Pennsylvania State Budget
Cancelled health care plans, an unusable exchange website—do we still trust the federal government to deliver on its health care promises?
In what could be a sign of what's to come, the federal government looks likely to give less funding to Pennsylvania for matching welfare costs. Department of Public Welfare Secretary Beverly Mackereth estimates a formula change would result in a $325 million reduction in Medicaid funding for Pennsylvania next year. Medicaid is jointly funded by the state and the federal taxpayers, with the federal government chipping in more than half of the costs.
While Medicaid spending is already out of control, these cuts don’t come along with the flexibility Pennsylvania needs to revamp its program to save costs and provide better care to low-income families.
This could become new normal if Pennsylvania accepts federal Medicaid expansion funds to purchase insurance for low-income individuals on the exchange boondoggle. President Obama has already twice proposed reducing the matching rates for Medicaid expansion.
The federal reductions should serve as a warning to resist any form of "free federal money."
Gov. Corbett signed a more than $28 billion budget at the end of June—but was it a win for you the taxpayer? CF policy experts offer answers on this and more of your questions, video below.
Prefer an audio-only version? Click here to listen in podcast format.
- Is Medicaid expansion finally dead?
- What happened with liquor privatization?
- With a Republican governor and Republican majorities in the House and Senate, why can't we get common sense reforms across the goal line?
- Do reforms still have a chance in the Fall?
- What can you do to effectively make your voice heard on these issues?
Find out what the major obstacles preventing liquor privatization and pension reform are in our latest commentary, Big Government Party Blocks Bold Reforms.
And thank you for contacting your legislators as things came down to the wire in June!
The state budget deadline came and went without passage of any of the "Big Three" policy items—liquor store privatization, pension reform, or transportation tax and fee increases. It was clear heading down the stretch that while pension reform made progress, there wasn't agreement on all the details.
But many pundits expected deals to be cut to get liquor privatization and transportation done. So what happened?
To the surprise of many, government union bosses spent last weekend trying to stop the House from passing any transportation funding plan. Their opposition wasn't done because of any principled opposition to the proposal, but solely out of spite. Their lobbying effort was aimed at blocking transportation funding so the Senate would not act on liquor store privatization, despite having both legislative and public support for that.
PA Independent notes emails sent from leadership of the Independent State Stores Union, representing liquor store managers, trying to thwart the entire policy agenda.
As further evidence that the two issues are linked: on Saturday, a union opposing liquor privatization began urging House Democrats to block the transportation bill – despite the fact that other major unions in the state favor the transportation spending plan that would put an estimated 12,000 people to work.
"Privatization is now being tied to transportation funding currently being deliberated by the House. Call your House Representative, Republican or Democrat, and tell them to vote NO to transportation until the Senate pulls the plug on privatization of the state stores," read a portion of the email sent by the Independent State Store Union, which represents managerial-level employees in the state-run liquor system.
It seems that the efforts of the government unions were effective, at least for the time being. As the Patriot News reports,
Meanwhile, House Republicans pointed to an email from union leaders as perhaps the culprit behind the Democrats’'stubbornness about negotiate their demands. The email urged union members to call on lawmakers to vote against the transportation bill "until the Senate pulls the plug on privatization of the state stores."
For those who still wonder why these major reforms stalled out, look no further than the special interests who would do anything to preserve the status quo.
Medicaid expansion is an optional part of Obamacare that would result in quarter of Pennsylvanians on government health care.
It takes courage to say no "free money" from Washington but these lawmakers understand that the short-term gain will be followed by long-term pain. The expansion is estimated to cost Pennsylvania taxpayers billions over the next decade in both state and local taxes, and would have resulted in untold harm to the poor who experience long wait times and worse health outcomes under Medicaid.
Before the vote, 33 representatives signed a letter promising to vote against the budget if Medicaid expansion was included in any of the budget-related bills. These lawmakers deserve special praise. Their united front was essential in defeating a last-minute expansion effort.
