Audio: Smarter Spending, not More Spending, Key for State Budget

MARCH 4, 2015  | by JONATHAN REGINELLA

Education proved to be the centerpiece of Gov. Wolf’s budget address, but his facts on school funding get a failing grade.

This morning, Nate Benefield, CF’s Vice President of Policy Analysis, gave radio host Gary Sutton the real facts about Pennsylvania’s school spending, saying that Gov. Wolf’s plan to simply throw more money at schools will not mend a broken system.

Nate adds that overwhelming Pennsylvania families with more taxes, when they already pay one of the highest tax rates in the country, is not a sensible solution. Gov. Wolf’s budget would afflict an additional $1,419 on the average family of four per year—not exactly the “fresh start” he promised.

Gov. Wolf’s plan to increase the sales tax rate and expand what is taxable (including diapers, daycare service, funerals, doctor visits, etc.) would ensure Pennsylvanians are taxed from “the cradle to the grave.”

Listen below for more of Nate’s analysis of Governor Wolf’s budget address:

The Gary Sutton Show airs daily on WSBA 910AM in the York area.

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Gov. Wolf Authorizes New Union Money-Grab

MARCH 2, 2015  | by NATHAN BENEFIELD, ELIZABETH STELLE

Pennsylvania's Government Unions

On Friday, Gov. Tom Wolf issued an executive order that effectively helps SEIU (Service Employees International Union) unionize home health care workers. Many of these workers are simply taking care of a family member or loved one, and have no connection to government employment.

This stealth unionization effort:

  • Allows SEIU or another union to organize Direct Care Workers.
  • Allows SEIU or another union to become the exclusive representative (monopoly) of home health care workers as the "Direct Care Worker Representative"
    • This election could be held with only 10 percent of home care workers signing up, far lower than the 30 percent threshold in the current labor law.
    • Moreover, the election of this exclusive representative would be conducted by the American Arbitration Association, not the Pennsylvania Labor Relations Board which is the standard in all other cases.
  • Allows the Secretary of Human Services to negotiate with the "Direct Care Worker Representative" over compensation, procedures and voluntary payroll deductions.
  • The state would provide a list of all Direct Care Workers with their names and home addresses to help SEIU organize.

This executive order mirrors one attempted by Gov. Rendell in 2010. It was challenged in court by a coalition including the Pennsylvania Homecare Association and R.E.A.L. Home and Community-Based Services. After the Commonwealth Court issued an injunction, Gov. Rendell rescinded the order.

At the time, several care providers spoke out against the unilateral action:

"The Executive Order causes this one-on-one relationship to drastically change because a third party – a union – is being forced into it. This prevents me and other people with disabilities from fully taking control of our own lives"—Keith Williams, Community Organizer for the Northeast Pennsylvania Center for Independent Living (NEPA CIL) in Scranton

"We are very concerned that the names and addresses of consumer employers and their homecare attendants will be provided by the Commonwealth to unions for the purpose of recruiting membership."—William Kepner, Vice-President of the Pennsylvania Providers Coalition Association.

Similar efforts to quietly unionize home health care workers took place in Michigan and Illinois.

In Michigan, Robert and Patricia Haynes care for their adult children—Melissa, 34, and Kevin, 30—who suffer from hypertonic cerebral palsy. The Haynes family noticed some of the Medicaid dollars for their kids' care was being diverted to the coffers of the Service Employee International Union. The Haynes claimed they never voted to join a union. In fact, 80 percent of Michigan home health care workers did not vote in the election for union representation.

Over in Illinois, Pam Harris was disturbed by efforts to divert dollars from her son's care. Joshua has a rare genetic syndrome that causes severe intellectual and developmental disabilities. One Sunday morning in 2009 union representatives showed up unannounced at her home and asked her to join the SEIU. She declined, she wanted her checks to support Joshua’s care, not the union’s agenda.

Like the Haynes family and Pam Harris, many Pennsylvania families could soon see tax dollars skimmed from their needy family members to fund political candidates and election activity. Last election cycle, SEIU gave Tom Wolf nearly $1 million.


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Spending More, or Spending More Wisely?

MARCH 2, 2015  | by JAMES PAUL

When you purchase a good or service—be it a cheeseburger, a pair of shoes, or a car wash—how do you evaluate its quality? Do you consider the outputs—whether the service lived up to its billing and satisfied your demand—or do you focus solely on inputs—how much money was spent to create the good?

In the realm of public education, inputs are king while outputs are largely ignored. Education advocates typically focus solely on dollars spent instead of academic progress. Accordingly, it’s no surprise that education spending continues to steadily increase while achievement stagnates.

Can you think of any other industry or enterprise that is judged on inputs, instead of results?

This singular emphasis on inputs is exemplified in a proposal from the Campaign for Fair Education Funding, which seeks an additional $3.6 billion in state education spending over the next eight years. Given the Commonwealth’s financial outlook, this proposal should be a non-starter.

A massive spending increase is not a means to improve educational quality; it is a means to boost educational inputs. Higher-quality schools require a different approach—one that expands choice, protects and rewards the best teachers, and empowers local school leaders.

The Campaign for Fair Education Funding—comprising a few dozen union, business, and issue advocacy groups—seeks to influence Pennsylvania’s Basic Education Funding Commission, a body of lawmakers and state officials that will offer recommendations to the General Assembly in the next few months.

