House Budget Holds the Line on Taxes


Pennsylvania State Budget

Yesterday, the PA House of Representatives advanced a $29.1 billion spending bill. This bill could be voted on by the full House today. There is much to like in this budget in terms of fiscal responsibility.

For starters, the $29.1 billion budget represents a 2.1% increase over the 2013-14 passed budget (1.9% when including "supplement appropriations" that are added to 2013-14 spending totals). This increase is less than the rate of inflation and population growth as measured by the Taxpayer Protection Act.

The budget plan also addresses the spending gap without raising any taxes. While it does rely on transfers from other funds, it does not delay pension payments or expand Medicaid.

Underfunding pensions, while making it easier to balance the budget this year, requires higher future payments to make up the difference and lost investment income. Moreover, shifting costs to the federal government via Medicaid expansion would grow the welfare state—hurting Pennsylvanians with higher federal taxes and higher future state costs and harming the poor with low-quality health care—without tackling the necessary reforms to fix a broken system.

Further, the proposed budget and revenue changes include temporarily suspending some targeted tax breaks and reducing some economic development subsidy programs. These programs are generally less effective than lower tax rates across the board in encouraging job growth and making Pennsylvania more economically competitive.

Finally, the proposed budget would use $380 million in revenue from liquor privatization. While recent indications are that liquor privatization seems unlikely to pass the Senate, the House plan sets the right priorities.

Enacting liquor privatization, a reform that the vast majority of Pennsylvania voters want, would deliver greater convenience, selection and prices for consumers. This should be a budget priority given the oft-suggested alternative of job-killing tax hikes.

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AFL-CIO Convention Spotlights Dues Spent on Politics

JUNE 24, 2014  | by JOHN BOUDER

Yesterday, the House State Government Committee voted in favor of paycheck protection legislation that promises to empower teachers like Bill Frye and John Cress with more control over how their money is spent on politics and to get taxpayers out of the business of collecting political money.

Predictably, Pennsylvania AFL-CIO President Rick Bloomingdale and Secretary-Treasurer Frank Snyder greeted this news, which signals that their control over their member’s paychecks could be in question, by calling it “paycheck deception.”

But there’s no deception: Union dues collected from government employees using taxpayer resources are used for partisan politics as we’ve pointed out again and again.

The latest example is video from PA AFL-CIO’s own constitutional convention (funded by union dues collected by taxpayers) from earlier this year, where Bloomingdale and Snyder are featured applauding partisan rants by other union leaders from AFSCME and UFCW.

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The Real Cost of Paycheck Protection


Critics of paycheck protection claim that the practice of our government deducting union dues and campaign contributions from workers' paychecks “only costs $100.” That's based on a letter from Treasurer Rob McCord to Rep. Markosek and Sen. Hughes that was circulated among Democrats in the legislature. Here are four reasons why that claim is wrong and irrelevant.

#1) Paycheck protection isn’t about the added costs, but the privilege of using taxpayer resources for politics

Supporters of paycheck protection have never argued that the cost of collection isn’t small. Rather, that collection of political money using public resources is improper and conveys a unique benefit to certain political organizations.

Previous open records requests have revealed that the Pennsylvania Treasury dispersed:

  • $41 million in union dues and fair share fees and $707,399 in union PAC contributions in 2010-11,
  • $41.4 million in union dues and fair share fees and $736,301 in union PAC contributions in 2011-12, and
  • $40.7 million in union dues and fair share fees and $775,259 in union PAC contributions in calendar year 2013.

It is this unique benefit that allowed government union PACs to contribute more than $339,000 to McCord for Governor in 2013 and 2014, without having to collect those contributions themselves, but rely on state government, municipalities, and school districts to collect these campaign contributions. 

#2) No other group receives this sort of taxpayer subsidy for collecting political funds

No other entity has the power to force taxpayers to collect its funding by binding contract. Nor do public employers collect the political money for other entities. In fact, the Treasurer’s Office was unable to identify other Political Action Committees that receive transfers from the treasury other than union PACs.

While Treasurer McCord may argue that such costs are “nominal” in light of total government spending, it doesn’t change the fact that taxpayer resources are being used for political action right in our own capitol.

Such activities—even with “nominal costs”—are illegal under other circumstances. State and legislative offices cannot be used to make phone calls or send emails for campaign fundraising, no matter how little, if anything, such activities add to the cost of government. One phone call, one email, one staff person making copies of a campaign mailer are all illegal activities.

