Children Benefit From School Choice, And So Do You


The moral argument for school choice is irrefutable: Every child deserves access to a first-rate education. Families should not be limited by the supply of public schools within artificially-drawn district boundaries. This is why Pennsylvania’s private scholarship programs, the Educational Improvement Tax Credit (EITC) and Opportunity Scholarship Tax Credit (OSTC), are so important. They empower thousands of children each year to break free of the education-by-zip code injustice and instead attend a school that best fits their unique needs.

It is not just scholarship recipients, however, who benefit from tax credit programs. Taxpayers, too, realize massive savings thanks to school choice. This according to The Tax-Credit Scholarship Audit, an essential new report from the team at EdChoice.

Author Marty Lueken’s analysis of Pennsylvania’s EITC program finds roughly $1.3 billion in taxpayer savings between 2002 and 2014. The report, which does not examine the OSTC, compares the cost of an EITC scholarship with the variable costs of each student enrolled in traditional public schools.

Crucially, Lueken estimates and accounts for students who switch from public to private schools as a result of the scholarship program. These are the students who generate the highest savings to taxpayers. The report estimates between 26 and 45 percent of scholarship recipients must have switched from public schools in order for the program to be fiscally neutral—certainly a reasonable and achievable projection.

What’s the bottom line? Say you’re pleased with your local public school. Perhaps you never thought twice about the state’s scholarship program, and you don’t have strong feelings about school choice one way or another. If you’re a Pennsylvania taxpayer, you have still benefited from the EITC.

All the more reason to increase the program and provide more scholarships to families.

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Prioritizing Tax Revenue over People

NOVEMBER 2, 2016  | by BOB DICK

PennLive recently published an editorial analyzing the General Assembly’s actions—or lack thereof—on key issues during the last two weeks of the legislative session. Their views on the e-cigarette (vape) tax deserve special attention.

The editorial board writes in defense of keeping the tax in place:

We'll also credit lawmakers for what they didn't do: They didn't punch a $13.3 million hole in the budget by revising the state's new tax on eCigarettes (one can also debate the rosiness of that projection).

Lawmakers should not get “credit” for failing to repeal a tax that has forced more than 60 shops out of business. The editorial board’s indifference to the plight of small business and the damage of the tax is stunning. 

PennLive celebrates the legislature’s inaction because it may result in higher revenues for state government. In a choice between saving small businesses and sending more money to Harrisburg, the board chose the latter—even though revenue projections surrounding the tax are dubious.

Still, if the state captured every penny of the $13.3 million projected to be raised by the vape tax, it would cover 0.04 percent of projected spending in the General Fund budget

PennLive's editorial board cannot envision a scenario in which the legislature saves small businesses and balances the budget. CF can. And it involves cutting just a small portion of the $800 million in special subsidies the state hands out every year to companies like Aramark and Amazon.

“A win-some, lose-some final week for the General Assembly” was the title of the board’s editorial. That’s not how people in the vaping community see it. Many have lost their livelihoods, and knowing the state will have a little more money to spend, as a result, is little consolation. 

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Missed Opportunities: Fall Legislative Session


Three critical bills stalled last week amidst a flurry of last minute legislative activity. Failure to reform pensions, repeal the e-cigarette tax, and prohibit ghost teaching were missed opportunities that will compound challenges facing lawmakers in 2017.

Pension Reform

A compromise proposal to place newly-hired state workers into a hybrid pension plan fell three votes short of passage in the House. The bill provided a 401(k) component paired with a smaller defined benefit component. Employees could also choose to opt-in to an entirely 401(k)-style plan, providing ultimate portability and retirement control. Although the legislation provided little in immediate cost savings, it shifted future financial risk away from taxpayers and provided a predictable system for measuring costs. 

Union leaders and lobbyists campaigned hard against the bill, and it was narrowly defeated without seeing a vote. 

Reducing the E-Cigarette Tax

Revising the punitive e-cigarette / vape tax from a 40% retroactive wholesale tax to a 5 cents per milliliter tax failed to advance in the House. Meanwhile, the Senate was reluctant to add any session days to send the bill to Gov. Wolf. This inaction will eliminate thousands of jobs and bring in far less revenue than the $13 million originally projected.

