Poor Excuses Used to Prolong PLCB's Power

JULY 6, 2015  | by BOB DICK

Tom Wolf missed an opportunity to be a different kind of governor. He was positioned to finally end the corrupt and inefficient state-controlled liquor system. He opted for the status quo instead.

In a press release explaining his veto of liquor privatization, the governor parrots talking points used by the United Food and Commerical Workers (UFCW)—the state store employees union—to explain why the government needs to sell wine and spirits. Needless to say, the excuses fail the red-face test.

Let’s take them one by one:

This legislation falls short of a responsible means to reform our state liquor system and to maximize revenues to benefit our citizen[sic]...

The primary function of the Pennsylvania Liquor Control Board (PLCB) should not be to wring dollars from consumers. But, for the sake of argument, let’s say it should. The privatization plan put forth by Republicans raises $220 million annually. In contrast, the governor’s own “modernization” plan raises $185 million. If maximizing revenue is the goal, the Republican plan wins.

It makes bad business sense for the Commonwealth and consumers to sell off an asset, especially before maximizing its value.

The PLCB isn’t an asset. In fact, the agency’s net income is scheduled to decline due to operating costs. It’s a liability. And it has consistently failed taxpayers and entrepreneurs. And if the governor is truly concerned about "bad business sense" then perhaps he should study the PLCB's recent history, lest we forget TableLeaf wine, the failed kiosks, the Wine Shrine...

During consideration of this legislation, it became abundantly clear that this plan would result in higher prices for consumers.

The governor has a point. Increasing revenue by $220 million annually through licenses, permits and renewal fees will lead to higher prices. But the governor’s alternative, liquor modernization, gives the PLCB the power to mark up the prices of its products. In other words, you pay more under his favored plan too.

In the most recent case of another state that pursued the outright privatization of liquor sales, consumers saw higher prices and less selection.

Although he doesn’t state it explicitly, it appears Gov. Wolf is referring to liquor privatization in Washington. But privatization isn't to blame for the price increases. The real culprit is the state’s liquor taxes, which are the highest in the nation. As for the claim about selection, the number of WA liquor stores increased by 327 percent. It defies logic to suggest a large increase in stores led to a decline in selection. 

Enough excuses. Free the booze.


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Growing Bipartisan Support for Municipal Pension Reform

JULY 2, 2015  | by NATHAN BENEFIELD

Public Pension Reform

On Tuesday, a task force spearheaded by Auditor General Eugene DePasquale released its recommendation for municipal pension reform. The report recommends, among other things, more transparency and accountability in municipal pensions and taking pensions out of the collective bargaining process.

This report is the latest in a string of bipartisan efforts to tackle the municipal pension problem.

Last week, the Senate Finance Committee advanced SB 755, legislation that would indeed take pensions out of collective bargaining and put all new public safety employees into a defined contribution plan.

SB 755 has the support of the Commonwealth Foundation along with the Coalition for Sustainable Communities—a coalition of local officials and business leaders. But for the first time, the legislation received Democratic legislative support. Sen. Art Haywood, from Montgomery County and a former township commissioner,  joined with Republicans to advance the bill.

Other Democratic Senators also indicated they might be open to supporting the final legislation.

The panel's ranking Democrat, Sen. John Blake, D-22, Archbald, voted against the bill as did other caucus members with one exception. But Mr. Blake said he’s keeping the option of eventually supporting the bill open, depending on what a pending report from Gov. Tom Wolf’s task force on municipal pensions recommends.

Mr. Blake said he’s concerned that switching to a defined-contribution plan could ultimately lead to more pension debt. He noted that Carbondale Mayor Justin Taylor supports the bill.

Sen. John Yudichak, D-14, Plymouth Twp., said he plans to keep an open mind about municipal pension changes if the bill reaches the Senate floor. He said pension changes are one reason why Nanticoke is ready to leave Act 47 distressed municipality status.

Of course, municipal pension reform has been a top priority for Democratic mayors from across the commonwealth for some time. As the Pittsburgh Post-Gazette reports:

[Pittsburgh] Mayor Bill Peduto has pushed hard this year for overhauling municipal pensions, joining nine other Democratic mayors in chastising Democratic legislators for what they called a failure to act, and has met with the governor and legislators on the issue.