#3 )The $100 claim ignores numerous costs

Further, while we don’t challenge the idea that the costs of payroll collection are a small part of the state budget, Treasurer McCord omits numerous costs when claiming the total cost is “less than $100” per year. In fact, this claim only counts the actual charges for electronic transfers. His claims ignores the cost of staff inputting deduction forms  for union dues into the state payroll system and the cost of the computers and software used to process payroll deductions.

The Commonwealth Foundation was charged $64.24 for copies of these payments for one year, which itself undermines the claim that the total cost is less than $100.

#4) Local governments would also benefit from paycheck protection

In addition, Treasurer McCord’s letter only talks about state costs. But SB 1034 and HB 1507 would impact all levels of government, including 66 counties, 1,015 municipalities, 1,564 townships, 499 school districts, and 1,756 special district governments. All of these face real costs. For example, officials in Blair County report that one payroll employee devotes a full day's work every two weeks to calculating deductions for union dues.


Critical Vote Advances Paycheck Protection


Today, the House State Government Committee advanced House Bill 1507 to the floor, taking the first step towards ending the taxpayer collection of government union campaign contributions and political money. We applaud the House State Government Committee’s determination to restore fairness and accountability to a process that harms both taxpayers and public employees.

Thanks to today’s vote, teachers like Keith Williams, who testified before the committee, now have hope that their voices will no longer be co-opted by union executives who abuse taxpayer resources and teachers’ paychecks to advance their own political agendas.

A big thanks to Chairman Daryl Metcalfe and the Committee members who voted 'YEA' on paycheck protection—an important step in order for the legislation to move on for a full House vote.

Please join me in thanking those representatives who stood with the taxpayers and teachers!  You can click below for their contact information, or thank them publicly via social media.

Rep. Daryl Metcalfe, chair YEA Rep. Mark Cohen, chair NAY
Rep. Stephen Barrar Absent Rep. Mary Jo Daley NAY
Rep. George Dunbar YEA Rep. Marty Flynn NAY
Rep. Eli Evankovich YEA Rep. Jordan Harris NAY
Rep. Garth Everett YEA Rep. Daniel McNeill NAY
Rep. Matt Gabler YEA Rep. Daniel Miller NAY
Rep. Fred Keller YEA Rep. Michael O'Brien NAY
Rep. Jerry Knowles YEA Rep. Michael Schlossberg NAY
Rep. Timothy Krieger YEA Rep. Brian Sims NAY
Rep. David Maloney YEA Rep. Greg Vitali NAY
Rep. John McGinnis YEA  
Rep. Brad Roae YEA  
Rep. Rick Saccone YEA  
Rep. Justin Simmons YEA  
Rep. Dan Truitt YEA  

Click here
for a listing of links to these members' social media accounts.

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5 Ways to Balance the Budget Without Increasing Taxes

JUNE 23, 2014  | by BOB DICK

State spending is at an all-time high, but calls for even more spending persist, despite Pennsylvania’s precarious fiscal situation.

Pennsylvania doesn’t need more government spending to improve the quality of life in our state. In the heat of budget season, this message tends to get lost in the shuffle. This year is no different.

Higer taxes may be on the horizon too. Pennsylvanians labor under the 10th highest tax burden in the country, but that hasn’t stopped government unions—and their allies— from pushing for a $1 billion tax increase.

Instead of sticking taxpayers with the tab, lawmakers should focus on balancing the state’s budget by controlling excessive and harmful spending. Below are five ideas to help achieve this goal.

1. Don’t Increase Spending: A large portion of the nearly $1.3 billion deficit is the result of proposed spending increases in Governor Corbett’s budget. If lawmakers were to forgo the increases, a significant amount of the projected deficit would be eliminated. Government should not be spending money it doesn’t have.

2. Utilize Part of the Legislative Reserve Fund: According to an audit, lawmakers have $153 million sitting in their reserve fund. While a portion of this may be necessary to continue operations during budget disputes, lawmakers should consider transferring some of this money into the general fund to bridge the budget gap. This move is not unprecedented, as reserve funds have been transferred to the Hazardous Sites Cleanup Fund and Accountability Block Grants for public schools.

3. Eliminate Corporate Welfare: Government grants and loans given directly to businesses harm real people and hinder job creation. The Commonwealth Foundation has identified more than $700 million in grants, loans, and special tax credits which should be phased out, preventing taxpayers from having to pay more for years of government overspending.