Vape businesses are already beginning to close

Expelling Ghost Teachers

Lawmakers were unable to prohibit release time provisions that enable unions to pluck teachers from the classroom to perform union work on school time. These ghost teachers continue earn salaries, rack up pension benefits, and accrue seniority while working for the union. Worse, the union may not be formally required to reimburse school districts for these costs. In other words, resources are being diverted from the classroom to line the pockets of a private organization. Strictly limiting the practice of ghost teaching, as would HB 2125, would have saved taxpayers millions and corrected an obvious injustice. 

HB 2125 will be reintroduced next session.

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Painful Year for Pennsylvanians on the Obamacare Exchange


Today marks the fifth open enrollment season for Obamacare's insurance exchange. As predicted, premiums continue to skyrocket. In fact, Pennsylvania's premium increases are among the highest in the nation. High prices aren't the only bad news, competition on the exchange has plummeted with only two insurance providers in Pittsburgh and one in Philadelphia.

What went wrong? Some proponents of the ACA are blaming insurance companies, saying it's their fault rates were . . . wait for it . . . set too low in 2013.

The real culprit is a faulty system. Limiting insurance companies' ability to adjust premiums for age and allowing people to sign-up for insurance once they get sick, plus the slew of coverage mandateslike maternity care for single menset the exchanges up to fail.

Whether the exchanges collapse this year or in five years the real question is how to fix this mess. The answer lies in empowering consumers. Forget gold, silver, and bronze, consumers should be able to choose from a wide variety of insurance products, from bare bones coverage to zero out-of-pocket cost.

Price transparency is another essential ingredient. In the age of $1,000+ deductibles, patients need access to prices. Keeping them in the dark drives up the cost of care and creates unnecessary stress.

Obamacare isn't salvageable, but there are many alternative health care models that are working. States can work to protect innovations like direct primary care. This allows patients to pay a low monthly or yearly membership fee for all preventative and primary care needs. Fourteen states have passed laws to protect this form of care from Obamacare regulations. In addition, states can lead by example by rewarding their own employees for choosing high quality health care. New Hampshire saved more than $10 million by using a model called "right-to-shop."

Health insurance costs can become affordable again if leaders are willing to scrap the Obamacare experiment and give patients real choice over their care.

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Unions Profit by Restricting Workers' Choices


The gold standard for labor reform is right-to-work, according to the conventional wisdom. However, our latest policy reportTransforming Laborshows why right-to-work laws aren't enough to protect public employees. 

Of the 50 states we surveyed, 18 were right-to-work states that allow collective bargaining for public employees. That means government unions can negotiate limits on workers' choices, such as demanding exclusive representation of all employees, even if some would rather negotiate their own salary without the union's help.

Clear limits on collective bargaining can go a long way in protecting workers from a host of special privileges public sector unions negotiate to maintain power and reduce accountability to members.

In Pennsylvania, there are few restrictions on a government union's ability to collectively bargain. So it's no surprise that less than 1% of public school teachers in large cities have ever voted for their union. It also shouldn't come as a shock when union executives demand public resources and staff to run their private operations, resulting in ghost teachers haunting public schools.

Whether it be protecting public employees from threats or ensuring their dues aren't used for politics, Transforming Labor shows we still have a lot of work to do.

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State Pension Reform This Week?


Pension reform talks are in full swing as state lawmakers finish up their fall session. The latest pension proposal offers a side-by-side hybrid system for new employees, including new lawmakers and judges, beginning January 2018. The hybrid consists of a defined benefit component (at half the benefit of current employees) and a defined contribution component, like a 401k.

Alternatively, new employees could choose a defined contribution only option.

This represents a significant improvement over Governor Wolf's proposed stacked hybrid plan. And it's an improvement on the side-by-side hybrid approved by the State Senate in December, which was linked to a $1.8 billion tax increase.

