Podcast: Profiles in Perseverance, Overcoming Poverty

AUGUST 25, 2014  | by ELIZABETH STELLE

Bobbi was struggling. A single mom of two kids, she had a job but no place to live. Thanks to Opportunity House in Reading, Pennsylvania, Bobbi found a home and eventually advanced her career by becoming an operations manager for the non-profit organization.

Tracy was homeless when she first came to Opportunity House’s shelter. Today, Tracy works three jobs to support her children, and she’s a school crossing guard. Her kids are finishing high school and are on track to attend college.

What do these success stories have in common? Both show that moving out of poverty takes a lot of support.

We spoke to Opportunity House’s president, Modesto Fiume, to find out how they are overcoming poverty in Reading, one of the nation's poorest cities. Modesto explains, “It takes a lot of commitment. It takes a lot of hard work. It’s not something that happens overnight—there’s no quick fix here.”

Lifting families out of poverty isn’t only on Modesto’s mind. Key players at all levels of government are trying to get a handle on poverty.

In Washington, D.C., Congressman Paul Ryan released a book and policy paper focused on reforming welfare. His Opportunity Grant combines eleven different programs into one funding stream for states. Most critically, benefits are tied to work requirements, because Ryan and others recognize that work is about more than just a paycheck. Work provides purpose and builds self-worth.

In Harrisburg, the House Majority Policy Committee, led by Rep. Dave Reed, is spearheading the Gateways out of Poverty initiative. The committee spoke with the poor and community organizations to indentify common barriers and areas where public policy can make a positive impact.  

Among those focus areas is Benefits That Work, where lawmakers are working to address the disjointed system of benefits that punishes families for working more hours or receiving a promotion.

Modesto explains one barrier called the welfare cliff: “A family at min wage can get the full subsidy. If it’s a single mom with two kids they may have to pay $5 a week per kid. But if they get up to $9 an hour, they may now want $50 per week per child. I’m just giving you examples of how it doesn’t reward people for advancing throughout their lives.

"You can’t be a little dependent; you have to be totally dependent or independent.

In fact, Opportunity House had to turn down a government grant because it discouraged work.

“We were looking to apply for a grant, a homeless prevention grant . . . In the past, we asked the client to pay 50 percent, so if they owed $500 we could pay $250 and they could come up with the other $250 to cover their rent and utilities. We had to turn it down . . . they want us, the agency, to come up with the other 50 percent.

"We’re being asked to cover other people’s bills as opposed to empowering the client to pay half their bill. So ultimately people in the community who are struggling to stay in their homes are going to, in many cases, end up losing their homes because the state has this inflexible rule.”  

Hear more of Modesto’s solutions to poverty and Opportunity House’s success stories by listening to the entire podcast.

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Landowners Will Bear Burden of Severance Tax

AUGUST 21, 2014  | by ELIZABETH STELLE

Randy Walker’s Armstrong County farm has been in the family for three generations. On 72 acres they grow hay, corn, oats, and care for cattle. A few years ago, Randy leased his land to local energy firm EQT, which built three Marcellus Shale wells on his property. Randy receives damage payments for the acres that aren’t usable during drilling. "The payments aren’t much" he says, "but if I said no, no one would get the benefits."

The drilling site includes two lined ponds, one with fresh water and one with flowback water. "The water has to be at least two feet below the liner’s edge," Randy explains, "and the fence around the pits go eight inches into the ground. When all the wells are drilled they’ll take out the water, and put the dirt back...the well pad will cover less than two acres."

Randy has a good relationship with EQT. "They’ve been so easy to work with. They explained everything to me so I knew what was coming. They’ve been extremely honest...they took care of small problems quickly."

For example, the company couldn’t build a road to move in their equipment due to an existing pipeline that no one would claim. In the meantime, EQT asked permission to use a small farm road. Randy recalls the road being completely destroyed, "It was a quagmire of disaster." Eventually EQT rebuilt the road—a road they would never again use. In fact, Randy later asked EQT to add more gravel, and the same day they were out adding rock.

EQT also took care to protect the environment. "They did all kinds of water testing before and after drilling. I have cattle that drink from a spring just down the hill from the well pad, and we’ve had no problems."

Soon the crews will return and begin a fourth well.

Randy is grateful for the extra income. He notes there are fewer financial pressures, "Life is a lot easier now for my wife and me." Thanks to a leasing bonus and royalty payments, he was able to paint his barn and purchase a higher quality tractor. "There are over 600 acres in my pool. That’s a lot of people benefiting from drilling."

