PA House Takes Another Step To Reduce Debt

SEPTEMBER 24, 2014  | by ELIZABETH STELLE

Every man, woman and child in Pennsylvania owes just over $10,000 in state and local debt. Today, the state House made another positive step towards reducing that debt burden. HB 2420 passed the chamber on a 114-82 vote. A related bill, HB 2419 has advanced from committee and awaits a floor vote when the legislature is next in on October 6.

HB 2420, sponsored by Rep. Kerry Benninghoff, would reduce the state's borrowing for the RACP programs by $50 million each year beginning in 2018-19 until it reaches $2.95 billion. Last year, RACP's debt limit was reduced from $4.05 billion to $3.45 billion.

RACP allows taxpayer-backed borrowing for private projects, like sports stadiums and corporate headquarters. RACP has a long history of funding questionable projects such as the Arlen Specter Library, the bankrupt August Wilson Center in Pittsburgh and a $3 million grant to the Second Mile, the charity founded by convicted child molester Jerry Sandusky.

HB 2419 sponsored by Rep. Mike Turzai would cap the annual borrowing for new projects beginning in 2015-16. Specifically, the bill would cap:

  • Redevelopment Assistance Capital Projects, known as RACP, at $125 million
  • Flood Control Projects at $25 million
  • Highway Projects at $25 million
  • Public Improvement Projects at $350 million
  • Transportation Assistance Projects at $175 million

House lawmakers should be commended for tackling Pennsylvania’s borrowing problem, and recognizing that RACP subsidies crowd out private investment and prevent broad-based tax reduction to stimulate job growth for all.


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Solving Health Care Without Obamacare Headaches

SEPTEMBER 23, 2014  | by NATHAN BENEFIELD

Montana's Rib and Chop House in the Pittsburgh area is taking an innovative approach to providing health care coverage to employees, in spite of Obamacare. The Pittsburgh Tribune-Review reports the small business is using privately-run (not government-run) insurance exchanges to offer employees a variety of insurance plans.

This approach makes a lot of sense. Employers can offer a "defined contribution"—providing funds for health care without having to get involved in the bureaucracy of insurance mandates. Employees can then choose the insurance plan that best meets their needs for their family.

Of course, there is a downside, as the Tribune-Review notes:

There are other obstacles as well. One is a penalty under the Affordable Care Act that fines large companies $2,000 per employee for not providing coverage.

Another is the substantial tax benefit to workers from employer-sponsored health insurance that would go away if companies stopped buying health insurance.

"You've got to make the tax treatment for nonemployer-based coverage basically the same," said Stuart Butler, an economist with the liberal Brookings Institution in Washington. "It's got to be neutral."

In other words it's bad tax policies, not employers, that are blocking access to affordable health insurance. Employers get a tax benefit for providing insurance coverage. But individuals buying coverage for themselves don’t get the same treatment.

To encourage innovations that provide more choices, like those enjoyed by Montana’s Rib and Chop House employees', policymakers should look to a couple of reforms Commonwealth Foundation has recommended for years.

Congress should level the playing field and treat individuals purchasing health insurance the same as businesses buying insurance. The state can do the same.

And state lawmakers should allow "list-billing," like that adopted in Missouri, allowing companies to contribute and collect for an employees’ individual insurance plan.


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Audio: Taxpayer Protection Act Responsibly Limits Spending

SEPTEMBER 22, 2014  | by JOHN BOUDER

Taxpayer Protection Act

Last week, legislation moved out of the Senate Finance Committee that would set guardrails on state government spending, establish a “Rainy Day Fund,” and, potentially, even send rebate checks back to Pennsylvania taxpayers.

Sound enticing?

Check out our new Taxpayer Protection Act handout for more information.

So, what are some of the benefits of responsible spending limits?

CF’s Nate Benefield answers in a conversation with radio host Gary Sutton. Listen here:

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.

And for mobile listening, get the SoundCloud iPhone and Android apps.


