The $20 Billion Energy Tax


Solar Subsidies Sink State

More than ten years after its passage, Pennsylvania's Alternative Energy Portfolio Standards continue to stunt our economy. The standards cost the state $4 billion annually, according to a study by the Institute of Political Economy at Utah State University.

Researchers reviewed renewable portfolio standards in all states and found the law reduced Pennsylvanians' personal incomes by almost $20 billion from 2004 through 2009.

Data beyond 2009 is still forthcoming, but if the trend continues, alternative energy standards will have cost Pennsylvanians almost $50 billion to date. That's not too far off from the state's pension debt.

So what do these figures mean for each household in Pennsylvania? A loss of $10,000 in purchasing power. That's an enormous cost to bear for such a small benefit. 

A recent Tribune Review article highlighting the study aptly notes this isn't an indictment of renewable energy but a reality check.

As technology advances, renewable energy will become cheaper and markets will shift to renewables as a matter of course. Mandating the shift before the technology is ready simply wastes our resources.

Up until this point, government efforts to transition to a clean energy economy have been costly and unsuccessful. Ultimately, it will be entrepreneurship, not government planning, that will make clean energy affordable and reliable for all. 

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Sugary Drink Tax: Not So Sweet for Philadelphia

MAY 11, 2016  | by JAMES PAUL

Such a believer is Philadelphia Mayor Jim Kenney in universal preschool that he supports a punitive tax on low-income residents to pay for it. During his stint on City Council, Kenney twice voted against soda taxes—but now, as mayor, Kenney favors a 3-cents-per-ounce sugary drink tax.

Although Kenney maintains a soda tax will only hit corporations, the experience in Berkeley, California—the lone American city to enact a sugary drink tax—tells a different story. A University of California-Berkeley study found that 50 to 70 percent of the tax is passed on to consumers.

Kenney estimates raising taxes on low-income residents could generate $400 million in new revenue over the next five years—with $256 million earmarked for universal pre-K.

Does publicly-funded preschool have a good track record in other cities? Not exactly. The evidence on pre-K effectiveness is mixed, according to a report from the American Enterprise Institute (AEI) which examines the body of research on early childhood education.

Children enrolled in universal pre-K often see no significant learning gains by the time they reach third grade, compared to students not enrolled in pre-K. This was the experience in Tennessee’s Voluntary Pre-K Program, as well as the Head Start Impact Study, where students not enrolled in preschool caught up to their preschooled peers by third grade.  

From the “Key Findings” section of the Head Start Impact Study:

There were initial positive impacts from having access to Head Start, but by the end of 3rd grade there were very few impacts found for either cohort in any of the four domains of cognitive, social-emotional, health and parenting practices. The few impacts that were found did not show a clear pattern of favorable or unfavorable impacts for children.

Other studies purporting to show “pre-K works” are narrow in scope. For example, the Perry Preschool Program, commonly cited by defenders of universal pre-K, only studied 123 students. It also included weekly home visits by teachers to participating families—which would be nearly impossible to scale up on a city-wide basis across Philadelphia.

To recap: the most prominent item on Kenney's first-year agenda is a large tax on low-income Philadelphians to fund a program with poor outcomes in other cities.

What’s not to like?

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Cigarette Taxes Aren't a Budget Fix

MAY 10, 2016  | by BOB DICK

Gov. Wolf’s plan to raise taxes by more than $2.7 billion stands little chance of passing the legislature. Indeed, Republican legislative leaders effectively nixed the governor’s proposal last February. But lawmakers are still considering one element of the plan.

Last month Capitolwire reported House GOP leaders could run a bill raising cigarettes taxes to cover the projected structural deficit—an unfortunate feature of autopilot budgeting.

Cigarette taxes may be politically acceptable, but the regressive nature of the tax is troubling.

According to a Cato Journal article, more than a third of men and a quarter of women below the poverty line reported smoking in 2012. Both figures are above the national average. In other words, cigarette taxes hit the poor most often and have a disproportionate effect on their incomes:

From 2010 to 2011, smokers earning less than $30,000 per year spent 14.2 percent of their household income on cigarettes, compared to 4.3 percent for smokers earning between $30,000 and $59,999 and 2 percent for smokers earning more than $60,000.

