A Shoddy Attack on Charters

NOVEMBER 11, 2014  | by JAMES PAUL

Charter Schools

My letter to the editor of the Philadelphia Daily News takes issue with the paper's recent characterization of charter schools as "fiscal monsters." 

The Daily News editorial on charter schools ("Frankencharters") includes scary Halloween analogies but does a disservice to genuine efforts to improve education in Philadelphia. Referring to charter schools as "fiscal monsters" flatly ignores that charters spend and receive fewer dollars per student than district schools.

Despite significantly less funding, Philadelphia charters outperformed district schools on the 2012-13 State Performance Profile. Charters actually operate with maximum accountability, since poor academic performance or financial mismanagement will result in closure - a fate that rarely, if ever, befalls district schools. Will the Daily News similarly refer to failing district-run schools as "monsters" that need to be "reined in" when the next cheating scandal occurs?

It should come as no surprise that charters receive their funding from school districts, since charters are public schools, too. That so many families have opted for charters reflect their success - it illustrates the overwhelming demand for expanding school choice.

Continued oversight and transparency is an appropriate policy goal for charter and district-run schools alike - especially in light of the closure of Walter Palmer, which is indeed devastating to the students and families involved. But the unique circumstances surrounding Walter Palmer do not justify demonizing largely successful charters citywide.

The 34,000 students currently languishing on charter waiting lists illustrate the urgent nature of school reform. Denying them more educational options - just to prop up the failing status quo - does not serve the best interests of Philadelphia.

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Audio: Election Lessons


This week a “Republican wave” swept the country and propelled many fiscally conservative governors to reelection. And in Pennsylvania, candidates that ran on pension reform, liquor privatization, choice in education, and paycheck protection were elected—expanding Republican control of the state Legislature.

So, why did the same voters hand the keys to the governor’s mansion over to a candidate promising higher taxes and more spending?

Matt Brouillette, discussing the election results on WSBA’s The Gary Sutton Show on Wednesday, offers an explanation:

Ultimately it was [public sector union leaders] using tax payer collected union money that framed that narrative of billion dollar cut in education, a lack of a severance tax—these were the things that unfortunately Tom Corbett was not able to counter, nor did he confront it head on.

Matt says governors in other swing states took a more direct approach to combating government union leaders’ undue influence and were rewarded by voters:

This biggest takeaway I think, and we certainly see this in the context of nationally, where you saw Republican governors in blue states—such as Scott Walker in Wisconsin, Rick Snyder in Michigan, as well as Bruce Rauner who is the governor elect in Illinois—these folks took head on the opponents of the taxpayers and that was the public employee unions. When you have bold leadership and you fight those battles that are absolutely necessary, you will win!

Listen here or below:

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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Missing the Wave


Last night, candidates embracing free-market policies not only won legislative seats across Pennsylvania and our country, but in states like Wisconsin, Michigan—and even Illinois—gubernatorial candidates who made the case for fiscal restraint and union reform prevailed. In our own state legislature, Republican majorities in the both the House and Senate match the largest in almost 60 years.

So why did Governor Corbett miss yesterday’s national conservative wave?

Corbett's loss was not a rejection of his support for free-market policies, which voters endorsed in many other races. but the public's perception of the governor. This perception was influenced by a relentless, negative PR campaign by government union leaders. 

Government union leaders declared war on Governor Corbett from day one of his administration. But while they may have succeeded in defeating Governor Corbett, they failed in Pennsylvania—and across the country—to defeat taxpayers' overwhelming desire for sane fiscal policies. 

Poll after poll shows voters want liquor privatization, school options for their kids, pension reform to save their homes, lower taxes to spur economic growth, and reduced government spending.

Persistent and well-funded opposition from government union leaders stymied critical pension reform as well as popular liquor privatization efforts, either of which would have hugely boosted Corbett’s perception among voters as an effective leader. In contrast, voters in Wisconsin and Michigan—swing states like Pennsylvania—supported their incumbent governors’ bold leadership in taking on these forces with meaningful reforms. 