Please take a moment to thank these brave men and women who stood on principle to protect you and set Pennsylvania on a path to real health care reform.
Finally, a big thank you to Americans for Prosperity Pennsylvania for their tireless efforts to reassure lawmakers that Pennsylvanians do not want to expand Obamacare.
This past weekend was not for the political faint of heart. Special interests, led by government union bosses and crony capitalists, prevented real liquor privatization and effective pension reform from moving forward. They did so by a slim majority, but they did it nonetheless.
Until lawmakers address these important issues fully, Pennsylvania families will continue to pay for their inaction. Property taxes will rise to feed the $47 billion pension deficit, and government officials will still promote and sell liquor on your dime.
We’re disappointed, but this is not the time to despair. The fight is far from over, our resolve has only grown stronger, and we’ll keep pushing this summer and beyond. These issues will continue to be debated in the fall, and thanks to you and the thousands of messages you sent lawmakers this spring, we’ve made significant progress already. Special interests delayed, but did not kill, these critical reforms.
The floodgates are opened, and the beneficiaries of big government cannot keep the will of We the People at bay forever. We are encouraged by lawmakers that stood strong against expanding a failing Medicaid program, preventing it from being included in the budget for now. We are grateful that cyber school funding was not arbitrarily slashed, so thousands of kids can continue to attend these schools of choice. And considerable progress was made in both houses on pension and liquor store privatization, though we have yet to achieve the outcomes you deserve.
Those who benefit from big government are counting on you to give up – because the only way they can win is if we stop fighting. That is why it’s critical that we keep up the pressure, stay informed, and stay engaged with the process.
Both Republicans and Democrats have recently engaged in some risky business by pushing for the Medicaid expansion. They've been quick to assure state taxpayers they won’t be left with an enormous bill if federal matching funding deteriorates thanks to "opt-out" protections and cost-saving reforms.
The problem is that there’s nothing in the law that gives states the ability to opt out of Medicaid expansion, even if the federal government doesn't hold up its end of the deal. All the power is in the hands of HHS Secretary Kathleen Sebelius. In short, expansion is forever, or a "Hotel California," as Rob Alt over at the Buckeye Institute calls it. States can check-in, but never leave.
Other states have already tried to insert cost-saving reforms with little avail. Maine sought to extend the 100% matching rate beyond 2016, Tennessee tried to increase co-pays, and Indiana is still awaiting an answer on whether their Healthy Indiana Plan can be expanded to meet the Medicaid expansion provisions. In short, the federal government has been quick to squash state reforms.
Even worse, the federal government will not give the commonwealth a straight answer on whether they can opt-out or what reforms will be denied until a proposal is in writing. This is the same tactic used on Arkansas in the midst of their expansion debate. And even if the federal government allowed Pennsylvania to opt-out of an expansion, it would be politically impossible to pull the rug out from under citizens who have come to depend on government health care.
Rest assured federal funding will deteriorate, triggering opt-out provisions. Congressman Joe Pitts warned, "There is no way the federal government can keep these promises. We can't afford the entitlement promises we made before the ACA, and we can’t afford this either. . . "
Christie Herrera sums it up nicely over at the Mackinac Center blog: "[states have] no other option but to expand the Medicaid program exactly as it exists today, which other states have done with disastrous results. States can't vary Medicaid benefits or implement co-pays or other cost-sharing mechanisms that aren't currently allowed by federal law. If exchange benefits don't comply with current Medicaid requirements, states must provide "wrap-around" coverage at the state's expense."
Our lawmakers are playing fast and loose with people's health and taxpayer dollars by trying to outmaneuver the federal government to collect millions in taxpayer cash.
Instead of playing political games, let’s follow the lead of Florida which is working to improve Medicaid on their own terms.
About one week remains for lawmakers to finalize a state budget. But along with a spending plan, a number of major policy reforms remain in the mix. The outcomes of these debates won't just affect the next budget, but the future of Pennsylvania families for years and decades to come.