4. Reform Prevailing Wage Mandates: Pennsylvania’s Prevailing Wage Act mandates contractors pay inflated wages on most state or local government-funded construction projects. Mandating the highest “prevailing” wages on qualifying government construction projects has increased costs by 10 percent to 30 percent more than what contractors would pay workers for identical projects funded with private dollars. If the mandate were ended, taxpayers could save upwards of a billion dollars.

5. Partner with the Private Sector: Pennsylvania owns 117 state parks and 24 museums and historical sites. Contracting out management of these locations would realize real savings and free up revenue for other areas of the budget.

For more ideas on how to fix Pennsylvania’s fiscal problems, read our report, Blueprint for A Prosperous Pennsylvania.

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Lack of Priorities Triggers PA Budget Crisis


Pennsylvania has a prioritization problem. Recent controversies about the State Racing Fund and the legislature's reserve fund provide two examples of why Pennsylvania consistently wrestles with budget crises.

Auditor General Eugene DePasquale criticized the Department of Agriculture last week for shifting resources from the State Racing Fund to consultants and other non-related programs. But why does the state have an adviser on horse and harness racing issues when we’re facing a $50 billion pension liability? A liability that caused both Moody’s and Fitch to downgrade Pennsylvania’s bond rating, while Standard and Poor’s rated Pennsylvania’s fiscal outlook as negative, down from stable.

If Pennsylvania doesn’t prioritize pension reform, its bond rating could be downgraded again, which would increase the cost of borrowing and the likelihood of future budget gaps.

Likewise, it seems imprudent to squirrel away more than $100 million in the legislature's reserve fund. The last budget standoff reportedly cost $50 million in reserve funds. To be fair, lawmakers have allocated reserve funds to General Fund needs in the past. However, the reserve fund's suspicious history is reason for concern. Reserve funds were used for questionable expenditures such as expensive dinners and parking tickets. The most recent audit uncovered $150 for a Starbucks reward card.

On the other hand, taxpayers are facing exploding Medicaid costs with or without Healthy PA. The IFO (Independent Fiscal Office) projects public welfare will grow by 4.9 percent per year for the next five years while state revenues increase by only 3.1 percent.

It’s time to reprioritize the commonwealth’s spending and fund promises before perks.

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Mailbag: How do Union Dues Fund SuperPACs?


A PolicyBlog reader asked if we could explain a recent “SuperPAC” ruling we covered in an op-ed back in April, along with its implications for state and national elections.

The term SuperPAC is the informal term for “independent expenditure committees,” which can actually do less with their funding than tradition Political Action Committees (PACs). That is “independent expenditure committees” can runs ads in support of or opposition to candidates, but cannot give directly to or coordinate with candidates.

Where the SuperPAC term comes in is that these committees can receive, following the Citizens United decision, an unlimited amount of funding from union dues and corporate treasuries, hence the moniker “super.”

The recent Pennsylvania ruling (General Majority v. Aichele) basically said the commonwealth must allow SuperPACs in state races. The Department of State statement on this preliminary injunction (PI) explains the ruling and even sets up procedures for SuperPACs to register and accept contributions. So far, three independent expenditure committees have registered with the state, but expect more to come based on what we’ve seen elsewhere.

The organization that won the court ruling—General Majority—originated in New Jersey in 2013 under the name “Fund for Jobs, Growth & Security,” spending $8 million on elections. More than $6 million of that total came from union dues.

Another Super PAC called “Garden State Forward” was created by the New Jersey Education Association, the state’s largest teachers’ union, and spent an estimated $11.9 million.

With the availability of SuperPACs in Pennsylvania, expect to see even more money from union dues flow to politics. Union leaders have already declared their plans to spend an unprecedented amount of money in national and state races in 2014.

The AFL-CIO alone is committing $300 million to defeating Republicans. The NEA just announced it is setting aside $10 million in union dues for 2014 elections.  The American Federation of Teachers said that Pennsylvania is going to be their number one target for election activities in 2014. The PSEA told members in its June 2013 magazine that up to 12% of members dues, or about $7 million, would go to politics in 2014.

The SuperPAC ruling truly underscores the need to pass paycheck protection to protect workers, taxpayers and teachers—like the ones speaking out in our ad—from being forced to support politics they don’t agree with.

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End Teacher Bullying with Paycheck Protection


As most PolicyBlog readers already know, union dues are being used for political action. Moreover, taxpayer resources are used to collect both union dues and union campaign contributions. We at CF have been working to educate the public about this crucial issue—including a new TV commercial you can watch here.