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Teachers Sue PSEA in Landmark Case

SEPTEMBER 19, 2014  | by PRIYA ABRAHAM

Jane Ladley was a special education teacher in Chester County for more than 25 years until she retired this year. She may have left teaching, but she has a bone to pick with the Pennsylvania State Education Association (PSEA), the union that represents some 180,000 educators around the state.

In a landmark step, Ladley and Lancaster County teacher Chris Meier sued the PSEA for violating their rights as "religious objectors." It's the first case for newly established public interest law firm, the Fairness Center.

Ladley and Meier are fee payers—teachers who don't officially join the union, but by contract rules and state law are forced to pay a "fair share fee" to the union to cover representation. However, both teachers became religious objectors who, because their faith conflicts with union support of policies such as abortion, decided to have their fee instead donated to a charity.

In this case, both teachers got stuck in limbo. The PSEA accepted their religious objections, but have nixed the charities the teachers chose. Christen Smith from Capitolwire (paywall) reported on Ladley's experience:

“I first chose a scholarship in our local community for students who showed an interest in the Constitution, which is definitely close to my heart,” she said in editorial submitted to newspapers by her attorney, Nate Bohlander, assistant general counsel for the Harrisburg-based Fairness Center. “They looked at the organization sponsoring it and said they would not agree to it based on it being a political group.”

Ladley said she searched for another charity with a similar mission — she chose one that offers classes on the Constitution, instead — but the PSEA hasn't approved it to date, either.

“They are telling me which groups I have to choose,” she said. “It’s a wrong that needs to be righted. I’m doing this on principle and for the other teachers coming up through the ranks, so that they have these options available to them.”

The PSEA has 20 days from the filing of the lawsuit (September 18) to respond.

According to the Fairness Center, the PSEA is exploiting a loophole in Pennsylvania law that effectively silences teachers: The 1988 agency shop law requires the money to go to a "non-religious charity" both union and teacher agree on, but doesn't prescribe a procedure or deadline to reach that agreement.

Ladley says the amount of money at stake or whether she's still in the classroom is irrelevant. "Why should I have to fund an organization that counters my faith and values so I can work as a teacher?" she said. Even if only future Pennsylvania teachers see their rights better protected, for her, it's worth the fight.

For more on the teachers' groundbreaking lawsuit, see stories at PennLive, LancasterOnline, the Philadelphia Inquirer, and the below TV report from Fox43.


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Safety Net Should be Reformed, not Renamed

SEPTEMBER 18, 2014  | by ELIZABETH STELLE

Good news: Pennsylvania will no longer spend 40 percent of the general fund budget on public welfare.

Instead, we'll spend it on "human services."

Yesterday, the general assembly approved HB 993 to rename the Department of Public Welfare the Department of Human Services.

The stigma associated with the department has nothing to do with branding but everything to do with its failure to lift people out of poverty—despite ever-growing budgets. New census numbers reveal the poverty rate in Pennsylvania is 13.7 percent, which is a 30 percent increase since 2003.

Meanwhile, welfare spending continues to grow faster than taxpayers’ ability to pay, consuming 40 cents of every dollar spent by state government.

Lawmakers should be concerned with reforming the safety netnot renaming it. 

Their first priority should be to address the welfare cliff, in which families are punished for earning higher wages. Because safety net benefits decline more quickly than earned income increases, the system encourages families to settle for less. That's wrong. Fixing the cliff should be the primary focus for advocates of low-income Pennsylvanians.


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Treasurer Finally Accepts that Fiscal Restraint is Needed

SEPTEMBER 16, 2014  | by NATHAN BENEFIELD

We at the Commonwealth Foundation are pleased to welcome State Treasurer Rob McCord to the fight for fiscal restraint.

McCord, along with Auditor General Eugene DePasquale, held a press conference today to raise concerns about state finances. While DePasquale in his role as Auditor General is regularly fighting waste and abuse, such as his audit of Scranton's failing pension plan, this seems to be a first for McCord. The impetus is the state needs to borrow money from the Treasury to pay its bills until taxes roll in. 

