MARCH 14, 2012

House Passes Corporate Welfare Reform

This week the Pennsylvania House passed RACP (pronounced RCAP) reform by a wide margin of 184 to 9.

RACP - the Redevelopment Assistance Capital Program - is a political goody bag, rewarding politicians with borrowed funding for local "economic development" projects. Some of the more controversial projects include the Arlen Specter Library, the corporate headquarters of bankrupt Tastykake and numerous sports stadiums. Most recently, RACP was the source of a $3 million grant to the Second Mile, the charity founded by alleged child molester Jerry Sandusky.

HB 2175, sponsored by Rep. Turzai, seeks to shrink the program that's helped cover the commonwealth in red ink. Since 1986, the program has racked up more than $4 billion in debt. The RACP reforms include:

• Reducing the RACP debt ceiling immediately from $4.05 billion to $3.5 billion and then incrementally until it reaches $1.5 billion.
• Requiring future projects to demonstrate a substantial regional or multijurisdictional economic impact.
• Enacting a stringent review and approval process within the Office of the Budget, including meetings in local communities where the projects would take place.

While reducing corporate welfare programs is a step in the right direction, true reform would get rid of this government wealth redistribution scheme that benefits the politically savvy and contributes to the $120 billion in combined state and local government debt - almost $10,000 for every man, woman, and child.

Debt is just one part of the four-alarm fire that is threatening to destroy Pennsylvania's fiscal house - watch this video to learn more.

posted by ELIZABETH STELLE | 01:32 PM | 0 comment

FEBRUARY 13, 2012

Reforming State Borrowing for Corporate Welfare

Since 1986, state lawmakers have authorized more than $4 billion in borrowing for the Redevelopment Assistance Capital Program (or RACP). This is effectively debt for corporate welfare and other pork-barrel projects.

Last week, Gov. Corbett approved funding for the Arlen Specter memorial library, a Rendell-era RACP project Corbett campaigned against in 2010. In the end, the administration couldn't find a legal way to refuse the funding. Now House lawmakers are out to reform RACP and prevent future monuments to politicians.

HB 2175, unveiled at a press conference Wednesday with Rep. Mike Turzai and Rep. Rosita Youngblood, proposes to reform the way the Commonwealth incurs debt and shrink the RACP program. The bill reduces the RACP debt ceiling from $4.05 billion to $3.5 billion and then gradually to $1.5 billion over 20 years.

Pennsylvanians already owe $120 billion in combined state and local government debt—almost $10,000 for every man, woman, and child. Reforming RACP is an important first step in getting our debt under control, but a better solution would be to eliminate future RACP borrowing entirely.

Apart from the staggering amount of taxpayer debt, paid off over decades, the program is littered with economic projects of questionable benefit, from corporate headquarters to sports stadiums. Most recently, RACP was the source of a $3 million grant to the Second Mile, the charity founded by accused child molester Jerry Sandusky.

HB 2175 seeks to open up the process, requiring notification of the legislators affected, a public meeting to be held in the affected community, and certain information to be posted online.

HB 2175 was voted out of the House Finance committee today.

posted by ELIZABETH STELLE | 03:10 PM | 0 comment

JANUARY 31, 2012

Corporate Welfare Not Needed to Get a Cracker

The Pittsburgh Tribune-Review reports that Pennsylvania lawmakers are pushing a special tax deal to attract a "cracker" plant to the state. The proposed Shell cracker—which breaks down natural gas into ethylene, used in plastics—has been much talked about, with the Keystone State reportedly a finalist with Ohio and West Virginia. The plant would create thousands of jobs, at least by internal estimates.

The proposal would expand Keystone Opportunity Zones, exempting certain businesses from taxes (primarily targeted to the cracker). What's wrong with a KOZ? Well for one thing, tax breaks for a few require higher taxes, spending being equal, on all other businesses. Further, a Legislative Budget and Finance Committee report finds that the KOZ program has little accountability, and the promised jobs often failed to materialize. Most importantly, tax breaks and corporate welfare don't actually generate economic growth, they simply shift resources.

Rather than expanding corporate welfare, here is what lawmakers need to do to make Pennsylvania more attractive:

• Enact a natural gas policy that removes the political uncertainty stemming from the Frack Attack, and provides predictability for the gas industry.
  