But some union leaders not only continue to lie about basic facts, but resort to insults and playground name calling. Here is my response to a letter from a local union leader attacking teacher John Cress (you can read some of John's story here).

Bruce Koch’s letter ("Mailings don't tell the whole story," Jun 14) is both insulting and misleading. As a former local union president and teacher, he should know better than to insult a fellow teacher's appearance and even question his intelligence.

Moreover, he gets his facts wrong. Mr. Koch claims that "Not one single penny" of union dues "can be used for political action." This is demonstrably false. In 2013, the PSEA—the state's largest teachers' union—reported $3.8 million in political spending from union members’ dues. That comes from publicly available federal government records.

And even the PSEA's own magazine tells members that an estimated 12 percent of union dues "will be used for lobbying and political expenses" this year.

Mr. Koch also claims that no tax dollars are spent on campaign contributions. Again, this is wrong. State government and school districts collect political action committee (PAC) contributions for government union leaders using the state’s payroll systems. The Pennsylvania Treasury and school districts then write checks to union PACs—money that is then given out to politicians in the form of campaign contributions.

Given these facts, Mr. Koch should be joining John Cress in calling for change rather than attacking a fellow teacher. Taxpayer resources are being used to fund politics, and that’s just wrong.

To take action on paycheck protection and counter these lies, please click here.

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RCAP and Corporate Welfare Hurt Pennsylvanians

JUNE 18, 2014  | by MICHAEL HOGG

What would you do if the government spent your tax dollars on a project that could bankrupt your business? Would you fight back by pointing out the injustice? Hopefully you're never faced with such a decision.

But unfortunately, for some Pennsylvanians, this hypothetical is all too real. 

In a recent example, Lebanon Valley Cancer Center’s (LVCC) amicable relationship with Good Samaritan Hospital in Lebanon, PA hit a speed bump when Good Samaritan received a $3 million government grant that could put LVCC out of business.

As reported by abc27 News, Good Samaritan plans to build a new cancer care facility with this public money. Cancer centers are a laudable contribution to the health of our communities and the commonwealth, but the radiation oncology center will duplicate the services already provided by LVCC.

Redevelopment Assistance Capital Program (RCAP) grant, could, as LVCC representatives argue, destroy an established, local, and privately-funded small business that has served the community for 24 years. 

One LVCC reprsentative put it plainly in an interview with abc27:

"Inevitably, if they go through with this, it will put us out of business," said Susan McCoy, Lebanon Valley Cancer Center office manager.

This is one prime example of the ineffectiveness of the RCAP program. RCAP, and other "corporate welfare" type projects result in government picking winners and losers, which hurts our economy.

Last year, the General Assembly was on the right track when in lowered the program's debt ceiling to $3.75 billion. This debt ceiling reduction and other reforms establish greater accountability within the program, but more can be done.

Instead of picking winners and losers, lawmakers should eliminate RCAP and other corporate welfare programs to balance the budget, paving the way for lower taxes. An overall tax rate reduction would benefit hardworking Pennsylvanians without playing favorites.

For more information on how to make Pennsylvania prosperous and fiscally sound, check out our Blueprint for a Prosperous Pennsylvania.


There's No Such Thing as a Temporary Expansion


Last week, the House Health and Human Services Committee advanced HB 1492 to accept the Obamacare Medicaid Expansion. This move would shift the purpose of Medicaid from caring for vulnerable populations, like children, the elderly and disabled, as the current program does, to covering able-bodied childless adults.

Some believe HB 1492 is compromise that allows Pennsylvania to receive the generous "federal funds" and leave the the door open for approval of HealthyPA—the Governor's expansion alternative.

The Post-Gazette Editorial Board endorsed the idea, saying,

The measure approved by the state House committee meets in the middle. It would allow the federal expansion to go forward at the same time Mr. Corbett is trying to get the OK for his plan.

The problem is once you accept expansion, there is no going back. Robert Alt, president of the Buckeye Institute in Ohio, calls expansion a "Hotel California." In testimony before Ohio lawmakers he explains,

While the Supreme Court stated that the federal government cannot condition the first dollar of existing Medicaid coverage upon a state’s decision of whether to opt into the expansion, it did not say that those requirements of federal law would not apply after a state has opted into the expansion.

There is no such thing as a temporary expansion of an entitlement program. Once the state commits to expand an entitlement, it can't go back.

It's time we pursue other ways low-income adults access quality and affordable care, like removing coverage mandates and fostering charity care through legislation like HB 1760.

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