This is a real concern, but this is far from the first time the state has been in this fix. In 2009 and 2010, Pennsylvania issued "tax anticipation notes"—borrowing funds with interest until enough tax revenue comes in to pay them off. But McCord issued no warning shot then. He simply signed onto the bond issue.

In contrast, the Commonwealth Foundation has been sounding the alarm for years about the state's fiscal health, noting the "Four Alarm Fire" facing our commonwealth, and the frequent bond downgrades we are experiencing thanks to a pension crisis and excessive debt. As we've noted, this problem has been caused by seven consecutive years of spending more than revenue.

Nonetheless, we welcome Treasurer McCord in the fight for fiscal restraint. The treasurer noted, "the state's true financial condition is even worse than it appears because Pennsylvania has papered over its problems by draining other funds to balance the last several budgets."

In other words, this is a long-standing problem caused by decades of excessive spending. We have to put our fiscal house in order.

One good start is the Taxpayer Protection Act, which passed the Senate Finance Committee today. Click here for our fact sheet on that important issue.

Lawmakers should also tackle the critical issue of pension reform. And recent House efforts to reduce the "debt ceiling" on the RACP program—which is essentially borrowing for corporate welfare projects—would be a major step towards fiscal sanity.


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Employees Lose Under PA's Public Pension Systems

SEPTEMBER 16, 2014  | by GORDON TOMB

Most workers are shortchanged by Pennsylvania’s public employee pension programs, according to two recent studies.

The Urban Institute gives Pennsylvania's State Employees' Retirement System (SERS) an "F" grade, ranking it third worst in the nation—better than only Massachusetts and New Jersey.

The September 2014 report says:.

The plan scores poorly because it is inadequately funded, it penalizes work at older ages by reducing lifetime benefits for older employees, and it provides few retirement benefits to short-term employees"...

One in five employees with at least five years of completed service lose money by participating in the plan because pensions they earn are worth less than their required plan contributions.

SERS gives 76 percent of the benefits to 25 percent of employees, according to the Urban Institute.

A similar disparity is found in a Bellweather Education Partners study of the nation’s pension funds for public school teachers, including the state’s Public School Employees' Retirement System (PSERS).

Generous benefits for long-term teachers are partly paid at the expense of those who leave teaching earlier or move from place to place within the profession, according to the study, Friends without Benefits: How States Systematically Shortchange Teachers’ Retirement and Threaten Their Retirement Security.

Less than 25 percent of Pennsylvania’s teachers ever become vested in the pension system, compared to a national median of approximately 45 percent, says Bellweather.

In contrast, defined contribution plans like the 401(k), offer many features better for younger workers. In addition to portability and better benefits for short-term employees, our recent pension study outlines several reason why transitioning to a defined contribution retirement system is an improvement for many employees.

These include:

  • Ownership. Workers with higher risk preferences can pursue their own investment strategies without restrictions.
  • Potentially higher returns. A growing body of evidence suggests that a lifetime of defined contribution retirement investments produce higher returns than individuals cashing out of a defined benefit program.
  • Security. By definition, defined contribution plans are fully funded. All of the funds promised to an employee are paid up front and become the employee’s property. There is no risk of reduced benefits from municipal bankruptcy as in the case of Detroit.

The primary obstacle to a more equitable retirement system are teacher unions notes the Bellweather study, saying “the teachers who remain in the system long enough to maximize their benefits—an ever shrinking group—are the most organized politically, via teachers unions and other stakeholder groups."

Unfortunately, government unions' refusal to acknowledge the need for pension reform will hurt workers for years to come. Pension reform is essential to not only protecting taxpayers from enormous debt and rising property taxes, but to give workers a higher quality retirement system where benefits are better distributed.


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Is This What Democracy Looks Like?

SEPTEMBER 15, 2014  | by BOB DICK

An astounding 93 percent of union members had no role in choosing the union currently representing them, according to a new report authored by Dr. Daniel DiSalvo of the Manhattan Institute.