Those unresolved issues will challenge Governor-elect Wolf and the Republican-controlled legislature. Voters will be looking for bold leadership in the General Assembly to set and implement a taxpayer-focused agenda. 

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Step Forward for School Choice


Geronda Montalvo did not want to send her daughter Zayda to the low-achieving schools in her neighborhood. Thanks to an Educational Improvement Tax Credit (EITC) scholarship, Zayda is thriving at Holy Child Academy. And thanks to the passage of HB 91, more mothers like Geronda will have educational options.

HB 91 consolidates the EITC and Opportunity Scholarship Tax Credit (OSTC) into one statute, which will simplify and streamline the application process. Businesses are now able to apply for an alternate credit if its preferred credit is unavailable, and the Department of Community and Economic Development now has the authority to transfer unused credits between programs.

In 2001, Pennsylvania became the first state in the country to enact an education tax credit program. Since that time, the EITC has provided more than 430,000 scholarships to students and families seeking schooling options.

Here’s how the EITC program works. First, businesses make donations to registered, vetted charities that award scholarships. The business receives a tax credit worth 75 percent of the donation, while the charity organization uses the donated funds to award scholarships for students to attend schools of choice. The OSTC was added in 2012—a program designed specifically for students who reside in the lowest performing school districts in the commonwealth.

Ultimately, HB 91 allows more credits to be utilized, more scholarships to be offered, and more lifelines for students trapped in failing schools. 

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The American Dream: Our Stories


Commonwealth Foundation's Priya Abraham, Tom Bako, and Abhi Samuel share their personal stories of choosing to be Americans and their work today to defend the American Dream for their fellow Pennsylvanians.


Video: Minimum Wage Limits Opportunity

OCTOBER 31, 2014  | by JOHN BOUDER

Giving workers a boost in their hourly wages sounds like a good thing, doesn’t it? But, like most government-imposed market restrictions, it has some pretty negative consequences—like higher prices for consumers and fewer job openings for those looking to work.

CF’s Katrina Anderson recently made the case on WFMZ-TV's Business Matters that forcing hikes in labor costs by raising the minimum wage will harm family businesses and put young and low-skilled workers out of work.

Katrina points out that only 3 percent of Pennsylvania workers actually earn the minimum wage and the majority of them are under the age of 25. Forcing business to pay these workers more will surely make it harder for those first starting out to gain skills and work experience—effectively cutting off the first rung on their ladder to career success.

Indeed, many industries—like fast food—that have typically given low-wage workers their first job opportunity are transitioning to automation to control costs. Raising the minimum wage will only accelerate this process.

Katrina emphasizes that we want solutions that truly help lift the poor out of poverty, not policies that sound benevolent but actually limit opportunities for those that need it most.

For more on the minimum wage, please read our op-ed “The True Cost of Minimum Wage,” which tells the story of a small business owner considering automation as a response to a potential $15 minimum wage.

And check out the facts and figures in our policy points, “The Harmful Effects of a Minimum Wage Increase.”

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Taxes Hinder Pennsylvania's Progress

OCTOBER 31, 2014  | by BOB DICK

It may be boring and complicated, but a state’s tax code has a real impact on individuals and families who want to improve their quality of life. For instance, if Pennsylvanians are required to spend countless hours and dollars complying with Harrisburg’s complex tax laws, this leaves less time to invest in a business or save for the future.

Tax reformers often focus on the amount of revenue raised by a particular proposal. But the real focus should be on creating a tax climate that allows people to more easily improve their well-being. With this in mind, it was disappointing to read the Tax Foundation’s 2015 State Business Climate Index. It ranked Pennsylvania 34 out of 50, with 50 being the worst possible ranking. Here is a brief description of how the Tax Foundation created the Index:

The Index deals with such questions by comparing the states on over 100 different variables in the five important areas of taxation (corporate taxes, individual income taxes, sales taxes, unemployment insurance taxes, and property taxes) and then adding the results up to a final, overall ranking.

