Court Ruling Guts Obamacare Subsidies in PA

JULY 22, 2014  | by ELIZABETH STELLE

Back in 2012, many laughed at the idea of challenging Obamacare’s individual and employer mandates by arguing that the law as written allows subsidies for insurance in state exchanges only. Laugh no more: Today the U.S. Court of Appeals for the D.C. Circuit ruled the IRS could not provide tax credits or subsidies to individuals with insurance policies purchased on a federal exchange.

The prohibitions would apply to Pennsylvania and 35 other states that do not have state exchanges under Obamacare. 

If the case reaches the Supreme Court and court rules in Halbig’s favor, subsidies on federal exchanges will be illegal.

What does that mean in practice? It means an estimated 357,000 Pennsylvania residents will be free from the individual mandate tax. In addition, 15,000 employers with 3.9 million workers will be free of the employer mandate.

The reasoning is a little complicated. Under the employer mandate, employers can only be fined when their employee gets a subsidy from the exchange. Similarly, an individual can only be fined if the cost of their insurance would be less than 8 percent of their income after subsidies. Without subsidies, more people qualify for the affordability exemption and employers have no penalty.  

If the ruling is upheld, many will argue that the court is taking away tax credits, but in reality the blame lies with the Obama administration and the IRS which moved forward with doling out taxpayer funds in violation of the Affordable Care Act. Effectively the ruling means that the cost of insurance will no longer be shifted onto taxpayers, and the more than 20 new taxes created as part of Obamacare.

The fact is the Obama administration has been violating its own health care law to impose new burdens on Pennsylvania residents and a new tax on employers. It’s time for the administration to start implementing the law as written.  


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Downgrade Detrimental to Taxpayers

JULY 22, 2014  | by BOB DICK, NATHAN BENEFIELD

For the third time in two years, a major bond rating agency gave Pennsylvania a downgrade.

The most recent downgrade, courtesy of Moody’s, has real implications for taxpayers. Moody's points to "one-time measures", a "structural impalance," and "large and growing pension liabilities" as reasons for their downgrade.

This has been a long time coming. For seven straight years—dating back to the Rendell administration and reliance on temporary stimulus funds—Pennsylvania has spent more than revenue. The most recent state budget, while avoiding raising taxes and doing well to keep spending under the rate of inflation and population growth, did not fully fix this structural deficit.

In addition, past decision combined with poor investment performance have resulted in a massive, and still growing, unfunded pension liability. This pension liability and lack of meaningful reform was the primary impetus for Moody’s downgrade.

This should serve as a wake-up call to those who have either denied the pension crisis or claimed the solution has been to just "let Act 120 work." Ignoring our problems won't make them disappear.

Due to the downgrade, creditors may require higher interest rates for state and local debt, leaving you to pick up the tab. This threatens taxpayers with future tax increases, and makes Pennsylvania a less attractive state for investment or new businesses.

Moreover, neglecting pension reform could result in the commonwealth, not to mention cities that have their own pension problems, facing Detroit-like insolvency. This month, Detroit workers and retirees voted to accept a 4.5 percent cut in their pension benefits. Such a cut—particularly for retirees—used to be unthinkable in the public sector. But today's pension crisis represents a triple threat to state and local governments, taxpayers, and employees.

But Detroit's fate need not be our destiny. By continuing to practice fiscal restraint and addressing long-term cost-drivers via meaningful reform, we can build a Prosperous Pennsylvania.


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Sherlock Investigates: Politics on the Public Dime

JULY 18, 2014  | by JOHN BOUDER

On Tuesday, former House Speakers Bill DeWeese and John Perzel were issued public demerits in the form of gold plaques hung beneath their Capitol portraits. That same day, a court filing specified charges in current state Senator Leanna Washington’s corruption trial. What do these seemingly unrelated events have in common?

In any investigation, one must first gather the facts:

  • Senior Deputy Attorney General Susan DiGiacomo said Sen. Washington’s crime was "using state paid employees to plan and organize her campaign fund-raiser during state workdays” and charged Washington with “theft of services” and “conflict of interest.”
  • John Perzel, released from prison in March after serving two years behind bars, “orchestrated an illegal scheme to spend millions of taxpayer dollars on developing massive voter databases and customized software that were designed to give Republican legislative candidates an electoral advantage.”
  • As for DeWeese, Karen Langley at the Pittsburgh Post-Gazette reports, “Prosecutors said he used public resources for political gain by compelling legislative workers to do campaign work.”

