Pension Crisis Facts: What Are Our Options?

MAY 22, 2013  | by BOB DICK

Pennsylvania needs pension reform that provides state workers with a sustainable retirement system that’s fair to new workers, existing employees and taxpayers.  What are our options? The current system is a defined benefit pension plan that guarantees a government income for life. Switching to a defined contribution plan would require the government to regularly deposit a guaranteed percentage of a worker’s salary into a personal retirement account, like a 401(k).

This is the fourth in a series of blog posts debunking the myths surrounding Pennsylvania's pension crisis.

Myth: Defined benefit pension plans are better for taxpayers than defined contribution plans.

Fact: Defined benefit plans are inherently political. Defined benefit plans encourage lawmakers to increase benefits for current workers in good times, regardless of whether such benefits are affordable, and allow policymakers to push costs off onto future taxpayers in bad times. By contrast, defined contribution plans—which require a set contribution from employers and employees every month—make benefits predictable for taxpayers and workers.

Over time, defined benefit plans have proven to be unsustainable and unpredictable. This is why the private sector is rapidly abandoning such retirement systems. A survey by Towers Watson shows that Fortune 100 companies have overwhelmingly shifted to defined contribution plans.

These companies are also choosing 401(k)-type plans over "hybrid" plans. Hybrid plans, such as "cash balance plans," are defined benefit plans that incorporate aspects of defined contribution plans. While they offer less risk than traditional pensions, they suffer from the same funding and political shortcomings which plague Pennsylvania’s existing plans.

Since 2002, the number of Fortune 100 companies offering hybrid plans has rapidly decreased, while those offering 401(k) plans only increased more than 300%.  

 

Cyber Schools Save the Best & Brightest

MAY 21, 2013  | by JOHN BOUDER

Avi Stein, a resident of Camp Hill, overcame learning disabilities and the challenges of mentoring four younger siblings to be one of only 20 Central Pennsylvania students honored with a 2013 Best & Brightest award. With his unique gifts, he decided to attend Commonwealth Connections Academy (CCA), a cyber school with teaching centers across the state, including one in Harrisburg.

A member of the National Honor Society, Avi was also part of a team that designed an unmanned aerial vehicle (UAV) at the Pennsylvania Real World Design Competition.  CCA won first place in the statewide competition—for the third straight year—and will be competing at the national level. Avi, who was chosen to give a TEDxYouth talk earlier this year, plans to attend the honors program at Susquehanna University, studying engineering and pre-medicine.

But due to bills pending in the state legislature, his four younger siblings may not benefit from the same opportunity for choice in public schooling that helped Avi achieve success.

One week ago, hundreds of cyber and charter school parents and students marched on Harrisburg in support of these popular alternatives to traditional public education. Supporters rallied at the capitol where Sen. Mike Folmer and Rep. Dan Truitt were among the speakers urging continued pressure on legislators with the goal of saving cyber and charter schools from punitive and arbitrary funding cuts

The proposed cuts would leave cyber schools struggling to compete with already better-funded brick and mortar schools. Cyber schools are a solution for the education needs of more than 32,000 kids like Avi and Stephen who will excel if given the chance.

Help us protect cyber schools as a viable option for families at CyberSchoolsSave.org, where you can send a message to your legislator supporting parental choice in public education.

RELATED : SCHOOL CHOICE, CYBER SCHOOLS, EDUCATION

Demanding More Dollars From Drillers

MAY 20, 2013  | by GORDON TOMB

Pennsylvania’s new drilling impact fee has not deterred special interests from demanding more money from the state's most prolific producers of new energy.

Act 13 of 2012 imposed fees on natural gas wells that are based on the value of the natural gas produced. The fee for the first year of a horizontal gas well ranges from $40,000-$60,000, depending on the price of gas. The state expects to collect $400 million in just the first two years of this fee.