In its index, the Tax Foundation ranked Pennsylvania in each of the five tax areas mentioned above. The results are subpar:

  • Corporate Income Tax Rank: 46
  • Individual Income Tax Rank: 17
  • Sales Tax Rank: 24
  • Unemployment Insurance Tax Rank: 50
  • Property Tax Rank: 42

These poor rankings can be attributed to Pennsylvania’s second highest corporate tax rate in the country, highest unemployment tax rate in the nation, and a pension crisis putting added pressure on homeowners’ property tax rates.

Luckily, there is one bright spot: the state’s flat income tax. With a current flat rate of 3.07 percent, it is the lowest of any state (not including states without an income tax). Regrettably, there are proposals to replace the flat tax with a more progressive tax system, which would move us is the wrong direction for a variety of reasons.

For starters, more than half of all businesses in Pennsylvania pay taxes through the individual income tax. Raising this tax would adversely affect many of them, thereby hurting Pennsylvania's competitiveness. The perverse incentives created by this type of proposal are also troubling. If an individual is earning more money through hard work and success, he or she shouldn’t be punished with a higher tax rate. This is plainly unfair.

Pennsylvanians are already dealing with the 10th highest state and local tax burden in the country. Transitioning towards a system that allows people to keep more of what they earn would improve the commonwealth's business climate.

Pennsylvania has a prime opportunity to be a refuge from other states with even worse business climates. According to the Tax Foundation, four of the eleven worst states for business border our state. If lawmakers pursue policies than encourage people to live and work in the commonwealth, don't be surprised if people start voting with their feet.  

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Obamacare: Low Quality, High Cost


The federal government's health care overhaul is quickly becoming "Medicaid for all." The more we learn about the Affordable Care Act's (ACA) newly insured population, the clearer it becomes that most people gained low-quality health insurance.

For starters, the vast majority of individuals who gained coverage did not find policies on the exchange, but rather enrolled in Medicaid.

The Heritage Foundation found that Medicaid is responsible for 71 percent of the net growth in insurance coverage during the first half of 2014. Medicaid is taxpayer-funded insurance notorious for poor access and below average health care outcomes. In Pennsylvania, one in three doctors will not accept Medicaid patients.

But exchange patients are dealing with shortcomings too, from high out of pocket costs to limited access to primary care doctors. Both the New York Times and USA Today have documented serious affordability and access issues with exchange plans. In Indiana, one woman spent almost half a year trying to find a doctor that would accept her exchange plan:

"I definitely feel like a bad person who is leeching off the system when I call the doctors' offices," she says. Shawn Smith of Seymour, Ind., spent about five months trying to find a primary care doctor on the network who would take her with a new, subsidized silver-level ACA insurance plan.

A survey by the Medical Group Management Association found over 200,000 doctors will not participate in 2015 exchange plans.

What happens when millions of Americans obtain insurance that many doctors won’t accept? They end up in the emergency room.

Carolyn Oatman, a new Medicaid patient in Reno, notes that because it can take two months to get a doctor’s appointment, she opts for the emergency room. “I love it on Medicaid because now I can go the emergency room when I need to and don’t have to worry about the bill.”

No wonder Emergency Department visits in expansion states increased 5.6 percent from second-quarter 2013 to second-quarter 2014. In comparison, hospitals in non-expansion states reported a 1.8 percent increase in Emergency Department (ED) visits over the same time period.

ED visits are among the most expensive forms of health care and are often money makers for hospitals. In sum, Medicaid and exchange patients are seeking out the most-expensive yet least efficient form of care.

As Healthy PA rolls out, we should expect the same story to unfold. A spike in costly ED visits, as well as Medicaid and exchange patients struggling to find a doctor.

