How Does Gov. Wolf's Tax Plan Stand Up?


How out of whack is Gov. Tom Wolf's proposed $4.6 billion tax increase? Pretty far out there compared with the rest of the nation, according to a new report from the National Association of State Budget Officers.

Governors in 16 states proposed net tax and fee increases, while governors in 12 states proposed net decreases in fiscal 2016, resulting in an aggregate net increase of $3.0 billion. For the most part, increases were proposed for general sales taxes and cigarette taxes – ten states recommended a sales tax increase and nine states recommended increased taxes on cigarettes and tobacco products. Meanwhile, a dozen states proposed decreases for personal income taxes. Pennsylvania was the largest driver of the net increase, recommending $4.6 billion in tax and fee increases for fiscal 2016, followed by Connecticut and Alabama.

Not only was Pennsylvania a "driver" of state tax increases, Gov. Wolf's proposed tax increase is greater than the total for the rest of the country—which is a net tax decrease. In fact, Gov. Wolf's proposed increase of $4.6 billion is 8 times the next highest (Connecticut).

The chart below shows NASBO's compilation of net tax increases for fiscal year 2016, and Pennsylvania stands out like Shaquille O'Neal at a preschool.


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Government Union Puts Politics Ahead of Teachers

JUNE 18, 2015  | by BOB DICK

One government union is putting its political preferences and self-interest above the interests of public school teachers. Now, teachers are fighting back.

Jane Ladley, who recently retired from teaching after 25 years, Chris Meier, who teaches in the Penn Manor School District, and Linda Misja (pictured), a language teacher at Apollo-Ridge High School, are suing the Pennsylvania State Education Association (PSEA) to win back control of their own money.

We brought you Jane and Chris's story last year, but here's a quick synopsis: In Pennsylvania, if public employees demonstrate a bona fide religious objection to compulsory unionism, as Jane, Chris and Linda have, they are not required to pay union dues as a condition of employment. Instead, they can send their dues to an IRS approved charity.

But there's a problem. The PSEA is hijacking the religious objection process, and the Fairness Center (TFC), which is the group representing Jane and Chris in their lawsuit, explains why:

Now, the PSEA is telling Jane and Chris that it has a “policy” against allowing religious objectors to send their money to charities that they choose. According to the PSEA, Jane’s educational charity was too “political,” and Chris’s charity was a conflict of interest” because it represented teachers in separate, unrelated lawsuits against the PSEA.

Chris and Jane are currently waiting for a decision to be handed down by Common Pleas Court. Meanwhile, TFC filed a similar lawsuit against the PSEA today on behalf of Linda Misja, charging the union with the same transgression. Here's the background on Linda's case:

...Linda objected on religious grounds in 2012, the PSEA refused to let Linda send her money to a pro-life pregnancy center that, among other things, provides support to teenage mothers. Then the PSEA refused to allow her to send her money to the National Rifle Association Foundation, the 501(c)(3) charitable arm of the larger organization, which supports firearm safety education across the country.

In these three instances, the PSEA anointed itself the arbiter of what is political and made a calculated decision to put its self-interests ahead of public school teachers. Their intransigence has led to not only two lawsuits, but legislation to protect teachers' rights in the religious objection process.

House Bill 267, sponsored by Representative John Lawrence, would give religious objectors the freedom to choose a charity for their donation. After all, the money belongs to Jane, Chris, and Linda, not the PSEA.

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Audio: A New Solution for Underperforming Public Schools


A piece of legislation recently passed the Senate Education Committee that would provide a new solution for underperforming public schools.

CF’s James Paul spoke with WSBA’s Gary Sutton about Senate Bill 6 and how it would rescue thousands of students trapped in schools that–­despite record high spending­–continue to fail.

Schools in the bottom 5 percent of statewide performance would be identified as “intervention schools”. Their school boards would be given more capabilities, such as increased flexibility to employ better teachers and more authority to spend funds efficiently, to improve students’ education.

James also elaborates on the bill’s creation of an Achievement School District (ASD).

The ASD would absorb schools in the lowest 1 percent and provide them with a completely “new school board that has new incentives” rather than continuing with the destructive status quo.

Click here or listen below to hear more.

The Gary Sutton Show airs daily on WSBA 910AM in the York area.