The price of natural gas has steadily declined over the past two years due to an abundance of supply—saving Pennsylvanians hundreds on their energy bills. Now those who depend on big government are suggesting the state should base the fee on the volume of gas produced rather than on its price to get even "more" tax revenue.

John Hanger, a Democratic candidate for governor, went even further, calling the impact fee "a huge subsidy to the gas industry." A fee is now a subsidy? How Orwellian!

Claims that Pennsylvania collects less money from producers than other states are missing the big picture. Patrick Henderson, Gov. Corbett’s Energy Executive, says the critique ignores more than $1.7 billion in state taxes paid by oil and gas operators since 2007. Plus, the commonwealth’s taxation begins in a well's first year while other states exempt taxes for the initial few years, says Kathryn Klaber, president of the Marcellus Shale Coalition.

It may be fair to expect an industry to compensate for its negative impacts on local infrastructure, such as damaged roads; however, even the current impact fee goes beyond that by sending money to counties that have no gas wells.

Changing the law to maximize tax revenue would create chaos for companies doing business in the state, and would run the risk of driving the businesses themselves to other, more business-friendly gas-producing states. Despite the claims of critics, gas drilling has created tens of thousands of jobs, and provided billions to Pennsylvania residents in royalty and lease payments.

But the groups that depend on taxpayer funding as part of their business model aren't satisfied with the benefits for Pennsylvania families, they just want more for themselves.

RELATED : ENERGY & ENVIRONMENT, NATURAL GAS

From Cyber School to West Point

MAY 17, 2013  | by PRIYA ABRAHAM

Hannah Tuffy, 20, is one of the first cyber school students to be accepted at the prestigious U.S. Military Academy at West Point. The accomplished Scranton native credits her success to the flexible program she enjoyed at cyber school, which allowed her to excel academically while creating room for college classes, work and soccer. Her dream is to study biomechanical engineering and become an Apache pilot. Watch Hannah explain how cyber school prepared her for a successful military career.

Did you know that Pennsylvania’s cyber schools account for barely 1 percent of the state’s education budget? Despite this fact, legislation is in the works right now to slash what some call "excess funding" for cyber schools. Learn more at CyberSchoolsSave.org to find out how you can help us protect cyber school funding and keep kids like Hannah learning.

RELATED : CYBER SCHOOLS, EDUCATION

Dead? Mostly Dead? What's Happening with Privatization?

MAY 17, 2013  | by DAWN MELING

Have you heard that liquor privatization is dead? Or maybe just mostly dead? Well, as one of the great philosophers of our time (Billy Crystal in The Princess Bride) once said: "There's a big difference between mostly dead and DEAD." And here in Pennsylvania, there’s a big difference between mostly dead and where liquor privatization actually stands.

The two Senate hearings have frustrated liquor privatization advocates, to be sure, but key Senate lawmakers are publicly acknowledging and supporting some of the major components of privatization that consumers demand: choice and convenience.

Senate Law & Justice Committee Chairman Chuck McIlhinney stated that his privatization plan includes, "Ten times the number [of licenses than] in the House bill, albeit probably 30,000 less than the governor wanted." And Senator Joe Scarnati, President Pro Tempore, recently wrote in an op-ed:

That is why many were encouraged when, after years of hard work and long debate on the issue, the House of Representatives recently passed HB790.  While far from perfect, passage of this legislation was an important first step in advancing the cause of privatizing our state liquor system, which I also support. I will continue to work … to craft a privatization proposal which increases consumer choice and convenience for all areas of the Commonwealth, while protecting our small business owners who have invested so much in their communities.

These are encouraging statements for Pennsylvanians who want to buy their beer, bread, and Bordeaux in one place. But, while increasing choice and convenience is critical to liquor privatization, so too is ending the government’s monopoly on wholesale wine and spirits. As my colleague Elizabeth Stelle recently wrote: "The reality is a monopoly over wholesale pricing and distribution is a monopoly over all liquor sales. Wholesale privatization is essential to securing the convenience consumers want without burdening taxpayers."