Limiting insurance options through countless regulations isn’t working. Patients are smart enough to figure out what they do and do not want their insurance to cover. It’s time to put them in control. Only choice and competition will make health care accessible and affordable for all consumers.

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Audio: Teachers & Taxpayers Still Need Paycheck Protection

OCTOBER 29, 2014  | by JOHN BOUDER

It’s important to note—especially during election season—that one group of private organizations has an advantage over all others when it comes to funding their political agenda. That group is public sector unions, which are legally permitted to use taxpayer resources to collect their political money.

That advantage is highlighted this week as disgraced state Senator Leanna Washington is expected to plead guilty to using state Senate staff time to coordinate fundraisers and catalogue campaign contributions.

Why do we prosecute Sen. Washington for using public resources for politics on the one hand while turning a blind eye to a violation of the same principle by public sector unions?

During a recent radio interview, Matt Brouillette explained how this principle should apply to everyone:

Because if the PSEA, NEA is able to do it then why should the NRA be able be able to have their dues and PAC contributions collected at taxpayers’ expense? The answer is quite simple and taxpayers agree with us all across Pennsylvania, Democrats and Republicans alike, is that no one should use public resources for political purposes.”

Paycheck protection empowers teachers with more control over how their money is spent on politics and levels the political playing field. According to Matt:

We need to make sure that those teachers who disagree with their union have a strong voice to able to express that. When you empower them to have to write checks to the union before the union gets their money, that’s a measure of accountability that union simply doesn’t want. They want to treat those teachers like ATMs [and] continue withdrawing money spending on behalf of people who support the union’s agenda, not necessarily the teacher’s agenda.

Listen here or below for more:

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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AP Story Errs on Wolf Spending Plan


A recent Associated Press story questions part of our analysis of Tom Wolf's education spending and income tax proposals, specifically the notion that Mr. Wolf would have to double or almost triple the rate to fund $4.6 billion in additional spending.

Wolf has said he would not use the income tax alone to raise that new money. His other proposals include imposing a 5 percent severance tax on Pennsylvania’s thriving natural gas industry and closing business tax loopholes.

We welcome critical review of our work, and will admit to any errors in our analysis. However, we did not overlook these details as the AP story claims. 

First off, our analysis did account for Wolf's proposed natural gas tax, which his campaign estimates would raise about $1 billion.

But this $1 billion estimate is before replacing the revenue already generated by the impact fee (which Wolf has indicated he plans to do). Wolf's "Fresh Start" plan also indicates that severance tax revenue would be used for more than education. He plans to use some of the revenue for "infrastructure" and "development of clean energy alternatives."

In addition, our analysis lists 18 additional spending proposals in Wolf's Fresh Start plan, which are not paid for with any new revenue streams. The cost of just one of these initiatives—universal preschool—would exceed $1 billion. Our assumption that the total cost of these proposals, if enacted, would equal the remaining severance tax revenue after replacing the impact fee and funding infrastructure and clean energy, is extremely generous.

Second, while Wolf does propose "closing business tax loopholes," he plans to use this revenue in other ways. Wolf’s Fresh Start plan says closing loopholes and tax incentives would be used strictly to lower the Corporate Income Tax rate:

By implementing combined reporting and tax credit reforms, Tom Wolf will be able to lower the corporate income tax rates for Pennsylvania’s small businesses, which struggle to pay their taxes under the current system.

Wolf’s plan also calls for the retention or creation of business tax credits that are “tied to the creation of good paying, middle-class jobs.” 

Our analysis of Mr. Wolf's proposals is thorough, generous and as detailed as possible. Yet the AP characterized our estimates as, "hypothetical analyses whose value is mainly political."

In short, our research and analysis more accurately represents Wolf's proposals than the AP story.

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The Commonwealth Foundation is Pennsylvania's free-market think tank.  The Commonwealth Foundation transforms free-market ideas into public policies so all Pennsylvanians can flourish.