Follow Commonwealth Foundation’s SoundCloud stream for more of our audio content.

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School Districts Overwhelmed by Pension Costs

JUNE 18, 2015  | by JAMES PAUL

Pennsylvania's public sector pension crisis is undeniable

Consider the burden it places on local school districts, whose pension contributions increased from $1.4 billion in 2012-13 to $1.9 billion in 2013-14. In 2008-09, districts spent $562 million on pension contributions; schools have thus seen more than a three-fold increase in only five years.

And these costs will continue rising in coming years.

SD Pension Costs

Take a look at our most recent Policy Memo for more information on education spending trends. 

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Dubious Deficit Discussions

JUNE 17, 2015  | by BOB DICK

Pennsylvania State Budget Debate

Just how big is Pennsylvania's structural deficit? And what does that term even mean?

Although some news outlets reported Gov. Wolf and legislative leaders came to an agreement on the size of the deficit, The PLS Reporter published a story to the contrary. The Wolf Administration continues to put the budget deficit at more than $2 billion while House and Senate Republicans say the budget shortfall is closer to $1 billion.

So who's right? According to revenue estimates provided by the Independent Fiscal Office (IFO), Republicans have the edge in the deficit debate.

Projected Structural Budget Deficit (Totals in Millions)
2014-2015 2015-2016
IFO Revenue Projection $30,540 $30,722
Less Tax Refunds ($1,287) ($1,275)
Beginning Balance $81 $376
Prior Year Lapses $90 $0
Total Revenue Available $29,424 $29,823
IFO Projected Spending $29,048 $30,777
End Year Balance $376 ($954)
Sources: Independent Fiscal Office 2015 June Revenue Estimate; 2015-2016 Governor's Executive Budget

Over the past few months, revenues have surged above the original estimates, making Pennsylvania’s short-term budget picture look less bleak.

But even this budget "deficit" assumes a $1.7 billion increase in spending. In fact, projected spending increases will cause deficits for at least the next five years. This is the "structural deficit" referred to above. However, for this year, lawmakers can balance the budget simply by slowing the growth in spending.

By keeping spending growth at or below the cap established by the Taxpayer Protection Act, or a $498 million spending increase in the next fiscal year, the state would be on target to end the fiscal year with a $277 million surplus.

2015-2016 Budget Outlook Under TPA (In Millions)
IFO Revenue Projection $30,722
Less Tax Refunds ($1,275)
Beginning Balance $376
Total Revenue Available $29,823
Spending Under TPA $29,546
End Balance $277

To be sure, addressing the state's long-term structural budget problems requires tackling pension reform and controlling welfare costs. But balancing this year's budget doesn’t require tax hikes.

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District Reserve Funds Continue to Rise

JUNE 17, 2015  | by JAMES PAUL

Contrary to claims about budget cuts to public education, Pennsylvania school districts continue to accumulate large reserve funds, up to $4.1 billion in 2013-14. This amounts to more than 15 percent of their total revenue, according to recent figures from the Department of Education, and a $100 million increase over 2012-13.

A school district's fund balance is essentially a rainy-day fund. 

SD Fund Balances 13-14

Take a look at our most recent Policy Memo for more trends in Pennsylvania public education. 

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Pension Debt Strangles Local Government

JUNE 17, 2015  | by BOB DICK

Pension Reform

Pension reform commands a great deal of attention in Harrisburg these days, and deservedly so. Pension systems for state and public school employees are in bad shape, and reform is vital.

But the commonwealth's pension problems aren't confined to state government and school districts. Pension costs are strangling many of the Keystone State's local governments. Earlier this year, the Auditor General released a report detailing the magnitude of the local pension problem.

The report focused on 562 "distressed" municipalities. These 562 municipalities have underfunded their pension systems by at least $7.7 billion. Rising pension costs are forcing local governments to raise taxes and fees, lay off workers, and cut back on services—including those devoted to public safety.

To address this problem, lawmakers in the House and Senate introduced legislation to put new public safety employees into secure defined contribution or cash balance plans. Moreover, these bills would take pensions off the table during collective bargaining and binding arbitration—a process by which an arbitrator can set pension benefits regardless of a municipality’s ability to pay.