In a paper released last year, two Cornell University economists discovered an unintended consequence of higher cigarette taxes: larger food stamp rolls. This finding should be unsurprising given the people most likely to apply for food stamps are those living near the poverty line.

Some say the benefits of this “sin” tax outweigh the costs. For instance, the tax-induced increase in prices will lead to fewer smokers. Intuitively, this makes sense. But more research from the Cato Journal reveals why this benefit is overstated:

One can see that, from 1980 to 1994, there was a relatively strong negative relationship between cigarette taxes and consumption—as taxes (and prices) increased steadily, consumption decreased steadily. However, after 1994, the relationship largely breaks down. Cigarette consumption continues on the same steady downward path after 1994, but taxes remain flat between 1994 and 1998 and then spike between 1998 and 2009, with no noticeable change in the trend in cigarette consumption.

While smoking has declined as a result of the [federal] tax, our recent study shows that the “core” of smokers that remains after the multiple recent tax increases is less responsive to price increases than commonly assumed.

If higher taxes do not deter a core group of people from smoking, then, theoretically, cigarette taxes should provide a stable source of revenue. New York’s experience demonstrates otherwise.

The Empire State, which has the highest cigarette taxes in the country, saw revenue drop by $400 million over the past four years. While smoking did decline, it cannot account for the dramatic decrease in revenue. Smokers simply turned to the black market or neighboring states for cigarettes.

If Pennsylvania adopts Gov. Wolf’s cigarette tax proposal, the state’s tax rate will be higher than four of the six bordering states, spiking cross-border shopping and cigarette smuggling.

Lawmakers should reject any attempts to balance the budget on the backs of the poor through tobacco tax hikes and focus on ways to reduce government spending.

The commonwealth already imposes a heavy tax burden on Pennsylvanians. Adding to it will only compound the state’s economic challenges without addressing the source of its fiscal woes.


Gov. Wolf Threatens Veto, Denying Schools Flexibility they Want


Yesterday, James wrote about the passage of HB 805—legislation that would protect excellent teachers by using performance, not seniority, as the primary factor in furlough decisions. You can view the roll call vote here.

Unfortunately for students and teachers, Gov. Wolf has already threatened to veto this bill. But the rationale makes little sense.

"The governor believes this is a local matter to be decided by districts," said Wolf spokesman Jeff Sheridan. "He doesn't believe this is a matter for the state to decide."

What exaclty does Sheridan think should be decided by districts?

  1. Should school districts decide if tenure for teachers should set in after four years instead of three? Current law prohibits that. HB 805 allows superintendents, if they choose, to set tenure.
  2. Should school districts have flexibility to furlough employees? Current law severely limits when schools can reduce employment. In essence, they have to restructure academic programs and shut down entire departments. HB 805 allows schools to provide furloughs for “economic reasons”, which gives them far greater flexibility in meeting student needs.
  3. Should schools be able to look at teacher performance in furlough decisions? Current law prohibits that, requiring school districts to look solely at seniority. Under HB 805, schools would be able to use the new teacher evaluation system to furlough low-performing educators first.

In all cases, current law denies school districts the ability to make decisions about critical staffing issues. HB 805 empowers local school districts to make decisions with far greater flexibility.

That’s why Gov. Wolf should sign HB 805, empowering excellent teachers and protecting students. Send him a message today: 


Senate Protects Excellent Teachers, Sends Bill to Wolf

MAY 9, 2016  | by JAMES PAUL

In a crucial victory for both students and teachers, the Protecting Excellent Teachers Act passed the Senate this afternoon with a vote of 26 to 22.

HB 805, championed by Rep. Stephen Bloom, provides that public school teachers are retained based on effectiveness in the classroom—not merely seniority—in the unfortunate event of furloughs. Today’s passage ensures Pennsylvania’s best teachers remain in the classroom, helping every child reach their maximum potential.

Reform to rigid seniority mandates is long overdue in the commonwealth. A strict, seniority-based system punishes young, effective teachers who excel in the classroom but have not racked up sufficient service time. This is plainly unfair. Every teacher should be evaluated based on their talents as educators, not just their years of service. 