Here's a rough breakdown of the major components:

Component Proposed Side-by-Side Hybrid December Proposed Side-by-Side Hybrid
DB Employee Contribution 4.5% or 5.5% 4% or 5% 4% 3%
Benefit Accrual Rate 1% or 1.25% of final salary 1% or 1.25% of final salary 1% of final salary 1% of final salary
DC Employee Contribution 3% 3.5% 3.5% 3.25%
DC Employer Contribution 2% 2% 2.5% 2.5%
Optional DC Only Employee Contribution  7.5% 7.5%    
Optional DC Only Employer Contribution 2% 3.5%    

The proposal also closes loopholes that inflate pensions. Those reforms include altering the final average salary calculation to prevent the use of excessive overtime at the end of one's career to increase pension payments and ensuring the lump sum payment option is revenue neutral. The latter reform applies to current and future employees.

This doesn't get pensions out of politics, but any reform that reduces the influence of politics on the pension system—while creating a model for further improvement—represents a step in the right direction.

The next step is tackling the monstrous $60-plus billion pension liability driving tax hikes.

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Pennsylvanians Want Pension Reform


A majority of Pennsylvanians want pension reform. In a poll conducted from October 4th to 9th, 54 percent of voters supported placing new state employees in a 401(k)-style retirement plan. Pension reform isn't a partisan issue: 67 percent of Republicans, 51 percent of Independents and a plurality of Democrats are in favor.

Lawmakers appear to be obliging voters. According to Capitolwire (subscription), legislative leaders are considering a side-by-side hybrid plan for new employees. The proposal is similar to the plan defeated in December, which was linked to a major tax hike.

As we've noted before, this type of pension reform fails to fully remove politics from pensions, but takes an important step in the right direction. Under a hybrid system, new employees enroll in a defined contribution plan and a defined benefit plan. Only the defined benefit component would be subject to political manipulation.

The details of the plan are still murky, but pension reform that moves towards a defined contribution, or 401(k)-style plan, is an improvement upon the status quo.

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APSCUF Threatens Faculty


This morning, APSCUF, the union representing 5,000 faculty at the State System of Higher Education schools, went on strike.

As we pointed out a few weeks ago, one of the sticking points in contact negotiations is APSCUF’s health care demands. Despite being offered a 12 percent pay increase, the union refuses to accept modest cost-sharing for health insurance. Nevermind that the proposed cost-sharing is far more generous than what most workers in the private sector receive from their employers.

To enforce discipline, APSCUF leadership has threatened faculty who don’t agree with the strike.

As reported by Fox43, here is an email sent from an APSCUF chapter president—using his university email address—to faculty, implying anyone choosing to work during the strike would be “forever” labeled a “scab” (emphasis added):

This is probably the last EMAIL you will receive from me using the SRU addresses.  We begin using off-campus address today.

Dear Colleagues but especially to those who are unsure if they will work during the strike,

Personally I hate being told what to do by anyone – be they presidents of universities or unions.  But at the risk of being too direct, I want to help you in your decision-making if you are thinking about working during the strike, also known as “crossing the picket lines.”

IF YOU CROSS THE PICKET LINE you will be effectively saying to your colleagues on the line that you disrespect the sacrifice they are making in terms of making a stand and going without pay and benefits.  You would be effectively prolonging the strike by continuing to work so the administration can maintain a fig leaf of “business as usual.”  By your actions you are saying that you choose to continue to enjoy pay and benefits hard-fought by colleagues over the decades, but will not do your part NOW to take a stand to defend those benefits.   You are effectively saying to the SSHE that their proposals are OK with you to:

 *   Cut pay of our adjunct faculty (25% of our colleagues)
 *   Give up the concept of shared governance
 *   Be reassigned any time as needed by administration
 *   Have reduced say in tenure, sabbatical and promotion decisions
 *   Work for little or no net pay increase

If you decide to work during the strike, i.e., cross the picket line, you will be faced with:

 *   Colleagues who will try to convince you not to cross the line
 *   Peer rejection
 *   Being publicly identified as a “Scab” (strikebreaker) forever

What makes this university a great place to work is our colleagues.  We look out for each other, we respect each other, we defer to each other, we support each other, and we value each other.  This collegial atmosphere is a two-edged sword.  If one betrays his or her colleagues, the reaction could be negative.  Strikes are unpleasant – relationships can be harmed long-term.  If we have a brief strike, do you want to be branded by your colleagues forever as one of the few who crossed the picket line?  I don’t recommend it.