It doesn’t take Sherlock Holmes to sense the pattern: Each came under legal scrutiny for using taxpayer dollars for campaign politics—a clear-cut crime… at least for legislators.

Also this week, the Pennsylvania State Education Association (PSEA) released the latest edition of their magazine The Voice. In it, PSEA endorses Tom Wolf for governor and urges members to donate to PACE, their political action committee (PAC). That money is then donated to Wolf’s campaign. Indeed, he received more than $1.6 million in government union contributions in the month following the primary election.

Unrelated? Hardly. Let’s do some deduction.

The union dues money used to produce and distribute The Voice and the political campaign money it solicits is all collected using taxpayer resources. Worse, buried on page 24 is a notice telling members that 12 percent of their dues—which equals more than $7 million—will be spent on politics in just one year.

But a quick trip to my mind palace (AKA, Google) reveals that a few weeks ago, PSEA spokesman Wythe Keever told Scott Kraus at The Morning Call, “Dues aren’t used for political activity, other than to provide members with a list of supported candidates.”

Really? Something doesn’t add up.

How can government unions brazenly do what brings legislators public shaming and jail time?

Why can government union leaders get away with denying that dues are used for politics yet tell their members that $7 million will be spent on the same?

Are they Moriarty-like masterminds or are they simply not being held to the same standards everyone else—legislators and taxpayers alike—must live by?

The answer is… elementary. You’ll find it in our paycheck protection toolkit and you won’t need a magnifying glass.


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Is There a Pension Crisis?

JULY 18, 2014  | by NATHAN BENEFIELD

Public pensions

PolicyBlog readers will be well-familiar with the fact that Pennsyvlania state funding for public schools is at a record high. 

So why do government union leaders and some politicians still repeat a lie about multiple-billion dollars being cut from public education? Simply put, in some cases they refuse to count state funding to school districts for teachers' pension costs as part of education funding.

As the chart below shows, state aid to public schools for pensions has increased more than $1 billion since 2010-11 (this includes a $225 million transfer from the Tobacco Settlement Fund, not counted in the General Fund total).

State Pension Aid to Districts

Note that this $1 billion increase in state pension aid only covers about half of school employees' pension costs. School districts have had to match this increase with a billion dollar increase in payments from local property taxes.

It makes it easier to say that "there isn't a pension crisis" when you completely ignore a dramatic increase of more than $2 billion in public school pension costs. 

Unfortunately, that pension crisis is only going to get worse. Costs will continue to rise over the next few years. The required increases under Act 120 of 2010 are equal to about $900 per household. The costs increase for school districts for required pension payments would be the equivalent of laying off one out of every three teachers in the state.

The fact is this: We are spending more on public education than ever before (see chart below as a reminder of that), but more and more education dollars are going to pay off pension debt created by past political decisions.

State Education Subsidy 2-Color


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Will Higher Taxes and Funding Save Students?

JULY 16, 2014  | by BOB DICK

Philadelphia is in the midst of a crisis. According to the National Center for Education Statistics, more than 80 percent of 4th and 8th grade students did not reach proficiency in math and reading in 2013.

For years, the School District of Philadelphia has been plagued by poor performance and budget challenges. And to address the most recent challenges, some have suggested higher cigarette taxes and more funding as the solution. But raising cigarette taxes, which would disproportionately affect the poor, is not real reform.

Just as a funding mechanism, increasing cigarette taxes proves to be inadequate, as it encourages smuggling, which would mean a loss of sales for businesses and decline in tax revenue for governments

There's also the issue of fairness. For example, say a family in Philadelphia is already sacrificing to put their son through private school. And because both parents are smokers, they would feel the painful effects of the proposed tax increase. Is it fair that they bear an even bigger tax burden due to years of bad public policy decisions? 

Still, don't Philadelphia schools need more funding? It has to come from somewhere, right?

The School District of Philadelphia already spends about $14,000 per student, which is also around the state’s average for per-pupil spending. At approximately $25 billion, overall spending on Pennsylvania public schools is at an all-time high.

Yet, we haven’t seen the results expected from such an enormous investment. In Pennsylvania, nearly three out of five 8th graders are not proficient in math and reading, and according to a Cato Institute analysis, since 1972, SAT scores have slipped, despite a 120 percent increase (adjusted for inflation) in education spending.

Education is the key to a better future for students. This is why it’s critical to push for meaningful education reforms that put parents and students in charge of education.