"His message has been that pension reform is the number one priority for this city and every other one in the state," said Tim McNulty, Mr. Peduto’s spokesman.

Mr. Peduto and other proponents have said looming election cycles and the heavy political influence of public safety unions may make future efforts to overhaul the system difficult.

"It's going to be a hard reach to do state pension reform this year and municipal pension reform next year," said Lancaster Mayor J. Richard Gray.

While budget discussions continue under the Capitol dome, addressing municipal pensions is no less urgent. And given the bipartisan support behind this effort, the time is ripe.


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Pivotal Pension Reform Passes to Wolf

JULY 1, 2015  | by ELIZABETH STELLE

Yesterday, the General Assembly passed landmark legislation to free homeowners from skyrocketing property taxes, make school budgets go further, and protect public employees from politics.

SB 1 bill reforms the pension system by placing new state employees and school teachers in a defined-contribution retirement plan, similar to a 401(k). The bill passed the House of Representatives 106 to 89 and the Senate concurred with a 29 to 20 vote.

Please take a minute to thank your lawmakers for working to get politics out of pensions.

For years, public servants' retirement benefits have been at the mercy of political whims, with past legislatures making empty promises. Pension underfunding, along with market downswings, have left taxpayers with a $53 billion pension liability and skyrocketing local property taxes (an extra $600 per homeowner since 2008-09).

SB 1 not only stops the bleeding, but also benefits public employees by giving them stability, portability, and protection from political manipulation through a defined-contribution plan. The bill also provides employees with a cash-balance plan, adjusts the calculation of lump sum withdrawals to make them revenue neutral, and reduces "pension spiking" practices. SB 1 also puts lawmakers in the same defined-contribution plan as new employees, once they are re-elected.

The bill would save about $11 billion over the long-term.

Meanwhile, Governor Wolf continues to insist we do not have a pension crisis. A veto would be a huge blow to the commonwealth, paving the way for future credit downgrades, education cuts, and tax hikes.


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One Signature Will End PA's Prohibition

JULY 1, 2015  | by BOB DICK

The Pennsylvania legislature made history yesterday. For the first time since the creation of the state-controlled liquor system in 1933, both houses of the General Assembly voted to remove government from the business of selling wine and spirits.

The Senate voted 27-22 in favor of privatization while the House voted 113-82 to remove government from the booze business.

The privatization plan, HB 466, would gradually phase out the state stores and lease wholesale responsibilities to the private sector for a period of 10 years. After the 10 years is up, the state would completely divest itself of the wholesale system.

The bill gives beer distributors the exclusive right to purchase a permit to sell wine and spirits for six months. After six months, any remaining permits will be auctioned off to interested buyers. Establishments with a "R" license (taverns, restaurants, hotels, grocery stores) will also be allowed to purchase a permit to sell wine and liquor. The entire plan is expected to net the state $220 million annually, mainly through the sale of permits, licenses, and renewal fees.

While the bill is far from perfect, it takes a big—historic—step toward ending the PLCB's stranglehold on one of the last vestiges of Prohibition in the country. Now, the only person standing in the way is Gov. Wolf. Let's hope he sides with the majority of voters over special interests.

Join us in thanking the legislators that voted for this bill. To see if your lawmaker was one of them, click the vote counts above and take a minute to send them a note of thanks.


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Gov. Wolf Should Abandon his Taxes on Working People

JULY 1, 2015  | by NATHAN BENEFIELD

My letter to the editor in the Pocono Record tackles some of the myths about educations spending and Gov. Tom Wolf's proposed tax increase—and why, after the House of Represented rejected his plan by a 0-193 vote, he needs to move on.

Your editorial suggests state lawmakers should "make funding education a top budget priority." Done. Mission accomplished.

School district funding reached a record high last year at $26.1 billion, according to financial reports. That is a $1 billion increase from 2010-11. State revenue is also nearly $1 billion higher than four years ago.

Amazingly, school districts added $100 million to their reserve funds, and now have $4.1 billion sitting around. Moreover, Pennsylvania ranks in the top 10 states in funding per student, spending $3,000 more than the national average.