Ending the government’s wholesale monopoly is critical for the true privatization that Pennsylvanians want and deserve.  To better understand why, check out: Why Privatizing Liquor Wholesale Matters to You and Liquor Privatization Done Right.

RELATED : PRIVATIZATION, LIQUOR STORE PRIVATIZATION

Facts Contradict Claims of Liquor Monopoly Supporters

MAY 16, 2013  | by NATHAN BENEFIELD, BOB DICK

I've received some email responses critical of my recent commentary on liquor privatization. These responses, unfortunately, echo many of faulty claims served up by supporters of the government liquor monopoly.

To ensure others are not misled, here are some facts and myths about liquor sales, prices, and PLCB operations.

Myth: Prices are lower in state stores.

Reality: Prices are not lower in Pennsylvania. You can see our prices analysis here. The PLCB also performed a price comparison showing higher prices for wine in Pennsylvania. And a recent study in Addiction finds that prices in license states are consistently lower than in control states.

Myth: Shoppers are flocking to Pennsylvania to use our state liquor stores.

Reality: Quite the opposite is true. The PLCB's own analysis finds that 45 percent of residents in the Philadelphia area cross state lines to buy wine and liquor, costing Pennsylvania hundreds of millions each year in sales and tax revenue due to border bleed. Studies by the Wine and Spirits Wholesalers, Distilled Spirits Council, and Pennsylvania Food Merchants Association also show Pennsylvania a loser as residents are buying wine and spirits in other states.

Myth: State liquor stores are great, and everyone loves them.

Reality: Support for privatization is actually highest among those who regularly visit the state stores. An astonishing 77 percent of weekly shoppers support privatization.

Myth: Because of its wholesale monopoly, the PLCB is the largest buyer of liquor and can drive prices down through tough negotiations.

Reality: The PLCB is not among the largest buyers of liquor. It is a fraction of the size of the largest wholesalers in the U.S. Under wholesale privatization, the wholesaler that secures the license for a particular brand is the wholesaler of that brand for the entire state. The myth that the PLCB's wholesale monopoly gives it greater buying power to reduce prices is simply erroneous.

Students Excel with School Choice

MAY 16, 2013  | by AMY CLINGENSMITH MONGIOVI

Hannah and Alyssa will tell you that the freedom to choose a school that works for them was essential to their academic success. They are just two of the 32,000 students across the nation enrolled in cyber schools. But you don’t have to take their word for it. Now, there is new research backing the academic benefits of school choice, specifically voucher programs.

A new report from the Friedman Foundation for Educational Choice found that children and families who utilize school vouchers achieve better educational outcomes. According to "A Win-Win Solution: The Empirical Evidence on School Choice," 11 out of 12 "gold standard" studies showed that students excel with school choice vouchers, and none suffer when they chose educational options outside of the public school realm.

The report also found that 22 out of 23 studies on how school choice impacts public education showed that competition actually improved public school performance. No research concluded that school choice harms public schools.

The Friedman Foundation also reviewed empirical research related to the impact school choice has on taxpayers, diversity and civic values. Research consistently supports school choice in those areas.

Despite decades of carping by skeptics, vouchers and school choice in any form are a win-win for children—whether they attend private school or remain in a public school affected by school choice, said Robert Enlow, president and CEO of the Friedman Foundation for Educational Choice. Competition works in all segments of our society, and it certainly helps children when they’re permitted to attend a school that fits their needs.

Pennsylvanians don't have to look far to see school choice at work. Last week, kids and parents celebrated  the 12th anniversary of the Educational Improvement Tax Credit program. The program has allowed hundreds of thousands of children to escape failing schools while saving taxpayers millions of dollars.

In the past two years, five new states have adopted private school choice, and other states have expanded their school choice options, including the Pennsylvania's Opportunity Scholarship Tax Credit—a lifeline for kids trapped in violent and failing schools.