In Philadelphia, as students languish in violent and failing schools, their quest for a better life becomes much harder. As each year passes without a quality education, they fall further and further behind their peers.

Instead of unfairly taxing individuals to spend more on education, public officials should strongly consider a proven solution to the state’s education woes: school choice. In the end, Philadelphia's school crisis isn't about money. It's about allowing failed policies to continue—with kids paying the price.


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Hope and Success in Opportunity Scholarship Program

JULY 15, 2014  | by MICHAEL HOGG, ELIZABETH STELLE

James Cromartie is a 7th grader at the School of Church Farm in Exton, Pa. His mom, Lynne, is grateful for the school's challenging academics, art, music and athletic programs.

"Many of these 'extras' are unavailable at the middle schools in my neighborhood," she explains.

James is one of thousands helped by the Opportunity Scholarship Tax Credit (OSTC). Reserved for students in the lowest-performing public schools, the OSTC provides hope in largely hopeless situations. The program helped 1,318 students with $15.6 million in credits claimed in its first year. Fifty million dollars in scholarships will be available in the future, meaning the program can save almost three times as many kids from failing schools!

The OSTC, like the Educational Improvement Tax Credit (EITC), allows businesses to receive tax deductions for funding scholarships, so students like James can participate in groups that don’t exist in many public schools.

The quality of these programs is gaining national praise. A new report by the Center for Education Reform gives Pennsylvania a 'B' grade with the fourth best school choice options in the nation.

Plus, the OSTC is saving tax dollars. Each OSTC student that chooses to attend a private school instead of a public school saves taxpayers more than $11,000.

Cost per Student FY 2012-13

Public Public School Spending Per Student

$14,621

Average Opportunity Scholarship Tax Credit

$3,193

Savings Per Scholarship Student

$11,428

Lynne continues, "The effects of inferior education are devastating to families and communities. Parents should be able to select an educational setting which best fits the needs of their child and their families. The Opportunity Scholarship has enabled me to send my son to the school of his choice so that he can pursue his educational goals and dreams."

The OSTC, like the Educational Improvement Tax Credit, is a win for families, businesses and taxpayers. But most importantly, it's giving children trapped in violent and failing schools a second chance.


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Teachers Unions Putting More Dues Money into Politics

JULY 15, 2014  | by NATHAN BENEFIELD

While union leadership continues to repeat the myth that union dues cannot be used for politics, the latest newsletter from the Pennsylvania State Education Assocation again reveals, in small print, that 12 percent of members’ dues will be spent on politics next year.

That should not surprise anyone, given the rest of the magazine is chock full of political ads, endorsements, and calls to action.

PSEA 2014 IRS Notice

This is on the heels of increasing political activism out of the national teachers' unions. In case you missed it, last week the American Federation of Teachers decided to increase their union dues to bolster their political spending.  

To bolster the union’s coffers for the legal and political battles to come, the AFT leadership is asking members to support a two-stage dues hike that would add $5.40 a year to their bills this year and another $6.60 in 2015.

Most of the increase would go toward the “militancy/defense fund” and state and national “solidarity funds,” which support litigation, political activism and lobbying.

The $12 increase (over two years), would mean the AFT will collect almost $19 million more each year that can be used on politics. Last year, the AFT spent more than $28 million on political activity and lobbying, while more than half its spending went to the category "other," including gifts to other advocacy organizations.

Their sister organization, the NEA, spent $44.8 million on politics last year, not including their list of gifts to other political organizations. And as the Wall Street Journal reports, the recent NEA conference was full of political debate, while eschewing union transparency.

Delegates debated whether the union's president should write a letter to Washington Redskins owner Daniel Snyder denouncing the NFL team name's "institutional racism." They also discussed a resolution supporting reparations for "the lingering impact of slavery" and "subtle Jim Crow policies and thinking" including "unconscious bias." These items were referred to a private committee for further discussion.

Some business items approved by the delegates did pertain to teaching. Delegates signed off on drawing up a list of books, for students from pre-K to graduate school, "that have LGBTQ and gender non-conforming themes" ($6,500) and a lobbying campaign for legislation that requires "sensitive and respectful discussions of gender, gender identity, and sexual orientation" ($24,140). They also adopted a resolution to promote "clean energy" in curriculums ($10,760).