In contrast to his rhetoric, Gov. Wolf's proposed cradle-to-the-grave tax increase harms poor and middle-class families. His 16 percent sales tax and 20 percent income tax increases will be borne by all taxpayers. His highest-in-the-nation severance tax would drive up energy costs for households, including those with little income.

And his plan to tax everything from diapers and day care, college textbooks and school fees, to nursing homes and funerals, would cost some families thousands of dollars per year. Even with the promise of "property tax relief" in the future, the Independent Fiscal Office finds that every income group will pay more in taxes under the Wolf plan.

 The state House of Representatives already held a vote on Gov. Wolf’s tax proposal. It received exactly zero votes, even from Democrats.

The reality is, higher taxes will hurt working families and public schools need reform, not more taxpayer dollars. It’s time to abandon Gov. Wolf’s ill-advised tax plan and pass solutions that help.

Our latest chart, below, shows state funding for public schools through the years, including the $10.4 billion in the budget Gov. Wolf just vetoed.Education Spending Pencil Chart June 2015


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The Myth of the Modest Pension

JUNE 30, 2015  | by NATHAN BENEFIELD

One of the specious arguments used to thwart pension reform centers on the average benefits of retirees. Opponents of reform claim the "average pension benefit" is around $25,000 annually. But a deeper examination of this figure tells a different story.

The "average" retiree didn’t work in the school system her entire career. And the "average pension" is diminished by employees taking a "lump sum withdrawal" upon retirement. Data from the Public School Employees Retirement System (PSERS) show teachers who worked their entire career in education have a much better retirement plan.

  • Q: What is the average pension for a PSERS retiree with 30-34 years of experience?
  • A: $38,232

  • Q: What is the average pension for a retiree with 35-39 years of experience?
  • A: $50,176

  • Q: What is the average pension for a retiree with 40 or more of experience?
  • A: $53,377

All of these totals are after retirees take their lump sum withdrawal, which is comprised of employee contributions plus interest. If employees opt to withdraw the lump sum, often amounting to several hundred thousand dollars, they then receive a lower annual pension payment. Almost all employees choose this option. 

This withdrawal option (called option 4) is not available for employees hired after 2010. SB1, the current reform pension bill making its way through the General Assembly, would change the Option 4 formula, as it costs taxpayers more for employees who take the lump sum over the higher annual pension. The actuarial note for SB 1 released on Monday shows changing this formula would save an estimated $6.1 billion in pension contributions over 30 years.

This half-truth misleads for another reason—it implies shifting to a defined contribution plan hurts workers. That couldn’t be further from the truth.

As Matt pointed out in his testimony on SB 1, most new teachers will never be vested in their pension. In contrast, a defined contribution plan offers teachers and state workers a predictable, portable and sustainable retirement plan—one which is better for most young workers.

Of course, the most important reason to shift to a defined contribution plan is to get politics out of pensions—and end the cycle of overpromising and underfunding pensions.


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Has Wolf Dropped His Unpopular Tax Demands?

JUNE 30, 2015  | by NATHAN BENEFIELD

Throughout this state budget debate, Gov. Wolf has touted his natural gas severance tax to fund education. And some reporters refer to the severance tax as the "cornerstone" or "centerpiece" of his plan. 

Except it isn't. The severance tax makes up a slim portion of Gov. Wolf’s proposed tax increases. In fact, his plan to tax health care and day care would raise more revenue than slapping an additional tax on the natural gas industry.

He never talks about his sales tax proposals—probably because they are so unpopular. His entire tax plan couldn't garner one single vote in the House. It failed 0-193. Yet, he hasn't said whether he is still demanding a $4.6 billion tax increase.

Even if Gov. Wolf has dropped the majority of his massive tax hikes, that’s no reason to accept a new severance tax. As Dawn pointed out yesterday, the severance tax is bad for all energy consumers, no matter your income level.

Wolf Taxes Pie Chart


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Contract Transparency Still Critical

JUNE 29, 2015  | by BOB DICK

PA State Union Contracts

Harrisburg is abuzz as the budget battle continues. With high profile legislation on liquor privatization, pension and education reform receiving much attention, it's easy to lose sight of a fundamental issue: contract transparency.

Contract transparency is critical to giving taxpayers influence over a process often captured by special interests.