Here’s a short description of two pieces of legislation aimed at tackling municipal pension problems:

  • HB 316, sponsored by Representatives Keith Greiner and Seth Grove, freezes pension benefits at current levels for public safety employees and moves those employees into a cash balance plan to prevent the accumulation of additional pension debt.
  • SB 755, sponsored by Senator John Eichelberger, allows municipalities to establish defined-contribution plans for all public safety employees and would prevent local municipalities from using pension assets to fund any other programs aside from pension benefits.

While SB 755 is the better of the two plans—it takes the politics out of pensions—both proposals give local governments tools to fix the their pension problems.

Local government pension reforms are now gaining momentum thanks to bi-partisan support from Democrat and Republican local officials, business leaders, and the Coalition for Sustainable Communities, which the Commonwealth Foundation has proudly joined to help stress the urgency of municipal pension reform.

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Examining State Aid for Public Schools

JUNE 16, 2015  | by JAMES PAUL

State revenue to school districts reached an all-time high in 2013-14, at $9.7 billion. In part 2 of our week-long series on education finance in the commonwealth, take a look at this chart on state education revenue.

Funding levels slightly declined under Gov. Rendell in 2009-10, as they were supplanted by temporary federal stimulus dollars. However, since 2010-11, state aid has consistently increased. On a per-pupil basis, state taxpayers contribute roughly $5,400, which mirrors the national average.

State Revenue to School District 2015

For a more in-depth look at education spending trends, check out our most recent Policy Memo

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Another Year, Another Record High in School Spending

JUNE 15, 2015  | by JAMES PAUL

Pennsylvania spent $26.1 billion on public schools in 2013-14. According to state data, this amounts to a $600 million increase over the 2012-13 baseline. 

As you can see from the chart below, school spending has steadily increased over the past decade, save for 2011-12 upon the expiration of federal stimulus funds. Contrary to the myth propogated by government employee unions, state funding for public education was not cut in 2011-12. More on that tomorrow. 

SD Spending 13-14

School spending on a per-pupil basis also reached an all-time high in 2013-14, exceeding $15,000 per student. Of course, there are several steps lawmakers can take to more rationally and transparently allocate state education aid, but the broader argument that "schools are underfunded" doesn't align with the facts. 

Take a deeper look at education spending trends in our most recent Policy Memo

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A Solution for Persistently Failing Schools

JUNE 12, 2015  | by JAMES PAUL

Amidst a flurry of hearings on severance taxes, incomes taxes, and pension reform, a piece of legislation with less fanfare advanced with bipartisan support out of the Senate Education Committee. Senate Bill 6 has the potential to rescue thousands of students from persistently underperforming public schools.

Senator Smucker's SB 6 has two major components. First, it would enable school districts to utilize new powers to improve schools in the bottom 5 percent of statewide performance. These schools would be identified as "intervention schools," and local school boards would have enhanced staffing flexibility, as well as the ability to convert the school into a charter.

Most importantly, the legislation creates an Achievement School District (ASD), which could absorb schools in the bottom 1 percent of performance. This is the most transformative aspect of the law. Perpetually failing schools would transfer to the ASD, which has similar powers outlined above. However, the ASD is overseen by a seven-member board appointed by the governor and legislature. This unique management structure provides the right incentives to institute meaningful school reform for students who need it most.  

Achievement school districts are gaining in popularity across the country as a means to turn around chronically underperforming schools. They are perhaps most famous in New Orleans, where a Recovery School District was scaled up after Hurricane Katrina. In New Orleans, some 93 percent of public school students attend charters. Only 7 percent of schools are currently designated as failing, compared to 62 percent less than a decade ago. And 62 percent of students test at grade level or above, up from 35 percent in 2006.

Similar turnaround school district initiatives exist in Tennessee and Michigan, and they have recently been enacted in Georgia and Nevada.

Education solutions must be more innovative and forward-looking than simply raising taxes—especially given that Pennsylvania education spending is currently at an all-time high. During Tuesday’s hearing on SB 6, Democratic Senator Anthony Williams explained tax hikes over the last fifteen years have not improved the quality of schools in his district.

"Pouring more water into a bucket that has holes in it doesn't put out the fire." Take a look at Sen. Williams' complete remarks:

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