Sorry for the negative tone of this message, but I want it to be clear to faculty who are considering working during the strike that they will potentially face negative judgement by colleagues.  If we are solid and unified, a strike will be brief.  Plan to honor the picket lines and stand with us.

In solidarity,



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Podcast: Matt Lewis on the Roots of Conservatism


What are the roots of conservatism? How has conservatism and its messengers changed over time and what are the consequences for the nation?

Political commentator Matt Lewis, author of “Too Dumb to Fail,” answers these questions and more in our latest podcast.

Matt argues, “Conservatism started out as a thoughtful, intellectual philosophy,” but it has been “dumbed down” because of perverse incentives and short-term thinking.

To stay relevant, Matt says conservatives must overcome the media’s soundbite culture and advocate for long-term policy solutions consistent with the values of our nation’s founding.

Read more from Matt at The Daily Caller or The Week.

Click here or listen below, and stay tuned for more by subscribing on iTunesSoundCloudGoogle PlayStitcher, or via RSS.

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Record Premium Hikes Hit Pa. Exchange


Pennsylvanians shopping on the health care exchange are in for a rude awakening. Yesterday the Insurance Department announced premiums for individual plans will increase by an average of 32 percent. The largest hike is for Highmark customers who will see a 55 percent jump in premiums. Nine companies requested rate increases of more than 10 percent this year, roughly twice the number of double-digit rate hike requests from 2016.

As premiums and deductibles continue to climb, enrollment is on the decline. There were 412,347 Pennsylvanians using exchange insurance in March 2016, down from a high of 472,697 in January 2015. The lack of interest from healthy Pennsylvanians is driving insurance companies to the brink.

Wes Venteicher with the Tribune Review reports, "[Insurance Commissioner] Miller said the final rates followed a back-and-forth in which insurers threatened to abandon the market, which could have left some counties with no insurers selling the plans." It's a familiar refrain across the country.

Earlier this year, the insurance commissioner from Tennessee described the state's Obamacare exchange as "very near collapse" after approving significant premium hikes, including a 62 percent premium increase for Tennessee Blue Cross, Blue Shield.

But no amount of premium hikes could convince companies like Aetna or UnitedHealthcare to remain in Pennsylvania's exchange. Neither could hikes entice Blue Cross and Blue Shield of Minnesota or Texas’ Scott and White Health Plan to stay put.

The exodus of insurance companies from the exchange leaves many counties with one choice and, in the case of Pinal County, Arizona, no choice at all. Government officials have since convinced Blue Cross, Blue Shield of Arizona to provide insurance in the county. Back in Pennsylvania, residents in the southeast will have essentially one option since both participating insurers are subsidiaries of Independence Blue Cross.

What's more, Pennsylvania insurance companies are suing the federal government for "risk corridor" payments. The program was intended to stabilize the exchanges by collecting contributions from profitable insurers and redistributing those payments to insurers with significant losses. The problem is: insurers incurred $2.87 billion in qualifying losses, but ended up owing just $362 million in contributions. CMS paid $0.126 on the dollar to insurers—and plans to eventually pay out the rest, but insurers aren't waiting.

The slow death of state exchanges is a vivid example of Obamacare making health care more difficult to access. It's only a matter of time before the same trend appears for those using the Medicaid expansion.

Giving more control to regulators and bureaucrats failed. It's time to pursue health care reforms that empower patients. Namely, government should allow patients to decide which services health plans cover, end the tax bias towards employer-based insurance and provide genuine cost transparency. With these principles in mind, Pennsylvanians will finally be able to afford the care they need.

Note: This post orignially indicated Blue Cross and Blue Shield of New Mexico left the state exchange. While the company did not offer plans in 2016, they are reentering the exchange in 2017.

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The Commonwealth Foundation is Pennsylvania's free-market think tank.  The Commonwealth Foundation transforms free-market ideas into public policies so all Pennsylvanians can flourish.