Drilling in rural Pennsylvania isn’t just benefiting landowners. Randy notes his amazement when he visited the drilling pad and saw his brother-in-law from Texas. "He just happened to be assigned to my drilling pad," he chuckles.

It’s not just out-of-staters who are finding work. Randy says he’s always running into locals working on his pad, from mechanics to construction workers. And he’s quick to point out that even the experts from Texas and Louisiana contribute to the local economy. During the construction of his well pad, workers booked rooms at a nearby hotel in Kittanning.

If a severance tax is enacted in Pennsylvania, Randy knows he’ll be the one paying the bill. "My royalties are based on my share of what the wells produce," he explains. "A tax at the wellhead taxes my share and the company’s share, but the companies will just pass that on."

In other words, it’s the landowners and consumers of natural gas heat or electricity that will bear the brunt of the tax. It’s a good reminder that people ultimately pay the taxes levied on corporations. 

Randy concludes, "We could run our state economy on this boom if the government would let us. But with more taxes...I just don’t know how many wells won’t be drilled and jobs won’t happen."


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Pension Costs Forcing Teacher Layoffs

AUGUST 20, 2014  | by JAMES PAUL

We've debunked on this blog the "billion dollar education cut" myth time and time again.

Yet another common refrain—even among those who admit state spending has increased, which it certainly has—is that new expenditures are not "showing up in the classroom." In other words, school districts are hamstrung by pension costs and have to make cuts in other areas.

This point does indeed carry water. 

Take a look at how Public School Employees' Retirement System (PSERS) contributions have skyrocketed over the last five years in Philadelphia and Pittsburgh, the state's two largest districts. We can also project the coming costs for 2013-14 and 2014-15 using the mandated contribution rates for those respective years.

In Pittsburgh, pension payments rose from $11 million in 2008-09 to $26 million in 2012-13, and an estimated $45 million in 2014-15. In Philadelphia, payments rose from $42 million to more than $101 million, and will reach $175 million this coming school year.

Phila SD PSERS

Pitt SD PSERS

The statewide retirement contribution trend tells the same story. From 2008-09 to 2012-13—a span of just five years—statewide PSERS costs nearly tripled. Estimated payments for this year are about 5 times what they were in 2008-09.

With contribution rates continuing to rise, the fiscal outlook only grows more ominous in the years ahead. 

PA Statewide PSERS

To put this in perspective, consider how these costs compare to teachers' salaries. Pension costs from all public schools will have risen by approximately $1.9 billion from 2008-09 to 2014-15. Given that the average teacher salary is $63,500, that increase in pension payments equals the salary of 30,400 public school teachers.

The bottom line is that Pennsylvania faces a genuine pension crisis. School districts are simply running out of options. Even increased education revenue will not be able to offset the growing retirement costs. 

Responsible pension reform is the best way to ensure that future education funding truly finds its way into the classroom. 


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Audio: 81% in PA Support Employee Freedom

AUGUST 19, 2014  | by JOHN BOUDER

Should workers be penalized for leaving a union? 81 percent of Pennsylvanians say "no."

So why hasn't a policy change happened to free workers from having to pay a private organization they disagree with just to keep their jobs?

CF President Matt Brouillette joined The David Madeira Show to discuss this important issue.

Listen to and share a portion of the show:

The David Madeira Show airs daily and can be streamed live at www.thedavidmadeirashow.com

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Podcast: Teachers Opt Out of Union Membership

AUGUST 19, 2014  | by JOHN BOUDER

As part of National Employee Freedom Week, we sat down with two western Pennsylvania teachers who successfully left their teachers’ unions last year. John Cress is a middle school math and special education teacher and Rob Brough is a 20-year history and reading teacher. Both were motivated to opt out after seeing the political nature of their unions’ activities.

Why is an annual educational campaign designed to inform teachers of their right to opt out of full union membership even necessary? Teachers’ unions don’t make such information widely available. Indeed, both Rob and John thought they had to join the union as full members in order to get their first teaching jobs.

Rob Brough for BlogBrough says, “The bottom line is: No. I can say with absolute certainty that none of those options were given to me . . . If a person doesn’t know that their rights even exist, how can they exercise those rights freely?”

Cress agrees, saying, “There should be full disclosure on where the dues are going and the educator should be permitted to make the decision by him or herself as to whether or not to continue to contribute to those causes.”John Cress for Blog

After years of union membership, Brough determined that the teachers’ unions weren’t designed to help improve his effectiveness in the classroom: “I was learning nothing about becoming a better public servant. I was, however, learning about politics. I was learning about organizations that were designed to increase the union’s effectiveness.”