That’s why HB 805 is so important. The legislation now moves to Gov. Tom Wolf, whose options are clear: Side with the teachers’ unions which oppose the bill, or side with public school students and excellent teachers—both of whom stand to gain tremendously from the governor’s signature.

Sounds like a no-brainer.

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Free Market Solution Expands Access to Care

MAY 5, 2016  | by JAMES PAUL

Health Care

Harmful regulations prevent Pennsylvania’s nurse practitioners—highly-trained medical professionals who interpret diagnostic tests, treat chronic conditions, and prescribe medication—from doing what they do best: providing quality health care for patients in need.

State law currently requires nurse practitioners to enter into expensive contracts, called collaborative agreements, with two physicians. These contracts cost nurse practitioners up to $25,000 per year, but they do not serve the public interest. They do not improve the quality of care for patients. And they do not promote health care access.

Collaborative agreements simply serve as barriers for nurse practitioners to enter the marketplace.

Earlier this week, hundreds of nurse practitioners gathered in Harrisburg to lobby for full practice authority—which would allow them to practice without expensive collaborative agreements. HB 765, sponsored by Rep. Topper, and SB 717, sponsored by Sen. Vance, would make Pennsylvania the 22nd state to grant full practice authority.

An amendment recently offered by Sen. Boscola establishes full practice authority after nurse practitioners first abide by collaborative agreements for 3 years and 3600 hours. This compromise was endorsed by the Hospital and Healthsystem Association, which clears an important legislative hurdle.

These bills present an incredible opportunity to lower prices, increase access, and sustain high quality medical care. Every study conducted about nurse practitioners demonstrates they achieve equal or better patient health outcomes

Care provided by nurse practitioners is not only equal in quality, it is less expensive. Since Medicaid reimburses at lower rates for nurse practitioners than physicians, full practice authority will save taxpayer dollars—unlike many other state-funded health care proposals which rely on higher taxes.

Most importantly, full practice authority is a triumph for health care in rural or underserved areas—since these are precisely the areas where collaborating physicians are hard to find. The bills championed by Rep. Topper and Sen. Vance, which currently sit in committee, will increase access to high quality care without costing taxpayers a dime—the epitome of free market health care.

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The Consequences of Concentrated Power

MAY 4, 2016  | by BOB DICK

We aren't the type of people to begrudge anyone a well-deserved raise. But when it's a $9,000 raise for an inessential position running a government booze monopoly...well, that raises some eyebrows.

The Pennsylvania Liquor Control Board (PLCB) recently gave its executive director John Metzger a 6.2 percent raise, bumping up his salary to $154,035 a year.

A PLCB position commanding a six-figure salary might appear to be essential to the functioning of a government agency. But is this position needed? Gov. Ed Rendell created the controversial position just 10 years ago for former state senator Joe Conti. The PLCB’s Chairman at the time, Jonathan Newman, resigned in protest because he thought the position was unnecessary.

Ignoring the controversy of the hiring, did Conti improve the management of PLCB? Not in the slightest, as this list of boondoggles makes abundantly clear. Additionally, Conti used the position to enrich himself at the expense of people stuck dealing with an inefficient yet powerful booze bureaucracy. And he continues to profit off the PLCB’s existence as a lobbyist for the local United Food and Commerical Workers union.

The source of all these problems—arbitrary raises, unwarranted positions, mismanagement, and corruption—is the control the PLCB has over the sale of wine and liquor. The system consolidates power among a handful of people, giving rise to abuses that every Pennsylvanian should find unacceptable.

The liquor monopoly is hanging on by a thread. Last year, the legislature passed a privatization plan for the first time in 80+ years. Unfortunately, Gov. Wolf vetoed it. But this should not dissuade lawmakers from sending it to his desk again.

Only full privatization can end cronyism and offer the choice, convenience and, competitive pricing consumers and entrepreneurs deserve.

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Tom Wolf vs. Barack Obama on Charters

MAY 3, 2016  | by JAMES PAUL

It’s safe to assume Governor Tom Wolf and President Barack Obama agree on many policy issues. But when it comes to public charter schools, Wolf and Obama are worlds apart.

