Making the Most of New Funding Formula

APRIL 27, 2016  | by JAMES PAUL

A recent report from ABC 27 asks: “Will lawmakers stick with new education funding formula next year?” At issue is whether Pennsylvania’s student-based formula will be retained in future state budgets. The ABC story raises an important concern—but it slightly misses the mark.

Here’s the question we should be asking: Will lawmakers stick with the new formula and ensure the formula is applied to all funding above 2014-15 levels?

The 2015-16 budget includes $150 million in new Basic Education spending. This funding will be dispersed to school districts based on a formula that accounts for enrollment—which is undeniably a positive step forward.  

But the formula only applies to 3 percent of Basic Education funding, the largest line item in the education budget. The other 97 percent is restricted by Pennsylvania’s “hold harmless” provision, which guarantees each district receive no fewer education dollars than it received the previous year—regardless of changes in enrollment

It is crucial that lawmakers do not apply hold harmless to the $150 million appropriated in 2015-16. Should the legislature increase Basic Education funding in 2016-17, the new formula should apply to all funding above 2014-15 levels, not merely the increase appropriated in 2016-17. 

Thanks to hold harmless, districts with declining enrollment received more than three times the state funding per student than growing districts since 1996. Until the student-based formula is applied to a larger portion of the Basic Education line item, hundreds of school districts will continue to be treated unfairly.

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Middle Class Loses Under Gov. Wolf's Budget

APRIL 26, 2016  | by BOB DICK

The Independent Fiscal Office (IFO) released a sober analysis of Gov. Wolf’s 2016-17 budget proposal. It examines the consequences of eight separate tax increases as well as a minimum wage hike. The 35-page analysis can be summarized in four major points.

1. Higher middle class taxes than New Jersey. The IFO produced hypothetical scenarios for families in 12 states to demonstrate the impact of the governor's 11 percent personal income tax (PIT) hike. A Pennsylvania family making $50,000 will pay higher taxes than the same family living in New Jersey and five neighboring states.

Proponents of a PIT hike emphasize the current rate is one of the lowest in the country. While true, it does not account for the fact that Pennsylvania's rate is among the highest for low-income families, and that the PIT does not exist in seven states.

2. The highest severance tax rate among major gas-producing states. If the governor gets his way, Pennsylvania’s gas industry would pay a 5.6 percent severance tax. The tax would be imposed in addition to the taxes gas companies already pay.

Supporters of a severance tax insist wealthy gas companies need to pay their “fair share.” But this punitive tax will also fall on people who depend on the natural gas industry for their livelihoods. A slew of jobs have already been lost as natural gas prices remain at 20 year lows.

3. The 10th highest state cigarette tax rate in the country. Philadelphia’s tax rate would be 2nd only to New York. Cigarette taxes affect a narrow population and garner more support than broad based taxes. However, cigarette taxes disproportionately affect the poor and encourage violence stemming from smuggling. In 2014, Philadelphia implemented a $2 tax on cigarettes. The tax drove Philadelphia residents to purchase cigarettes in nearby counties, which hurt small businesses in the city.

4. A minimum wage hike would erase nearly 30,000 job opportunities. The IFO predicts raising the minimum wage from $7.25 to $10.10 an hour would boost the incomes of some workers. However, the new mandated minimum wage would also force layoffs and slow hiring.

Everyone wants to reduce poverty, but forcing businesses to increase wages will harm the very people the policy is intended to help. Those with little work experience or education will find it more difficult to land that first job. For example, teenage unemployment rates are consistently higher in states with higher minimum wages.

All of Governor Wolf's proposals have one thing in common: They concentrate more money and power in Harrisburg. Yet, job growth and economic prosperity come from innovative people in the private sector, not from a large and removed state government.

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Budget Complete as Fiscal Code Becomes Law

APRIL 25, 2016  | by JAMES PAUL

Late on Friday afternoon, Gov. Tom Wolf quietly announced the fiscal code will become law without his signature. This significant development closes the door on a tumultuous year of state budget politics—and represents an important victory for public and private school children.  

Just last month Wolf opted to veto the fiscal code, which included a fair funding formula for education spending, language authorizing businesses to receive tax credits for their donations to private school scholarship organizations, and state funding reimbursing school districts for construction and renovation costs.

Lawmakers responded to the governor's veto by passing a stripped-down version of the fiscal code—this time with strong bipartisan support and veto-proof majorities. Apparently Wolf saw the writing on the wall and decided to refrain from yet another veto.

Thanks to passage of the fiscal code, education spending above 2014-15 levels will be distributed through a rational formula that accounts for student enrollment. This formula includes recommendations presented by CF in testimony to the Basic Education Funding Commission.