Lawmakers have a chance to transform Pennsylvania into a state of opportunity, make us more competitive in the global economy, and deliver prosperity to our citizens. But there is also the threat lawmakers will continue the same failed policies that kept Pennsylvania stagnating near the bottom of the nation in economic growth for decades.
Opportunities for Prosperity:
- Ending the government liquor monopoly. Pennsylvania remains a laughingstock for being one of only two states with a complete government monopoly over wine and spirits. While the state House passed a liquor privatization plan in March, the Senate is still squabbling over details. A "starting point" proposal floated this week fails to deliver real privatization that will offer Pennsylvania consumers the selection, convenience and prices they demand.
- Fixing the state pension system. The state Senate appears ready to act on a proposal to reform the state pension system, putting new employees into a defined contribution plan. This reform would get politics out of pensions and end the manipulation that has created a funding crisis. This would represent a critical first step of plugging the leak on our sinking ship.
- Reforming prevailing wage. Prevailing wage mandates drive up construction costs for state government, counties, municipalities and school districts. Many lawmakers are demanding that any transportation funding be accompanied by removing this mandate that increases costs and prevents road work and other construction projects from being completed.
Threats to Prosperity:
- Expanding an already unaffordable welfare program. News stories indicate that the state Senate may look to expand Medicaid under Obamacare. This, despite a House hearing yesterday in which lawmakers were warned to be wary of federal promises of "free money," the future costs to the state, or that Medicaid is already too costly while providing low quality care. Expanding the program now would commit Pennsylvania to long-term costs for short-term "federal" dollars, while the program continues to consume a greater share of taxpayers' income.
- Continuation of a job-killing tax. Rumors are also circulating that lawmakers may scrap the planned elimination of the Capital Stock and Franchise Tax which is imposed on business assets. Businesses are assessed this tax regardless of whether they make a profit or lose money, and Pennsylvania is one of the only states to tax both business profits and business assets. This tax was supposed to be eliminated in 2009, but lawmakers have already broken their word three times and extended this tax. The additional cost paid by businesses exceeds $6.9 billion.
- Increasing transportation taxes and fees without reform. Transportation funding legislation continues to move forward, but without reform (such as the aforementioned prevailing wage mandate), which will just increase costs for drivers. Uncapping the Oil Franchise Tax would cost an estimated 28.5 cents per gallon of gasoline. The Senate's plan also includes increased driver and vehicle fees and significant hikes to fines for basic traffic violations.
There is a lot going on in Harrisburg over the next week. To see what you can do to affect the outcome of these debates, visit our activism page.
Before taxpayers are asked to give more for Pennsylvania's transportation needs, are current transportation tax dollars being spent wisely? That's the question several lawmakers are asking, as time winds down on the Governor's budget priorities, of which transportation is one.
Earlier this month the state Senate approved a bill that would fund a $2.5 billion increase in Pennsylvania's transportation funding, but the bill could be in trouble after conservative House lawmakers stated they would not support the plan without prevailing wage reform.
The half-century-old prevailing wage law adds zero value to the taxpayers but costs us a bundle—upwards of $900 per year for the typical family of four. The law requires that a community's "prevailing wage" (a union-inflated amount) be paid on public construction projects above $25,000. The $25,000 threshold has not been adjusted since its early 1960s level, when the average home cost half that amount. Previaling wage doesn't just hit taxpayers, it stretches the budgets of townships, counties, boroughs, cities and school districts.
Tuesday, Reps. Marsico, Millard, and Bloom discussed the prevailing wage reforms they are seeking via a Google Hangout broadcast. Their reforms include excluding road maintenance from prevailing wage, raising the $25,000 project threshold to $100,000, and allowing local governments the ability to opt-out of prevailing wage laws.
Before any transportation taxes are increased, we should demonstrate that the billions we already spend on transportation are maximized. Prevailing wage reform is one way to ensure taxpayers are getting the most bang for their buck.