The president recently issued a proclamation honoring May 1 through May 7 as National Charter Schools Week. In his statement, Obama explained the important role charters play in America’s education system:

Supporting some of our Nation's underserved communities, [charters] can ignite imagination and nourish the minds of America's young people while finding new ways of educating them and equipping them with the knowledge they need to succeed. With the flexibility to develop new methods for educating our youth, and to develop remedies that could help underperforming schools, these innovative and autonomous public schools often offer lessons that can be applied in other institutions of learning across our country, including in traditional public schools.

Although charter schools are lifelines for tens of thousands of Pennsylvania families, Gov. Wolf’s policies are decidedly hostile to charter students. Consider his actions since assuming office:

  • Last March, Wolf removed Bill Green as chairman of Philadelphia’s School Reform Commission (SRC) after the SRC approved merely 5 of 39 applicants from new charter schools. This was a clear message that even tepid support for charters will not be tolerated—and it prompted a lawsuit from Green seeking to regain his position as chair. According to the Philadelphia Inquirer—not exactly a bastion of school choice ideology—Green has a strong case.
  • Wolf’s budget proposals in 2015 and 2016 each includes massive cuts to cyber charter schools—reducing their revenue by one-third—and deny all charters the right to save new funds in their “rainy day” reserves.
  • Wolf undermined the recovery plan in York City School District, effectively forcing out the district’s chief recovery officer as retribution for his support of charter schools.  
  • Last summer, Wolf attempted to balance Chester Upland’s budget on the backs of special education charter students. Chester students are otherwise relegated to a school system Wolf admits “failed its students” and has been “mismanaged for over 25 years.”

A recent poll from the National Alliance for Public Charter Schools finds nearly 8 in 10 surveyed support parents being able to choose their child’s public school. Over half of parents surveyed who are supportive of charter schools cited lack of access as the main reason they don’t send their child to a charter.

Perhaps Gov. Wolf should pay heed to the thousands of families benefiting from charter schools—not to mention President Obama—and rethink his opposition to these effective educational options.   

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Pension Debt Grows by Another Billion


Last week the State Employees' Retirement System (SERS) announced its total unfunded liability increased from $18.44 billion in 2015 to $18.79 billion.

In truth, SERS' unfunded liability grew by about $1 billion this year due to artificially low employer payments. A more accurate calculation comes from the SERS actuary, The Hay Group. They estimate an unfunded liability of $19.45 billion as of December 2015.

Artificially low employer payments aren't the only reason the unfunded liability has grown. SERS assumes a 7.5 percent rate of return for investments, but the actual rate of return has been far less, only 0.4 percent in 2016.

Keep in mind that SERS liabilities represent less than half of the overall pension liability taxpayers will pay. The larger Public School Employees' Retirement System is carrying a $37 billion liability for a total of $56 billion.

Clearly, letting Act 120 work means more debt for taxpayers. Giving state workers greater control over their retirement is the only way to boost worker security and stop the flood of red ink.

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Making the Most of New Funding Formula

APRIL 27, 2016  | by JAMES PAUL

A recent report from ABC 27 asks: “Will lawmakers stick with new education funding formula next year?” At issue is whether Pennsylvania’s student-based formula will be retained in future state budgets. The ABC story raises an important concern—but it slightly misses the mark.

Here’s the question we should be asking: Will lawmakers stick with the new formula and ensure the formula is applied to all funding above 2014-15 levels?

The 2015-16 budget includes $150 million in new Basic Education spending. This funding will be dispersed to school districts based on a formula that accounts for enrollment—which is undeniably a positive step forward.  

But the formula only applies to 3 percent of Basic Education funding, the largest line item in the education budget. The other 97 percent is restricted by Pennsylvania’s “hold harmless” provision, which guarantees each district receive no fewer education dollars than it received the previous year—regardless of changes in enrollment

It is crucial that lawmakers do not apply hold harmless to the $150 million appropriated in 2015-16. Should the legislature increase Basic Education funding in 2016-17, the new formula should apply to all funding above 2014-15 levels, not merely the increase appropriated in 2016-17. 

Thanks to hold harmless, districts with declining enrollment received more than three times the state funding per student than growing districts since 1996. Until the student-based formula is applied to a larger portion of the Basic Education line item, hundreds of school districts will continue to be treated unfairly.

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