Transparency is the Antidote to Quid Pro Quo Politics

AUGUST 24, 2015  | by BOB DICK

Government Transparency

Did Attorney General Kathleen Kane promise a sweetheart deal to union leaders in exchange for support of her controversial chief of staff? According to The Philadelphia Inquirer, enough evidence exists to warrant an FBI investigation into the matter:

In recent months, agents have questioned at least three people about several issues, including Kane's role in negotiating a new contract with the union representing narcotics agents in her office, according to people familiar with the matter.

The agents sought information about whether Kane suggested to union officials that she would look favorably on their contract if they supported her embattled chief of staff, sources said.

The investigation may end without any charges filed against Kathleen Kane. However, the fact that Kane and other high-ranking government officials—like Gov. Wolf—can promise favors under a veil of secrecy during contract negotiations should greatly concern Pennsylvanians.

Already this year, the Wolf administration ratified and signed a contract worth billions of dollars without public input. Likewise, school boards in eastern and western Pennsylvania have rushed into new deals without any public awareness

This is why collective bargaining transparency is essential.

Making the collective bargaining process transparent will let taxpayers demand better deals for their money. Politicians will no longer be able to negotiate in the shadows of closed-door offices. Instead, voters will have a window to peer into during deal-making.

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Taxes and Taxes and Taxes, Oh My!


A recent NPR article notes that Pennsylvania “gathers less than 1 percent of its total tax receipts from an impact fee” on natural gas production (emphasis mine). Naturally, the Wolf Administration uses this to support its call for higher taxes.

But the article fails to mention the other side of that formula: Pennsylvania gets most of its tax revenue from other tax sources.

Indeed, of the states on NPR's chart:

  • Alaska, Wyoming and Texas have no individual income tax. Gov. Wolf wants to raise Pennsylvania’s.
  • Alaska has no sales tax. Gov. Wolf wants to raise and expand Pennsylvania’s.
  • Texas and Wyoming have no corporate income tax. Pennsylvania has the second-highest tax rate in the industrialized world.
  • Texas, Alaska, Wyoming and North Dakota all have no death tax. Only New York collects more in death tax revenue than Pennsylvania.

Instead of following the lead of other states by lowering our overall tax burden and cutting sales, income, corporate, and inheritance taxes, Gov. Wolf is proposing the largest tax increase in America.

In contrast to NPR's one-sided analysis, our policy memo on the proposed energy tax offers an apples-to-apples comparison of state taxes. Our analysis also notes that Gov. Wolf's proposal would impose the highest effective severance tax rate (17 percent) in the country. The current impact fee represents an effective tax rate of 4.7 percent, according to the Independent Fiscal Office. 

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Audio: Gov. Wolf's Gambling Problem


There are numerous ways Gov. Wolf can balance the budget without raising taxes: reforming the pension system, cutting corporate welfare and selling the liquor business.

Instead, he plans on adding to state debt with pension obligation bonds–essentially borrowing money to gamble in the stock market while hoping for a good return.

CF’s Nate Benefield talks with WAEB's Bobby Gunther about Gov. Wolf’s misguided borrowing plans.

Nate explains how pension obligation bonds have a terrible trackrecord. Even Pittsburgh’s Democratic Mayor Bill Peduto has publicly criticized Gov. Wolf’s plan to use pension obligation bonds, saying his city should be the litmus test that proves pension bonds are not a solution.

Gov. Wolf should listen to his constituents who want long-term solutions, not historic tax increases.

Click here or listen below to hear more.

Bobby Gunther is on WAEB News Radio weekdays from 5 a.m. to 10 a.m.

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

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Exposing Union Myths and Hypocrisy on Pension Reform


Pennsylvania government unions rely on disproven myths to lobby against pension reform. Their actions, however, demonstrate they don't believe their own snake oil, and offer their employees' the same retirement plans they claim are bad for workers. 

Union leaders repeatedly claim that “defined benefit plans cost less to administer” than defined contribution plans (like a 401k).This myth has been obliterated.

In practice, large defined contribution plans actually cost less to administer than the average public sector defined benefit plan, as highlighted in a new study by Josh McGee for the Manhattan Institute.

This should be no surprise to Gov. Tom Wolf, as he’s been complaining about the hundreds of millions of dollars our state pension plans pay in investment fees each year. Arnold points out that fees for the Pennsylvania Public School Employees Retirement System (PSERS) are about triple the average cost of the largest defined contribution plans.

McGee's study also finds that investment return are similar for defined contribution plans, and that most defined contribution plans offer annuities—providing predictable annual payments during retirement.

Government union leaders deny these facts and disparage any reform to our broken pension system. But there’s a catch—those same unions offer a 401k style plan to their employees.