Ideally, the formula would apply to the entire Basic Education line item—not only the new education spending—but the fiscal code remains a step in the right direction. Certainly, the formula is an improvement over Wolf’s preferred funding scheme which funneled millions to Philadelphia, Chester-Upland, and Wilkinsburg at the expense of 423 other districts.

Further, the finalized fiscal code allows businesses that made donations to the state’s popular scholarship tax credit programs to utilize their tax credits in either 2015 or 2016. Recall that last year the Wolf administration put a freeze on the scholarship programs—claiming student hostages and causing confusion for participating businesses. The technical amendment in the code will reduce administrative headaches for businesses and allow more students to receive scholarships.  

A no-tax increase state budget, combined with a fiscal code that protects students, is a crucial victory for families and businesses in the commonwealth.

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Tomorrow's Two Ballot Questions for Every Party


Pennsylvania Votes

Tomorrow's primary election is largely a partisan affair in which only registered Republicans or Democrats can vote for the presidential nominee and nominees for state office.

But there is one constitutional amendment on the ballot, that everyone—including independent voters—can vote on.

The ballot question seeks to eliminate the Philadelphia Traffic Court by striking all mention of the court  from the Pennsylvania Constitution. It reads:

Shall the Pennsylvania Constitution be amended to abolish the Philadelphia Traffic Court?

Why is this an issue? In 2013, the Philadelphia Municipal Court took over the functions of the Philadelphia Traffic Court after a damning report on corruption. The Post-Gazette summarizes the sorry history of the court:

For four decades, Philadelphia’s traffic court made headlines for all the wrong reasons. In 1978 the president judge was indicted, and later convicted, of taking $32,000 in bribes and gifts. In the 1980s a ticket-fixing scheme involving $100,000 in illegal payoffs ended in the conviction of 12 people. . . Finally, in 2013, three of the traffic court’s judges pleaded guilty to ticket fixing in exchange for gifts and four others were found guilty of lying to a grand jury or federal agents.

There's also a second ballot question that asks voters if they support raising the mandatory retirement age for judges from 70 to 75. The question will appear on Tuesday's ballot, but your vote won't count.

This spring, the state Supreme Court rejected a Senate Republican request to revise the wording of the ballot question.

In response, the legislature passed a resolution to move the ballot question to the November election. Here's the text that will appear on Tuesday's ballot:

Shall the Pennsylvania Constitution be amended to require that justices of the Supreme Court, judges and justices of the peace (known as magisterial district judges) be retired on the last day of the calendar year in which they attain the age of 75 years, instead of the current requirement that they be retired on the last day of the calendar year in which they attain the age of 70.

The question would affect several judges nearing the current mandatory retirement age of 70.

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(Un)Happy Tax Freedom Day!


(Un)Happy Tax Freedom Day!

If you thought Tax Day was April 15, think again. Today, April 22, is actually the day by which Pennsylvanians have finally earned enough to pay their 2016 tax bill – a bill that exceeds housing, clothing, and food expenses combined.

Check out the non-partisan Tax Foundation’s report on Tax Freedom Day in Pennsylvania and nationwide.

Here in Pa., the shocking truth is that Pennsylvanians will spend nearly four months earning enough income to pay their federal, state, and local taxes.  

Why so much in taxes? In short, government spending growth at all levels. In fact, state government spending grew by 41 percent from 2005-2015. Our state and local tax burden alone, excluding federal taxes, now stands at an astounding $18,000 per family of four.

As we saw with last year’s budget impasse, Pennsylvanians simply have no appetite for higher taxes. Today’s Tax Freedom Day only underscores they were right to reject Gov. Wolf’s record tax increase plans.

Despite the heavy tax load Pennsylvanians already bear, Wolf still insists it’s not enough. His 2016-17 budget proposal would increase the tax burden by $850 per family of four, including raising the personal income tax by 11 percent—retroactive to January 1.

Taxpayers who spend 112 days a year just to fund government spending don’t want to hear they’re not taxed enough. They want to hear lawmakers are doing everything possible to spend responsibly rather than spend more.

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How Ridesharing Helps the Poor and Disabled


Earlier this week, I used Uber to get a ride in downtown Philadelphia. Curious, I asked my driver how long he’d been driving for Uber. “Two years,” he told me, noting that he used to drive a taxi. “I’m so much better off now,” he added.

This flies in the face of criticism that Uber and other ridesharing services—despite the numerous benefits they offer—harm taxi drivers.

Just yesterday, the Public Utility Commission (PUC) issued an $11 million fine on Uber (which will certainly be appealed in court). The fine stemmed for Uber operating without PUC approval, not from any harm to riders or threat to public safety.

In fact, several recent news stories highlight the many beneficiaries of ridesharing.