• Improve Pennsylvania's business climate for all businesses. Indeed, lawmakers should take the lesson from the Keystone Opportunity Zones—that businesses are attracted to lower taxes—and apply it statewide.

posted by NATHAN BENEFIELD | 01:31 PM | 0 comment

DECEMBER 19, 2011

Time to End Borrowing for Corporate Welfare

The Pa. House is expected to vote this week on SB 1054, legislation to authorize $1.66 billion in state borrowing for the "capital budget." The annual cost of this bill would be $115 million per year for 20 years in annual interest and principle payments. In a memo to legislative leaders urging passage, Budget Secretary Charles Zogby claims the additional debt is needed to finance projects the commonwealth is already contractually obligated to fund.

Of this borrowing, $270 million would be for Redevelopment Assistance Capital Projects (RACP). Borrowing for RACP is one of the drivers of Pennsylvania state debt—a growing problem as interest payments continue to rise, while taxpayers' debt continues to grow year after year.

RACP borrowing has been used to fund everything from corporate headquarters to sports stadiums to the Arlen Specter Library. Most recently, RACP was the source of a $3 million grant to the Second Mile, the charity founded by accused child molester Jerry Sandusky.

In response, Rep. Rosita Youngblood (D-Philadelphia) is holding a press conference tomorrow to call for reforms to the RACP program to promote greater transparency and accountability. These reforms are much-needed, but better yet would be to eliminate future RACP borrowing altogether and stop accruing debt for corporate welfare.

posted by NATHAN BENEFIELD | 05:10 PM | 1 comment

NOVEMBER 22, 2011

Green Fiascoes and Boondoggles

Economist Mark Hendrickson, a member of CF's Council of Scholars, looks at the failure of government funded "green energy" projects in his latest column for the Center for Vision and Values.  He identifies  key lessons from these government fiascoes, for which the Solyndra scandal is only the most famous of many examples at the federal and state level.

There are at least four important reasons why we should stop funding "green" government programs:

First lesson: government-appointed experts are incompetent economic planners—a fact of life that any intelligent adult should know after the spectacular failure of central economic planning in the socialist experiments of the 20th century. No matter how brilliant and how well-intentioned government planners may be, they do not and cannot know what consumers want and how much they are willing to pay for it. Only free markets can solve this challenge. If electric cars are to be a viable industry, private companies will make them so.

Second lesson: The government's involvement in Solyndra raises troubling questions about possible corruption. While I think the Solyndra deal stinks to high heaven, I wonder whether any laws have been broken. Where is the dividing line between influence peddling, legitimate lobbying, political deal-making, and actual crime? Many farm-state Republicans have supported the uneconomical ethanol boondoggle for decades in exchange for generous support of their electoral campaigns, so the practice is bipartisan.

Third lesson: Government job programs are a blatant failure. They have never been economically beneficial. In the 1930s, Franklin Delano Roosevelt had the department of agriculture hire 100,000 Americans to monitor how much acreage American farmers were cultivating. These federal jobs produced no wealth. Their jobs made no more economic sense than paying people to dig holes and then fill them up.

Today's green workers are economically nonsensical, too. True, they sometimes produce something, but the economic value is invariably less than the amount of tax dollars needed to subsidize their job. In other words, federal jobs make us poorer.

Fourth lesson: Finally, we simply can't afford these green boondoggles. Uncle Sam's official debt is now $15 trillion, and when you include off-budget items and unfunded liabilities, the situation is far worse. Given this fiscal reality, it is the height of irresponsibility to throw taxpayer dollars at any special interests, and it is particularly egregious to subsidize enterprises that are plainly uneconomical.

posted by NATHAN BENEFIELD | 11:00 AM | 0 comment

SEPTEMBER 29, 2011

Lessons for Pennsylvania from Jersey Shore

New Jersey Governor Chris Christie recently nixed a tax credit for production of MTV's Jersey Shore. This is a TV show that apparently doesn't portray New Jersey in the best light. New Jersey has stopped taking new applications for its film tax credit, and as Stateline notes today, is among several states to eliminate or defund their film incentive programs. Gov. Christie is opposing legislation that would expand New Jersey's program.

Gov. Christie is right -- not because Jersey Shore is a terrible show (I have never seen the show, so cannot comment on its quality) -- but because film tax credits are ineffective. The credits go to productions that would have occurred regardless of the credit (Jersey Shore being a case in point), and more importantly, don't improve the overall business climates of states. Lower taxes and fewer regulations for all businesses would attract not only more filmmakers, but entrepreneurs from all industries.

On film tax credits, Pennsylvania should follow the script of our neighbors to the east.

posted by NATHAN BENEFIELD | 03:30 PM | 0 comment

SEPTEMBER 7, 2011

Rick Perry, Corporate Welfare and Pennsylvania

Texas Governor and Presidential Candidate Rick Perry has taken some flak recently for "job creation" funds, which largely direct taxpayer funds to corporations and special projects. This is commonly known as corporate welfare.