Cress disagreed with his unions’ political stances but was powerless to change them: “It was very frustrating every time one of those [political] emails came because I was thinking, ‘Why do I have to be part of this organization? Why do I have to support these causes just to be a teacher? I should have free will. I should be able to have an open mind, but I was under the impression that I couldn’t.”

Listen to the full conversation:

Know a teacher who might benefit from knowing their rights? Send them to www.FreeToTeach.org for more information.

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School Reserves Offer Pension Reform Opportunity

AUGUST 18, 2014  | by NATHAN BENEFIELD

Pension Reform

Despite the rhetoric of "billions of dollars" in cuts from education, school districts across Pennsylvania have been able to increase their reserve funds. School districts had a combined reserve fund balance of nearly $4 billion as of July 2013, a $445 million increase from the prior year.

Jan Murphy of the Patriot-News reports that several districts have fund balances equaling almost a third of their annual budgets. One district—Valley Grove School District—even has a fund reserve of more than 99 percent of its total budget.

As part of the story, the Patriot-News created a database for readers to look up school districts' annual budget and reserve fund balances.

PA School District Fund Balances 2014

One school superintendent suggested that school fund balances be considered as a factor in state funding—that is, school districts with excessive reserve funds would receive fewer state dollars.

At the Commonwealth Foundation, we've pointed to the growth in school funding reserves, but also outlined a commonsense way to put those funds to use immediately.

Many school districts have built up funding reserves in anticipation of the coming pension crisis—and yes, there is a crisis, and it is getting worse for school districts. Putting money aside for future pension costs makes a lot of sense.

But it would be better to pay off pension obligations now and earn investment income on those fund reserves. If a school district turned their reserves over to the pension system now, however, it would simply be pooled with other funds, and that district would still have to pay the same contribution rate as other districts next year.

To help alleviate our looming pension crisis, lawmakers should look to change state law to allow districts to use reserves to prepay their pension obligations and receive a credit for doing so. 


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Pennsylvanians Win: Liquor Markup Increase Nixed

AUGUST 18, 2014  | by BOB DICK

Finally some good news for booze consumers: the Pennsylvania Liquor Control Board (PLCB) has decided against increasing the markup added to each wine and spirits product, according to PLCB Chairman Joseph Brion.

The announcement came last week after an internal PLCB memo calling for a 16.6% increase in the PLCB’s markup received wide media attention, much of which was unfavorable. The proposal was being considered given the agency’s projection of a 20% reduction in their net income due to rising employee costs and government mandates. The memo itself quashed one of the anti-privatization movement's favorite talking points: that the PLCB is an unparalleled source of revenue for the state.

The PLCB’s decision to forgo the markup increase raises an important question, though: How will the agency make up the lost income, i.e., taxes it collects from consumers? Calls for "modernization" will undoubtedly be touted as a solution.

But instead of trying to mold the PLCB to work more like a private system, which is like pushing on a string, the state agency should be steered in a different direction, getting it out of the business of booze sales and ending its costly conflict of interest.

Privatization, anyone?


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More on Philadelphia School Trends

AUGUST 15, 2014  | by JAMES PAUL

Philadelphia-based Research for Action (RFA) took issue with CF’s Policy Points on spending, enrollment, and staffing trends in the School District of Philadelphia. The RFA rebuttal intended to provide “a more complete grasp of the situation.” Yet they don’t dispute any of the facts we provided in the Policy Points, which offer broader perspective on what has happened in Philadelphia over the past decade. Instead of “informing this important dialogue,” RFA only has spin to contribute.  

The following will respond to their criticism, point by point.

Why did CF examine the ten year window between 2002-2003 and 2012-2013?

By not including statistics from the 2013-2014 school year, RFA accuses CF of using “selective data points to build a case.” Our Policy Points relied on data from the Pennsylvania Department of Education (PDE) Annual Financial Reports, Public School Enrollment Reports, and Professional Personnel Reports. For each set of reports, the most recent year of available data is 2012-2013, so naturally, this is where we concluded our analysis. PDE statistics from 2013-2014 were not available. Far from using “selective data points,” the CF analysis draws on the most recent available information on the preceding decade.

Given the high levels of poverty in Philadelphia, shouldn’t low test scores be expected?

RFA notes that “nobody should satisfied with academic performance among city students.” The authors then qualify this statement by adding that Philadelphia’s poverty rate is one of the highest in the nation and “its [National Assessment of Educational Progress] scores on most categories are comparable to cities such as Los Angeles or Chicago with significantly lower poverty rates.” In other words: Philadelphia scores are lousy, but they are similar to the scores of other cities with high levels of poverty. RFA provides the chart below, which does very little to support their claims.

