states the freedom to design eligibility, benefits and coordinated care around the unique needs of their population. In exchange for this regulatory flexibility, Medicaid funding would be frozen at 2012 levels.

Getting rid of the current matching formula that rewards increases in state spending with additional federal funding (all from taxpayers) will go a long way in refocusing Medicaid benefits.

State Flexibility Act Endorsement Letter

posted by ELIZABETH STELLE | 03:55 PM | 0 comment