For more on the budget prevailing wage discussion, watch the entire Google Hangout here. For more background on Pennsylvania's prevailing wage law and its impact on school districts, local governments, and taxpayers, click here.
In a bipartisan vote, the state Senate approved a bill that would fund a $2.5 billion increase in Pennsylvania's transportation funding.
Like Gov. Corbett's budget, the proposal calls for uncapping the oil franchise tax paid by wholesale gasoline dealers, which currently sits at $1.25 per gallon. That is, the tax is only charged on the first $1.25 of gasoline prices.
The Senate proposal would also increase driver's license fees from $29.50 for every four years to $50.50 for every six years. Vehicle registration fees would increase from $36 per year to $104 for two years. The bill would add a "surcharge" for various traffic violations.
The Philadelphia Inquirer has a breakdown of how the proposed $2.5 billion would be spent:
Under the bill, the lion's share of money, about $1.9 billion a year, would go toward highways and bridges. Roughly $500 million a year would go to mass transit, including funding to help them convert their fleets to alternative fuels. About $115 million would be shared among airports, ports, rail freight, and walking and biking routes.
The annual Pennsylvania Turnpike payments to PennDOT would be eliminated after eight years.
The Senate's bill differs from Governor Corbett’s proposal, which also included uncapping the oil franchise tax, but does not contain any new fees or fines. Governor Corbett's proposal is estimated to raise $1.8 billion for transportation funding, $700 million less than the Senate’s proposal, and is phased in over a longer time frame.
To find solutions for fixing Pennsylvania’s deficient roads and bridges, check out CF’s Principles for Transportation Funding.
Elected officials are standing strong in their opposition to the Medicaid expansion under the Affordable Care Act, despite a number of "independent studies" touting the benefits of "free money" from the federal government and constant lobbying by the health care industry.
Last week, State House Republicans introduced their 2013-2014 budget proposal, devoid of Medicaid expansion. House Appropriations Chairman Rep. Bill Adolph stated, "When and if the governor decides to expand Medicaid, then we’re going to be taking a look at those figures."
Here are a couple reasons to pass on Medicaid expansion.
Medicaid doesn't make people healthy. An Oregon study designed to figure out whether Medicaid patients are healthier than the uninsured found no evidence that Medicaid improves the physical health of enrollees.
This randomized, controlled study showed that Medicaid coverage generated no significant improvements in measured physical health outcomes in the first two years, but it did increase use of health care services, raise rates of diabetes detection and management, lower rates of depression, and reduce financial strain.
Estimated Medicaid expansion savings are significantly skewed. Department of Public Welfare Secretary Beverly Mackereth challenged rosy predictions cited in the Independent Fiscal Office’s analysis.
Overall, the Department has serious concerns regarding several assumptions included in the report . . . the IFO report contains what we believe to be several material problems that merit further review and analysis before the report’s conclusions could be relied upon.
Altogether, she estimates the IFO overstates savings by about $515 million for 2014. Why the difference? Mackereth contends the analysis underestimates needed staff and training costs, underestimates the number of Pennsylvanians who will sign up for coverage, and overestimates the savings from moving patients from state programs onto Medicaid, where they qualify for more "federal dollars".
Finally, we still don't know what's in the bill. Last week we learned from Senator Jay Costa that federal officials will force children enrolled in CHIP (Children's Health Insurance Plan) to enroll in Medicaid regardless of whether Pennsylvania expands [pay wall]. Even the Governor's office was unaware of this provision until recently. Unlike Medicaid, CHIP patients can choose from a wide variety of private plans, which the government subsidizes on a sliding scale. Kicking kids off CHIP could force families to find new doctors since many CHIP doctors do not accept the lower Medicaid reimbursements.
Governor Corbett should reject any expansion to avoid what Michael Cannon calls a "fiscal timebomb" in the Morning Call and pursue Medicaid reform that improves outcomes by giving patients choice and control.
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