RFA NAEP

Philadelphia may have a slightly higher poverty rate than Los Angeles, but it also has lower test scores in three of the four categories. Compared to Chicago, Philadelphia scores are lower in all four categories. RFA is thus being rather liberal with the word “comparable.” Also of note: the only listed district with a higher poverty rate—Dallas—has higher average test scores than Philadelphia in all four categories. In this case, even the “selective data points” chosen by RFA do not support their arguments.

RFA claims the CF analysis of academic achievement “rests solely…on the National Assessment of Educational Progress (NAEP).” This is false, as the CF report also compares how charter schools stack up against district schools on the Pennsylvania School Performance Profiles (SPP). Charters significantly outperform district schools in Philadelphia on this metric, which is noteworthy, since they both operate in similar environments of poverty. 

When it comes to SPP scores, we agree with RFA that cyber charters have been underwhelming. Of course, cyber schools have the ultimate incentives to succeed and improve: they will be shut down if they persistently fail, and they only receive funding when parents choose these schools as the best place to educate their children. 

Throughout their rebuttal, RFA insists on singling out poverty as an explanation of poor academic performance. It is dangerous to get caught up in this “myth of helplessness”—a phrase coined by education policy expert Dr. Jay P. Green. Although many students face serious social problems outside the control of local school districts, is this reason enough to oppose school reforms that expand choice, opportunity, and accountability? Poverty must not become an excuse that prevents schools from improving their services to children and families.

Are charter schools contributing to growing costs for the district?

RFA claims that because “charters assume 30 percent of the district’s budget” they “undeniably contribute to the district’s rising costs.” This represents a fundamental misunderstanding of charter school financing.

For each student attending a charter, the child's home school district sends a payment to the charter equaling the district’s per-student spending, excluding all expenditures for adult education programs, community/junior college programs, student transportation, facilities acquisition, construction and improvement services, debt payments, and federal funds received.

The bottom line? Charters schools spend and receive less funding per student than district schools. In Pennsylvania, this discrepancy amounts to an average $1500 per student, money that school districts retain for students they no longer educate. Accordingly, it is wrong to argue that charter schools add additional costs beyond those of traditional public schools. 

Charters should not be criticized or punished for attracting new students. It is incumbent on district schools to compete, innovate, and improve in order to win back the lost enrollment, as well as the payments that are sent to charter schools.

What is happening with district enrollment? What implications does it have for spending trends?

Over the last decade, district schools have seen a 25 percent decline in enrollment, while charter schools have seen a three-fold increase. This is where spending per Average Daily Membership (ADM) is helpful, because it includes charter enrollment and provides a complete look at district-wide trends.

Curiously, the RFA report did not address CF’s analysis of spending per ADM—which has unquestionably increased in Philadelphia. This is true over both the 5 year and 10 year snapshot, with an inflation-adjusted 8 percent increase since 2008-2009, and a 21 percent increase since 2002-2003. 

philly schools spending per adm

Keep in mind, these figures actually underestimate spending in district-run schools, because they include charter enrollment. As mentioned above, charters spend and receive less funding than traditional public schools.

The RFA authors also claim that “districts cannot pare personnel, building, and services costs proportionately” to offset enrollment declines. This fixed costs argument is a classic red herring in the case against school choice.

What about the bond sale?

RFA seems to view a recent Philadelphia bond issue as a smoking gun in the case for increased state and federal funding for district schools. Of course, borrowing the revenue is not a policy supported by CF either then or now. It will amount to more costs over the long term, and it is yet another temporary solution to a long-term problem. If anything, this type of action underscores the urgent need for better financial management. The bond issue does not change the fact that district spending has increased substantially, which is a key finding of CF’s decade-long analysis.

What is happening to class sizes?

The original CF Policy Points was careful not to make any specific claims about average class sizes in Philadelphia. Our report merely presents the facts: the student-to-teacher ratio has declined over the last ten years. In 2012-2013, this ratio was 15.6 to 1. Nowhere did we claim that the average class size is 15 or 16 students. Average class sizes tend to be somewhat larger than the student-to-teacher ratio. But the ratio remains useful information in the context of claims that classrooms are on the verge of skyrocketing to 40 children or more. In light of a declining student-to teacher trend, it’s fair to say such claims are exaggerated and misleading.