  • A recent Pittsburgh Post-Gazette story looks at how Uber, Lyft, and zTrip have increased transportation options to underserved neighborhoods in Pittsburgh.
  • Similarly, a story shows the expanded economic opportunity generated by Uber and Lyft in Philadelphia.
  • The benefits extend beyond simply serving neighborhoods taxis don’t. A CBS Pittsburgh story explains how drunk-driving has declined in the city thanks to ridesharing services.
  • Another beneficiary of ridesharing has been disabled riders. An AP analysis looks at how major cities have utilized Uber and Lyft to provide transportation for residents with disabilities. Indeed, transit systems have actually saved money by using a voucher system to cover the fares of Uber and Lyft.

Certain special interests have thrown significant funds and manpower behind efforts to prevent Lyft and Uber from operating in the city. This would be most unfortunate for low-income residents of Philadelphia.

Emails uncovered by the Philadelphia Inquirer reveal the Philadelphia Parking Authority has conspired with the taxi industry to protect them from competition—at the expense of consumers.

Clearly, the PPA’s opposition to ridesharing services is about preserving its authority and regulatory powers. It has little to do with protecting consumers. Indeed, a study from the Cato Institute highlights that ridesharing services ultimately provide greater safety than taxis.

Given the need and numerous benefits of ridesharing, lawmakers should pass legislation authorizing ridesharing across the state, including Philadelphia.

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Changing Lives with Education Savings Accounts

APRIL 20, 2016  | by JAMES PAUL

Education Savings Accounts (ESAs) empower parents to personalize the academic experience for their children, as CF explains in a recent policy brief. But ESAs are about more than school choice.

They are changing lives for families in need.

ESAs have only existed for a short time—enacted in 2011 in Arizona and 2014 in Florida. But the stories of children served—and saved—by these flexible spending accounts are growing by the dozens.

Jordan Visser, a nine-year-old in Arizona diagnosed with cerebral palsy and dyslexia, was one of the first children to benefit from an ESA. Thanks to his ESA, Jordan receives more individual time with a reading teacher for the visually impaired, as well as his physical therapist:

When Katie Swingle’s son, Gregory, was eighteen months old, doctors worried that Gregory’s autism would prevent him from being able to speak. But thanks to Florida’s ESA program, seven-year-old Gregory is not only speaking, he’s writing in cursive. Watch Gregory’s mother describe the impact of ESAs on her family:

Consider Max Ashton, an eighteen-year-old in Arizona born legally blind, who used the ESA funding for specialized education and college tuition:

Eighteen-year-old Max Ashton is an ESA recipient in Arizona. Max is an exceedingly bright and ambitious young man. He was also born legally blind and has additional needs in school. This is why, when given the option to use an ESA in 2011, Max’s parents jumped at the chance. Marc Ashton, Max’s father, said of the decision:

A blind student in Arizona gets about $21,000 dollars per year to educate that student. We took 90 percent of that, paid for Max to get the best education in Arizona—the best education in Arizona—plus all his Braille, all his technology, and then there was still money left over—still money left over—to put toward his college [tuition]. And so he is going to be able to go on to Loyola Marymount University…and do extremely well, because we were able to save money even sending him to the best school in Arizona over what the state would normally pay for.

ESAs were also life-changing for Kasey Locke, a six-year-old diagnosed with autism who was not best-served by the local public school:

Rebecca Locke was frustrated with her daughter Kasey’s academic progress. Six-year-old Kasey is autistic, and when she started kindergarten at the local public school, her parents worked with school officials to incorporate a new learning method, applied behavioral analysis (ABA), into Kasey’s school work. “We were looking for different modes of treatment for her and came upon applied behavioral analysis, and that’s the only treatment that’s been empirically shown to cause improvement.”

But her parents were frustrated because Kasey’s school couldn’t incorporate ABA methods into her full school day. It really wasn’t the school’s focus to use this type of treatment.  “We did look into private schooling, but there was no way we could financially reach that.”

Then, when Arizona passed educational savings accounts into law, “it was almost too good to be true” for the Lockes. With an education savings account, Kasey’s portion of state education funding would be deposited into an account her parents could use for any educational services.

The education savings account has been life-changing for Kasey, who now attends Chrysalis Academy, a private school that incorporates ABA tools.  Recently, Kasey visited her speech therapist, who was “amazed” with Kasey’s progress. Her parents say the education savings account has been “a huge success for us.”

The experiences of Jordan, Gregory, Max, and Kasey must be replicated for all Pennsylvania families seeking the same type of educational opportunity. Everyone deserves access to this life-changing program.

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Take the Budget off Autopilot

APRIL 18, 2016  | by BOB DICK

As Pennsylvania inches closer to another budget battle, you’re likely to hear the term “structural deficit” used more often.

The term is defined as a multi-year shortfall between projected spending and revenue figures. Projected is emphasized because neither the spending or revenue figures are set in stone. They are estimates from the Independent Fiscal Office (IFO) that assume lawmakers make no changes to state programs.