The attendees voted down some in-house items: a proposal that would require the NEA's board to provide written justification for executive officers' raises, and another that urged the NEA to "bargain in good faith" with its internal union, the Association of Field Service Employees (AFSE), thus exemplifying "the behavior we advocate for in negotiations."

As for Pennsylvania, many teachers disagree with both the PSEA and NEA's spending on politics—and the lousy job the union does telling educators about it. As teacher Steve Calabro noted last month, one obscure notice does not make for notified teachers on such a critical issue.

"How much money is the government owed from teachers who don't take this into account when filing taxes?" Calabro askked. "This information should be a separate mailer that goes out the first week of January, not smothered in the back of a summer issue of a magazine that no one reads."


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Audio: Pension Reform's Biggest Obstacle

JULY 14, 2014  | by JOHN BOUDER

Public Pension Reform

On Friday, CF President Matt Brouillette joined The David Madeira Show to talk about Pennsylvania's looming $50 billion public pension crisis and the biggest obstacles to reform: government union leaders.

Listen to a portion of the show below:

The David Madeira Show airs weekdays from 6-9 a.m. on 94.3 FM in northeast PA and can be streamed live at http://thedavidmadeirashow.com/


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Leaders Agree: Public Unions Are Blocking Reform

JULY 14, 2014  | by ELIZABETH STELLE

PA Government Unions

House Majority Leader Mike Turzai took to the podium last week, providing press and spectators his response to the Governor’s criticisms, blue-line budget reductions, and House priorities.

We applaud Rep. Turzai for making paycheck protection among the important issues discussed, stating:

I know there is controversy in respects to the paycheck protection issues, but I think this is important. With respect to the state [union] contracts, at that bargaining table you could've negotiated out the ability to collect political contributions or the ability to collect union dues. 

Despite the sparring between the Governor and state lawmakers, many public officials were united in their belief that public-sector unions are blocking desperately needed pension reform. As Governor Corbett noted, "The out-of-touch, paid union leadership of PSEA sent out an email blast, taking credit for blocking [pensions]. We need to have the public-sector teachers' union in Philadelphia step up and make concessions."

Senator John Eichelberger agreed saying, "When the PSEA brags about stopping reform to the pension system and promotes the unethical practice of having the government collect their political funding, something needs to change."

State Representative Jerry Knowles adds, "The truth is, common sense can't even be heard above the voices of the union leaders and special interests. Union leaders are controlling Harrisburg through the heavy handed tactics of their highly paid thugs and a bottomless pit of money they give to Democrats and a group of liberal Republicans."

Unions aren't just opposed to pension reform; they are blocking a host of needed reforms. Franklin and Marshall College political science professor Terry Madonna explains the union conundrum well in the context of teacher seniority reform,

The problem is, Pennsylvania public unions, particularly the teachers unions, are very powerful, and they have a lot of even Republican support. Now, they could pick up some Democrats, but Democrats in Pennsylvania are often union-backed. I think it’ll be very tough to move that legislation.

The stage is set to end the collection of union political money with taxpayer resources. It's time to restore fairness to the political process in Pennsylvania.


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Government Unions' Political Power Persists

JULY 9, 2014  | by TOM BAKO

While labor unions nationwide have been on the defensive for the past few decades—especially in light of pro-worker measures in states like Wisconsin, Michigan and Indiana—Pennsylvania remains a bastion of union power, according to a series of articles in the Central Penn Business Journal (CPBJ) on the "State of the Unions."

According to the Business Journal, unions are confident that they are stronger and more united than ever. And if this past budget season tells us anything, it's that unions, particularly the powerful government employee unions like the Pennsylvania State Education Association, the American Federation of State, County and Municipal Employees, and United Food and Commercial Workers Local 1776 (the state liquor store clerks' union), have wielded their immense political influence to stop Paycheck Protection, stymie pension reform, and sink liquor privatization efforts.

Given the government unions’ power, it’s no surprise to see Pennsylvania ranked fourth in the nation in union membership, trailing only California, New York, and Illinois. However, union membership in the state has been in steady decline, mirroring national trends. At the same time, union membership among those in Public Administration has risen slightly between 2003 and 2013.

One CPBJ editorial (pay wall) pointed out that while the businesses interviewed have often found private-sector unions to be willing partners who have adapted to declining union power and a changing marketplace, the public-sector unions have continued to thwart necessary government reforms.

"Nobody seems to care about the citizens and businesses that foot the bill for preserving the status quo. It's about time they did," the CPBJ editorial concludes. We wholeheartedly agree!


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