Are school districts struggling to meet their obligations for pensions and debt/construction costs?

Absolutely this is the case, and we agree with RFA on this point. There is no disputing that these obligated costs will force a greater percentage of funds to be spent in areas other than classroom instruction. The key question now, however, is how to deal with such fiscal challenges. Do expensive bills for pensions and debt provide carte blanche to raise taxes? This has certainly been the preferred approach over the last decade, and it appears to remain the preferred approach for those in favor of an increased cigarette tax in Philadelphia.

What would a different approach look like? It would include reforms to public employee pensions, an issue we’ve been concerned about for quite some time. Prevailing wage reform is another step that would significantly lower school construction costs.

CF is hopeful that RFA will join us in support of these policy objectives, which would result in important savings to taxpayers, as well as increased flexibility for local school districts feeling the wrath of poor policy decisions from several years prior. 


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Booze Lose: PLCB Proposes Increased Mark-up Price

AUGUST 14, 2014  | by BOB DICK

Get ready to empty the piggy bank because soon you could be paying the government even more for your booze. At least, that's the Pennsylvania Liquor Control Board’s (PLCB) latest idea to cover the growing costs of its operations.

According to the Tribune-Review, the PLCB circulated a memo suggesting a 16.6% increase (from 30% to 35%) in the mark-up price added to each wine and spirits product. The proposal is a response to the growing personnel costs and new costs of government mandates, which the agency projects will lead to a decline in its “profits” for next fiscal year. But as we pointed out in the past, the PLCB isn’t any more profitable than the IRS. Any additional revenue it collects above the cost of its operations is essentially a tax paid by consumers.

Supporters of our anachronistic system have long defended the PLCB as a "cash cow" for the state, but this has never been true. More than 80% of the revenue generated by the PLCB results from taxes, which would still be collected under a private system. The lack of profitablity is even more obvious now that the PLCB's costs are eating away at the small portion of "profits" it does transfer to the General Fund. 

In its memo, the PLCB points out the difficulty in assessing the effects of its proposal on prices, but no matter the outcome, people will be hurt if the PLCB moves forward with their plan. If vendors decide to lower the prices of their products to keep competitive, they will have to absorb the losses. If vendors don’t change what they charge the PLCB, consumers will feel the effects in the form of higher prices. "People that buy at the state stores are going to pay more. Period," says Dr. Antony Davies, associate professor of economics at Duquesne University. "The PLCB doesn't have any competition," Dr. Davies tells WTAE, "so you don't have those forces pushing costs down."

This isn’t the first time the PLCB has proposed a change in its pricing formula. A few years ago, the agency proposed and eventually adopted a shift to variable pricing in its handling fees. This decision currently empowers the PLCB to charge more for certain products if vendors increase their own prices.

Here's the problem: Pennsylvanians have no choice but to live with these decisions, unless residents break state law and buy their liquor in other states (which does occur). But it’s still not fair to penalize entrepreneurs and those who don’t live near the border with a system obviously failing residents.

If Pennsylvania were to end the booze monopoly, one of the benefits (and there are many!) would be more choice and convenience for consumers and entrepreneurs who would no longer be subjected to the decisions of a small group of people in Harrisburg. Revenue for the state would increase as more job creators could expand their businesses, and more Pennsylvanians would buy their booze within state borders.

The lives and decisions of those in the wine and spirits industry should not be tied to a system well past its expiration date.

 


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Teachers Call for More Freedom, Choices

AUGUST 11, 2014  | by PRIYA ABRAHAM

Heather Lister and Joe Connolly are both Pennsylvania educators, and they couldn’t be more different.  Heather is a 25-year-old library media specialist and a registered Democrat. Joe is a veteran high school guidance counselor and a proud conservative.

On the surface, the teachers are poles apart, but there is something they agree on: Lister and Connolly both believe that labor union membership should be voluntary.

You might wonder why that’s such a big deal—don’t teachers already have a choice? The short answer is no.

In the 26 states that are not “right to work,” most public school teachers who decide not to join a union must still pay union fees—whether they want union representation or not. That's why Commonwealth Foundation is participating in National Employee Freedom Week (August 10-16), a broad grassroots effort to inform teachers and other unionized workers of their labor rights.

We're highlighting the stories of teachers like Heather, Joe and many others, and providing an easy step-by-step guide for teachers on how to resign from their union.  Stay tuned for more this week!


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The Commonwealth Foundation is Pennsylvania's free-market think tank.  The Commonwealth Foundation crafts free-market policies, convinces Pennsylvanians of their benefits, and counters attacks on liberty.