Our release today demonstrates union hypocrisy regarding pension reform. PSEA, SEIU, UFCW, AFSME, AFL-CIO, and the PFT all publicly oppose putting public employees into a 401k-style plan or a hybrid, yet they all offer a 401k or hybrid to union employees.

These hybrid models, which include both a defined contribution and a defined benefit component, are exactly what union leaders are lobbying against in both SB 1 and Gov. Wolf’s proposed “compromise.” Without fail, each of the seven union giants provides retirement plans similar to the ones they’ve called too “risky” for public employees.

The motto of union leadership is "do what I say, not what I do." 

What Do Pennsylvania Government Unions Offer their Employees?
Government union leaders have opposed putting new state employees and school teachers into a "defined-contribution" plan (like a 401k) or a "hybrid plan" that includes part of a defined-contribution model, despite the fact nearly all the private sector has made this conversion.

However, major public sector union offer their employees a defined-contribution retirement plan or hybrid.
Union PSEA SEIU UFCW 1776 AFSCME 13 AFT-PA AFL-CIO Pennsylvania Philadelphia Federation of Teachers
Defined Contribution Plan Started 1997 1999 1985 1984 1972 & 2013 2014 1979 & 1997
Also has Defined-Benefit Plan? Yes Yes ?? Yes* ?? Yes* ??
via national affiliate 
Source: U.S. Department of Labor form 5500 searchable database

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Something Pennsylvania Government Does Pretty Well


Government Transparency

A new report on state spending transparency websites gives Pennsylvania’s site—PennWatch—a solid ‘B’ grade.

Created through legislation passed in 2011, PennWatch offers data—down to the “checkbook level”—on state spending, grants, employee salaries, and tax incentives (via link to “Investment Tracker”).

The Commonwealth Foundation had long advocated for such transparency, and PennWatch became reality with the support of Republican Rep. Jim Christiana and Sen. Pat Browne as well as Democrat Rep. Rick Mirabito and former Speaker Bill DeWeese. 

According to the new report, Pennsylvania could move from a ‘B’ to an ‘A’ by making the data downloadable for research, and by tracking “actual public benefits” from economic development subsidies. We could also get extra credit by reporting “recouped funds” for subsidies with clawback provisions.

Overall, PennWatch has been a successful reform, giving taxpayers more information about how their hard-earned money has been spent.  

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Audio: The Real Danger of a Severance Tax


The Pennsylvania state budget remains long overdue, mostly due to Gov. Wolf’s misconstrued idea of compromise. He continues to insist on a severance tax to increase education spending, but a breakdown of his proposal shows most of the money for education comes from other tax increases.

CF’s Matt Brouillette joined Paul Guggenheimer on WESA’s Essential Pittsburgh radio show to discuss Gov. Wolf’s proposed severance tax.

Matt reminds listeners that Pennsylvania already has a severance tax–called an Impact Fee. “While we don’t call it a severance tax, we have an effective severance tax that the Independent Fiscal Office has said it is about 4.7%”.

A severance tax, as Matt points out, would bring economic harm not just to the natural gas industry, but to all Pennsylvanians. This includes $180 million more in higher utility taxes for poor and middle class families and 4,138 fewer private sector jobs in 2017.

Click here or listen below to hear more.

The Essential Pittsburgh radio show airs weekdays from noon to 1 p.m.

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

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Pension Reform to Protect my Kids


Legislative leaders have rightly rejected a so-called pension reform "compromise," a plan that fails to address the problems in our pension system and continues to put our kids and grandkids on the hook for our pension liabilities.

It's that burden on future generations that prompted Jim, a teacher in Lawrence County, to speak out.

Jim writes:

I chose teaching because I enjoy interacting with students and helping them learn. My science classes show students that certain actions yield predictable results. With this in mind, I am particularly concerned about Pennsylvania’s current retirement system for state employees, which includes public school teachers. 

Our pension system is underwater by more than $50 billion and, without change, will sink billions deeper. While this is bad news for educators, it’s downright frightening for parents and catastrophic for our Commonwealth.

My wife and I have five wonderful daughters. We’ve raised them to be responsible and self-sufficient. Only a hypocrite would ask them to deprive their children - my grandchildren - in order to pay for my retirement.

The truth is, pensions were originally offered with good intent: to retain quality state employees when higher pay was available in the private sector. Yet, according to 2014 data from the Bureau of Labor Statistics, the average salary of Pennsylvania state employees is higher than those of private sector employees. The original justification for defined pensions is now moot. 

The pension crisis is not another political soapbox issue. I know what it’s like to be faced with the unexpected. In 2008 when the economic downturn hit, I was working as a patent attorney and had my own pension plan. The high cost of this pension compelled me to terminate my own pension - I just couldn’t afford it. At the same time, a teaching opportunity arose that allowed me to continue providing for my family’s future.