The IFO estimates assume state government will carry over all spending from the prior year. They also include new costs associated with inflation, public employee compensation, and an increase in the service population.

Essentially, the IFO produces estimates for a budget running on autopilot. No extensive review of programs exists on an annual basis. How can working Pennsylvanians be expected to pay higher taxes when state budgeting permits spending to grow largely unchecked?

Moreover, tax increases could prove counterproductive. They may exacerbate Pennsylvania’s already high tax burden, thereby hindering job growth and driving more residents out of the state.

Fewer taxpayers depress revenue collections, making it harder for lawmakers to balance the state’s booksespecially if spending programs are left unreformed. Just ask residents of New Jersey, who are now facing a budget deficit simply because one wealthy individual moved out.

To avoid this nightmare scenario, a rigorous review of the nearly $76 billion state budget is needed. CF has already identified a list cost-savings measures which would redesign government to help keep state and local budgets in balance

Government must utilize every dollar it has before taking more from taxpayers. Anything less would be a disservice to the people who work hard everyday to make sure their own budgets are balanced.

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Give Children the Best: Education Savings Accounts

APRIL 14, 2016  | by JAMES PAUL

Education Savings Accounts (ESAs) empower parents to design the best educational experience for their children.

How do they work? Funding otherwise earmarked for K-12 education is deposited into an account controlled by parents and supervised by the state. These funds may be spent on a variety of educational services, including private school tuition, tutoring, online programs, transportation, textbooks, standardized test fees, and therapy for students with disabilities.

ESAs are changing lives for students in need. Consider the story of 4-year-old Elias from Arizona, the first of five states to enact this innovative program.  

When Elias turned 4 months old, his mom, Holland, knew something was wrong. Holland explained he needed to be held constantly, and while most babies do not sleep through the night, Elias’s discomfort was troubling.

After months of research and doctor visits, Holland discovered that Elias had symptoms on the autism spectrum. He would need 20-40 hours per week of individual therapies to help him function each day.

When he was old enough to attend school in Arizona, Holland said that Elias’s educational needs were diverse. Along with autism, he had hyperlexia, a precocious reading ability.

In 2011, Holland and Elias applied for an education savings account. Arizona was the first state to adopt the accounts, and the state deposits public funds in a bank account that Holland used to pay for Elias’s education needs. The accounts allowed Holland to pay for education therapies, school textbooks, and private school tuition.

The accounts’ flexibility has helped Holland find a host of quality services for Elias. Holland said that Elias had an adapted schedule that allowed him to attend school half-time to work on academics, social interaction, and classroom etiquette. The other half of his school week was spent attending speech, occupational, physical, and music therapies that his doctor prescribed.

Unlike vouchers or tax credit scholarships, which can be used only for private school tuition, ESA funds can be spent on multiple educational services. With an ESA, parents are no longer limited by the selection of nearby brick-and-mortar schools. Instead, parents have the freedom to customize the best learning environment for their child.

School choice is popular in the commonwealth, with upwards of 120,000 charter students and 45,000 tax credit scholarship recipients. But demand exceeds supply for affordable, high-quality educational options. Thousands of Pennsylvania students are stranded on waitlists for charter schools. Tax credit scholarships are limited by the caps on business donations. ESAs are the next step Pennsylvania students and families deserve.

Read more about ESAs in CF’s most recent policy brief.

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Historic Victory for Transparency


Gov. Tom Wolf just signed Senate Bill 644, empowering the Independent Fiscal Office to estimate the cost of government union contracts before they are finalized.

Matthew Brouillette, president and CEO of CF responded:

For years, the government has negotiated billions of dollars in contracts with public sector unions, many of which donate heavily to the very politicians they’re negotiating with. As a result of this legislation, costs negotiated in secret will come to light before, not after, contracts are ratified. We commend Sen. Folmer and members of the state Legislature for championing this critical reform.

Gov. Wolf has been a vocal advocate for transparency reform. He should be applauded for walking the transparency talk and putting people before public union interests. 

Brouillette continued,

We hope the governor applies this accountability measure to contracts he is currently negotiating, even if they are resolved before the law goes into effect in 60 days. Such action would resonate by providing greater transparency to all Pennsylvanians.

The contracts under negotiation could add significant costs to the 2016-17 budget, putting more pressure on state lawmakers to raise taxes.

Meanwhile, there are two more contract transparency reforms making their way through the legislature.

  • SB 645, sponsored by Sen. Patrick Stefano, requires public sector collective bargaining agreements to be posted on state, school district, or local government websites two weeks prior to signing.
  • SB 643, sponsored by Sen. Ryan Aument, requires public notice and open meetings when public sector collective bargaining agreements are negotiated.

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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.