This really shouldn't come as a surprise given the rarity of union recertification elections, which deny union members the opportunity to vote for or against their union. Never mind that 77 percent of union households support periodic recertification elections.

Dr. DiSalvo's report exposes a pattern of antidemocratic behavior and rules within union organizations, finding unions to be democratic only on a superficial level. Here are just four of his findings supporting his contention:

Very few members vote in standard union-leadership elections (turnout is often below 20 percent; in one recent New York City public-sector union election, turnout was 4 percent).

Those who do vote are not representative of the membership as a whole (with older workers voting at higher rates, thus skewing, for example, union policies on the importance of pensions relative to wages).

Incumbent leaders often go unchallenged for long periods, sometimes “anointing” chosen successors (who then anoint another generation) instead of fostering genuine contests.

Unions, especially at the state and national level, often take political positions with which a substantial number of members disagree (thus forcing those members to pay, with their dues, for the advocacy of policies that they do not support).

This last point is one which CF has covered repeatedly. In Pennsylvania—a forced union state—union members can be required to subsidize organizations with political views antithetical to their beliefs. To make matters worse, these dues used for politics are collected with taxpayer resources, an unfair political privilege afforded only to government unions.

How democratic is an organization that forces you to become a member on condition of employment, refuses to give members the opportunity to vote on its legitimacy, and forces members to pay for political causes they may not support?

In an effort to make unions more democratic, Dr. DiSalvo suggests a number of reforms including publicizing electoral procedures and reporting election results, instituting online voting, and ending the practice of requiring union members to pay for political advocacy they don't support.

While the efficacy of these reforms and others is up for debate, one thing is clear: the current system of unionization is far from democratic.


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Rendell's Legacy Handcuffs Schools

SEPTEMBER 12, 2014  | by JAMES PAUL

Former Governor Ed Rendell wrote to the Philadelphia Inquirer and took issue with our policy points on Philadelphia school trends. The Inquirer printed a portion of our response.

Here is the full version:

Ed Rendell appears more interested in defending his tenure as governor than actually discussing the facts about Philadelphia. The Commonwealth Foundation’s analysis of school spending, enrollment, and staffing trends spanned several administrations. We present the facts—most notably that spending has dramatically increased—regardless of who resides in the governor’s mansion.

Despite that increased investment—more than $1 billion since 2002—Philadelphia public schools continue to leave children unprepared. Four in five students failed to meet proficiency in reading and math in 2013, according to the Nation’s Report Card.

These results shouldn’t be surprising, however. A study conducted by the 21st Century Partnership for STEM Education found “either no or very weak association between levels of education expenditures and student achievement” in Pennsylvania.

Rendell goes on to blame Republicans for slashing state education funding. This claim is false. The loss of funding was due to the expiration of temporary federal stimulus money Rendell used to balance the state budget. Today, state education funding in Pennsylvania is at a record high.

The reality facing Philadelphia, though, is that pension costs are consuming more and more of the increase in spending—the result of legislation signed by Rendell and backed by teachers’ union lobbyists to underfund pensions and delay those cost increases until after he left office.

In Philadelphia alone, contributions to the Public School Employees Retirement System (PSERS) increased by $133 million over the last 5 years, which is equivalent to the salary of 2,000 school teachers.

The pension crisis is real, and its impact is handcuffing Philadelphia and school districts across the state. 


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Audio: Is Selling Liquor a Core Function of Government?

SEPTEMBER 12, 2014  | by JOHN BOUDER

Is it government's job to monopolize a service that private enterprise can easily provide? Matt Brouillette says no—and Pennsylvania's state-run liquor monopoly is a prime example of why government should stick to its core functions and allow free enterprise to flourish.

Matt points to a simple "yellow pages test"—if you can find a service in the yellow pages, government shouldn't be providing it.

Listen below to hear Matt on WSBA 910's The Gary Sutton Show as he justifies this stance and illustrates how government fails when it tries to assume the role of private businesses.

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.

And for mobile listening, get the SoundCloud iPhone and Android apps.


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Who are We?

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.