RELATED : ACADEMIC ACHIEVEMENT, SCHOOL CHOICE, EDUCATION

Perpetual Problems Plague PLCB

MAY 15, 2013  | by BOB DICK

As Yogi Berra once quipped, "It's déjà vu all over again." Another year and another audit of the PLCB released by the Auditor General’s Office found mismanagement at the state agency. The report noted the agency is plagued by "internal control weakness over financial reporting for capital assets." (Still awake?)

In other words, the PLCB lacks any policy to label and keep track of its inventory properly. Why is this a big deal? The audit found out of a random sample of ten items, six were no longer in use, or could not be identified by PLCB employees. The price tag for these six items: $1.047 million.

The problems don’t end there. Kari Andren has more:

The audit found that the agency's internal controls over its Information Business Management System, which tracks store and warehouse inventory, agency assets and other financial details, are deficient.

• An "excessive number of users," including contractors, can add, change or delete user IDs and data. And a group of users can log in and make changes in the system under the same user ID, rather than individual IDs. The LCB does not have a policy or procedure in place to monitor the use of those functions.

• Credit card users who made purchases in state stores between Nov. 23 and Nov. 28, 2011, were charged twice because the computer monitoring did not detect a problem with the transactions. Cash-paying customers were not affected, and the LCB removed the duplicate credit card charges in March 2012.

This type of mismanagement is nothing new for the PLCB, yet opponents of liquor privatization are pulling out all the stops to prevent change.

Pennsylvanians deserve better than a wasteful, outdated government monopoly on wine and spirit sales. They deserve more choice and convenience at lower prices, which is why it's way past time to get government out of the booze business.

RELATED : PRIVATIZATION, LIQUOR STORE PRIVATIZATION

Anti-Privatization Study Dismantled

MAY 15, 2013  | by JOHN BOUDER

A study frequently cited by liquor privatization opponents is soundly debunked in an article by Trevor Butterworth, a statistics guru at Forbes.com. Butterworth dismantles the methodology of the Center for Disease Control’s (CDC) Task Force study that claims privatization would increase alcohol consumption (though admitting no connection with alcohol-related harms). Mr. Butterworth’s critique concludes with a few choice words:

[…] whatever way you parse the recommendations of the Task Force, and their adoption by the CDC, such reasoning is about as robust as Styrofoam. This is an astonishing abuse of data in the service of trying to sway legislation – and one which points to an agency being driven by politics and ideology, and not by science.

Why such an emphatic condemnation? The Task Force study relies on something called Single Distribution Theory to reach its anti-privatization conclusion. This theory contends that changes in the mean alcohol consumption level result in corresponding changes in consumption levels for all alcohol drinkers. So, if liquor stores are privatized and alcohol consumption increases, Single Distribution Theory suggests that those who use alcohol irresponsibly will also be drinking more, resulting in more DUIs and other social ills.

The problem is, Single Distribution Theory has been essentially debunked for more than a decade for a variety of reasons explained by Mr. Butterworth. To put it simply, some people wouldn’t accept a drink for free, while others, like many Pennsylvanians, are willing to skirt the law and drive across state lines to get the products they want. These bootleggers will not necessarily be drinking more under privatization; they will just be keeping their tax dollars in Pennsylvania and employing workers in our own state.

He also points to another major flaw in the research. The Task Force found a 44 percent increase in median alcohol consumption in states after privatization. But this is mostly the result of the dramatic rise in wine consumption across the U.S. over the past few decades—an increase which also occurred in states that did not privatize alcohol.

Butterworth aptly calls the study, "an astonishing abuse of data in the service of trying to sway legislation,"—very convenient for vested interests currently seeking to keep Pennsylvania stuck in the 1930s, but very inconvenient for the rest of us.

RELATED : PRIVATIZATION, LIQUOR STORE PRIVATIZATION