While the popular phrase claims "everything is bigger in Texas," that doesn't hold true when in comes to corporate welfare. Pennsylvania's handouts to corporations dwarf those in Texas despite the Keystone State having about half the population. Ohio leads the nation with the dubious honor of most corporate welfare, according to the latest data.

The top three states in economic development spending all lost jobs between 2002-2010.  In fact, it would seem Texas added jobs in spite of corporate welfare spending.

While this year's General Fund Budget reduced corporate welfare spending and consolidated some programs, there remain a number of other subsidies and incentives in Pennsylvania. These include the Redevelopment Assistance Capital Program (RACP), issuing state bonds for projects such as sports stadiums; independent state agencies such as the Commonwealth Financing Authority, which issues its own debt to implement Pennsylvania's "stimulus" program; and targeted tax breaks such as the film tax credit.

Here are a few, but almost certainly not all, the various programs Pennsylvania has offering welfare to corporations and economic development groups—all in the name of "creating jobs."

posted by NATHAN BENEFIELD | 05:14 PM | 0 comment

JUNE 22, 2011

Growing Greener is Corporate Welfare

The Patriot News editorial board has yet another editorial arguing for a new tax on natural gas, on top of the taxes they already pay. While the board's passion for a tax or fee is unmistakable, their facts and logic are noticeably absent.

They give no reasons why the state should have a severance tax, other than other states do. What about the fact that Pennsylvania already has the 10th highest state and local tax burden in the country and the second highest corporate net income tax rate in the world, that drillers have paid more than $200 million in taxes so far this year and that the industry has poured hundreds of millions into roads? Not even mentioned in the Patriot's editorial.

The Patriot goes on to argue that an "impact" fee should increase with the price of natural gas. How exactly do they explain why higher market prices for gas would increase the impacts? They don't.

Finally, the Patriot claims that not taking more money from these companies is "corporate welfare." A few sentences later they argue the state should tax companies to fund Growing Greener. But Growing Greener is corporate welfare.

Growing Greener has nothing to do with natural gas drilling.  It is a program that doles out tax dollars to a myriad of special interests. Alternative energy companies have received millions for expanding their operations. Growing Greener has also funded cosmetic improvements to privately-owned buildings. Even PennFuture, the eco-lobbying group, has been a recipient of Growing Greener funding. Shockingly, PennFuture is lobbying hard for a tax to fund Growing Greener.

Indeed, support for the impact fee is about those who feed off the taxes of others demanding "more."

posted by NATHAN BENEFIELD | 04:38 PM | 0 comment

MARCH 31, 2011

On Pennsylvania's Job Growth

Former Gov. Ed Rendell emerged from his semi-retirement to toot his own horn, saying his spending is why Pennsylvania's economy is so great. Rendell cites statistics that Pennsylvania ranks 7th in job growth over the past year.

There are several problems with this one-year ranking:

• After decades of stagnant economic growth, Pennsylvania had continued stagnant economic growth. Indeed, the job growth in 2010, coming out of a recession, was a scant 1.9 percent.
• Since 1970, Pennsylvania ranked 46th in job growth (slightly updated figure from our PolicyBrief on the state budget). Under Gov. Rendell, the state ranked 29th in job growth—one could argue the state's economy was less bad, but this was a period in which Pennsylvania lost jobs.
• The primary reason for Pennsylvania's ranking in recent years is that other states suffered major job losses as part of the housing market collapse. Pennsylvania, however, had no economic boom from which to collapse.
• Rendell's logic that Pennsylvania had a good 2010 because of his tax-borrow-and-spend economic development programs fails to address why Pennsylvania had a lousy 2003, 2004, 2005, 2006, 2007, 2008, or 2009. Or why the growth in state spending from 1970-2010 didn't create jobs in the commonwealth. And while Gov. Rendell blames the national economy for job losses under his tenure, he can't explain why the borrow-and-spend economic development programs of Bush and Obama (which mirrored his own) didn't work.

In looking at Pennsylvania's job growth, consider where job growth occurred over the last year, from the Bureau of Labor Statistics' quarterly data on county employment. The fastest growing counties where those in which natural gas drilling is occurring:

In other words, the reason for job growth during Gov. Rendell's final year is the natural gas industry—which Gov. Rendell wanted to tax, but lawmakers thought better of.

posted by NATHAN BENEFIELD | 04:12 PM | 0 comment