Here is a short summary of the two transparency bills aimed at improving the collective bargaining process:

  • SB 644, sponsored by Sen. Mike Folmer, empowers the Independent Fiscal Office to provide the public with cost estimates on state public sector union contracts prior to ratification.
  • SB 645, sponsored by Sen. Patrick Stefano, requires public sector collective bargaining agreements to be posted on state, school district, or local government websites two weeks prior to signing.

By making union contracts and their costs available to the public before they are implemented, taxpayers will have a chance to offer their input on the terms of the deals. If they feel the terms are unfair, they can demand changes to the contracts.

The current collective bargaining process provides no such recourse. As my colleague Nate pointed out last week, new union contracts were ratified more than a month ago, but we still aren’t privy to the contracts' terms. However, thanks to a story from Capitolwire, we do know the contracts will make government more expensive.

In writing about the budget process, Chris Comisac details why a few appropriations bills needed to be amended (paywall):

During the meeting, House Appropriations Committee Minority Chairman Joe Markosek, D-Allegheny, noted some of the bills have been amended with larger appropriation amounts. Markosek explained those increased figures – which have been agreed to by legislative leaders – represent the additional costs associated with the new collective bargaining agreements (emphasis mine) reached by Gov. Tom Wolf’s administration and the various state employee labor unions.

The new union contracts negotiated by the Wolf Administration—with some of his largest campaign contributors—will increase the cost of government by millions of dollars. This is the result of a process played out entirely in secret. No debate. No accountability. No transparency.

As Gov. Wolf likes to say, the status quo is unacceptable. Let’s upend it.


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Why a Severance Tax is a Bad Idea

JUNE 29, 2015  | by DAWN TOGUCHI

As lawmakers work on passing a state budget, one of Gov. Wolf's top priorities—a severance tax on the natural gas industry—is being hotly debated.

Here are six reasons why a natural gas severance tax is a bad idea:

  1. Middle class families and businesses will pay for it. Households earning less than $100,000 will pay $180 million more annually in higher utility bills as a result of Gov. Wolf's proposal.
  2. Jobs would be lost. According to a recent analysis, a proposed severance tax, with no other tax changes, would result in 4,138 fewer private sector jobs in fiscal year 2017.
  3. We already have a severance tax. It's called an impact fee, but it hampers the economy like a severance tax.
  4. Gas companies already pay every single tax that businesses in Pennsylvania are required to pay. A severance tax would unfairly punish one type of industry in Pennsylvania to provide funding for legislative interests that have nothing to do with natural gas.
  5. Any claims of the gas industry needing to pay their "fair share" are bogus. Gas drillers paid more than $800 million in impact fee taxes from 2011 to 2014 and $318 million in other state taxes since 2009. If these amounts don't constitute a “fair share,” what does?
  6. Punishing the gas industry with higher taxes punishes workers. Private sector labor leaders have bemoaned the reduction in man hours already under way. According to the vice president of the Laborers’ International Union of North America, "If you excessively tax the shale industry, you risk hurting employers, workers and communities across the state."

In the end, a severance tax would hurt the very people Governor Wolf claims he is trying to help.


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Of Volkswagens and Public Schools

JUNE 29, 2015  | by NATHAN BENEFIELD

In a story by Capitolwire (paywall), state Rep. Curtis Thomas is quoted as saying, "We cannot ask children to give us Cadillac performance when you give them Volkswagen dollars to work with."

Rep. Thomas' remarks are curious for several reasons. Consider these facts: 

Fact: You could actually buy a new Volkswagen for the $15,000 that Pennsylvania public schools spend per student—nearly $3,000 more than the national average.

Fact: 84 percent of Volkswagen owners are satisfied.

Fact: Most voters and parents are dissatisfied with the performance of public schools. 

Fact: More dollars won't improve academic performance.

On the bright side, lawmakers aren't just talking about more spending, but are instead advancing meaningful educational reforms. 

Last week, the state House passed HB 805, which would use teacher performance, rather than seniority, during furlough decisions—ensuring our best teachers stay in the classroom.

And just last night, the state Senate passed SB 6, which would create a recovery school district that can intervene in our worst performing schools, potentially rescuing thousand of student trapped in chronically failing schools

Public schools shouldn't be like factories, spitting students off the assembly line as if they were cars. Educational reforms like these will help put students' needs first.  


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