The vast majority of private companies have realized the dangers of defined benefit pension plans and have switched to defined contribution plans, such as a 401(k). Unlike pensions, employees legally own the money in a 401(k) plan.  Investments move with the employee, can be accessed before retirement, can compensate for inflation, can be left to one’s children, and exist independently of any employer’s fiscal status.

We must fix our broken pension system. The future retirement of state employees should not be dictated by politicians, and the faulty formula will continue to produce abysmal results. Passing the costs of today’s broken system to our children is morally unacceptable.

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Wolf to Chester Families: ‘There is No Escape’

AUGUST 19, 2015  | by JAMES PAUL

Tom Wolf’s record on public education is well documented. The governor is hostile to schools of choice, cozy to union interests, and wedded to the educational status quo.

Chester Upland School District is ground zero for the most recent example of this hyper-partisan, antiquated philosophy.

Yesterday, the Wolf administration went to court in Delaware County, filing an amended recovery plan for Chester Upland that would slash district payments to charter schools. Officials project $25 million in savings entirely through reduced payments for special education charter students and flat-funding cyber charter students at $5,950 per pupil.

Although Wolf admits that district finances have been “mismanaged for over 25 years,” his solution is to effectively block families from a escaping a school system that has, in the words of Wolf, “failed its students.”

What does failure look in Chester Upland? Two percent of students are proficient in math at Chester High School. Sixteen percent are proficient in reading. The average SAT score for Chester High students is 725 (out of 1600), and the School Performance Profile (SPP) score is 33.5.

In contrast, the three brick and mortar charter schools that receive Chester Upland students have SPP scores of 71.7, 61.5, and 51.3. Parents and students have been fleeing to better-performing schools.

Persistently low academic performance spurred almost 54 percent of Chester students to enroll in charters. Naturally, charter payments assume a significant chunk of the district budget—46 percent in 2014-15.

Although charter students account for more than half of the district’s enrollment, they comprise less than half of the district’s cost. 

Chester Upland certainly faces financial challenges, but charters are not the culprit. Amazingly, the revised recovery plan includes no other cost saving measures aside from the punitive action taken against charters.  

The illogical Wolf Doctrine on public education is perfectly encapsulated, here, by Education Secretary Pedro Rivera:

For too long the quality of education a student receives has been dictated by their zip code, and in some cases a child’s education has suffered due to the missteps of adults. Reducing the structural deficit is essential in order to secure financial stability for the district and make the improvements needed to provide Chester Upland students with the opportunities they deserve.”

These remarks are detached from reality, as it is the Wolf administration perpetuating the “education-by-zip code” travesty that has dominated public education for decades. Trapping families in a failed district and arbitrarily punishing students seeking alternative educational options will not produce “Schools that Teach.”  

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Union Leader Still Flouting the Law


Yesterday’s Post-Gazette featured a story highlighting the fact that Wendell Young still isn’t registered to lobby, and UFCW 1776 is underreporting their expenses:

Mr. Young isn’t registered as a lobbyist, though lobbying is “one of many hats I wear.” While UFCW discloses payments to outside lobbyists, state law exempts any “individual who does not receive economic consideration for lobbying” — and as president, Mr. Young said, he isn’t paid to lobby per se.

But the law doesn’t exempt people who wear “many hats” from having to register before they lobby. It requires anyone spending a significant amount of time lobbying—20 hours in a quarter—or is paid more than $2,500 in a quarter to register.

UFCW reports Young spends 10 percent of his time on lobbying and political activity. Given his compensation of $331,051, that represents well more than the minimum threshold for registering.

Moreover, UCFW refuses to report millions of dollars in TV commercials as “indirect lobbying:”

UFCW also hasn’t reported a 2014 TV campaign urging viewers to “tell your state [legislators] to say ‘no’ to liquor privatization.”

State law requires lobbying interests to report the cost of messages that “encourage others [to take steps that will] directly influence legislative action.” But Mr. Young said the ads were “representational activity” about contract issues, not lobbying.

Here’s the ad UFCW purchased at the cost of $300,000 last year:

It ends with a call to “contact your state senator & state representative,” after laughably claiming that liquor privatization will kill more children.

The previous year, UFCW spent more than $1 million airing this TV ad:

It also calls on viewer to “tell your state senator to say no to liquor privatization,” after implying that allowing grocery stores to sell wine would create many more orphans.

Wendell Young doesn’t care if he broke the law or not. Maybe you do.

But either way, government unions are significantly underreporting their political spending to the state.


Gov. Wolf's So-Called Compromise


Gov. Wolf proposed a new "compromise" on pensions and the budget last week, according to news reports.

Here is what that compromise includes:

You can tell your lawmakers what you think of this compromise plan here.

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