The purpose of the Funding Commission is to develop a more rational, equitable method to distribute current funding levels. It is not tasked with recommending higher funding levels—let alone a 63 percent increase in the Basic Education subsidy.

Commission member Rep. Donna Oberlander said as much last August:

This Commission’s charge is not to study so called adequate levels of basic education funding. The responsibility of determining a funding level belongs to the General Assembly and is based each year on overall state revenues. This Commission cannot tie the General Assembly to funding targets.

The Campaign for Fair Education Funding did embrace elements of weighted student funding (WSF), which, in a vaccuum, is a good thing. The Commonwealth Foundation has long advocated for WSF as a solution to Pennsylvania’s outdated education funding system—but WSF should be implemented in a revenue-neutral fashion. Instead of a $3.6 billion tax increase, pure WSF distributes current funding levels more equitably and transparently.

Above all else, WSF ensures that state dollars truly follow each student. Currently, if a Pennsylvania student moves from one district to another, state funding does not follow the child to her new school. This must change, if Pennsylvania is to begin to funding students instead of systems. 


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Fair Share? How Pennsylvania Gas Taxes Compare

MARCH 2, 2015  | by ELIZABETH STELLE

Pennsylvania is the only top natural gas producing state that doesn't tax drilling. Sound familiar? It's a favorite argument of tax proponents, but it misses the big picture. Pennsylvania taxes the natural gas industry many ways that don’t exist in other drilling states. For example, there is no corporate income tax or personal income tax in Texas or Wyoming, and the corporate income tax in West Virginia is 6.5%, compared to Pennsylvania’s 9.99% rate.

The chart below demonstrates that Pennsylvania's economy is far less inviting to natural gas development, even absent a severance tax.

Top Natural Gas Producing States 2013

States

Severance Tax on Natural Gas

Exemptions and Incentives for Unconventional Wells

Top Corporate Net Income Tax Rate

State and Local Tax Burden (as a percentage of State income/national rank)

1

Texas

7.5% of market value

Rate reduction appr. 2% for up to 10 years

none

7.5% / 47

2

Pennsylvania

2.1% *

 

9.99%

10.3% / 10

3

Louisiana

$0.03-0.13 per MCF

Severance tax suspension on horizontally drilled well for 2 years or until payback

8%

7.6% / 46

4

Oklahoma

7% plus 0.095% excise tax

Exempt from severance tax for 4 years or until gas production pays for the cost of the well

6%

8.5% / 39

5

Wyoming

6% of taxable value

Gas transportation costs subtracted from the taxable value

none

6.9% / 50

6

Colorado

2% - 5% based on gross income

Allows producers to deduct 87.5% of their property taxes paid to gov. from severance tax to state

4.63%

9% / 32

7

New Mexico

3.75%

 

7.3%

8.6% / 37

8

Arkansas

5%

1.5% on new discovery wells for 24 months and on high cost wells for 36 months (can get extension)

6.5%

10.3% / 12

9

West Virginia

5% + $0.047 per MCF

 

6.5%

9.7% / 19

10

Utah

3% - 5%

6 months exemption for development wells

5%

9.4% / 28

11

Alaska

25% - 50% net value

Reduction for all drilling in Cook Inlet basin and when gas in used in state; Limited tax credits for exploration

9.4%

7% / 49

12

Kansas

8% on gross value severed from earth

3.67% tax credit for ad valorem taxes paid, effectively reducing the severance tax to 4.33%

7%

9.4% / 26

13

California

<0.01 per MCF

 

8.84%

11.4% / 4

*Pennsylvania levies an impact fee (akin to a tax) based chiefly on the number of natural gas horizontal wells.
Sources: Energy Information Administration, Independent Fiscal Office, Tax Foundation


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A Toast to the House, but Challenges Lie Ahead

FEBRUARY 27, 2015  | by DAWN TOGUCHI

On Thursday, the Pennsylvania House of Representatives passed liquor privatization legislation sponsored by Speaker of the House Mike Turzai. You can see how your legislator voted in this interactive graphic from PennLive.com.

Back in 2013, the House passed the first liquor privatization bill since the end of Prohibition more than 80 years ago. With yesterday's vote, the House has recommitted to expanding choice and convenience for consumers by getting government out of the booze business.

We applaud the House for acting in the best interests of taxpayers and consumers and again recognizing that the vast majority of Pennsylvanians—no matter their political leanings—want government out of the liquor business.

Even with this victory, the liquor privatization debate is only just heating up. As talks continue, it's critical that these principles of liquor privatization undergird any changes to the legislation:

  • Government should permanently and unequivocally get out of the business of selling alcohol and end the system in which state-run liquor stores, with all their advantages and taxpayer subsidies, compete against private mom & pop businesses.
  • Only full privatization ends the conflict of interest inherent in having the Pennsylvania Liquor Control Board both regulate and promote wine and liquor sales with tax dollars. Modernization would allow the PLCB to continue to produce government-brand wine and fiascos such as the failed wine kiosk program, undermining Pennsylvania wineries, consumers, and taxpayers alike.
  • Modernization or other measures that maintain the current state store system fail to move Pennsylvania into the 21st century and deliver the choice and convenience Pennsylvanians want.  Modernization is like offering consumers a "touch-tone" phone—it's better than a rotary phone, but is a far cry from the smart phones consumers really want in 2015.
  • To promote competition, lower prices, selection and convenience, lawmakers should allow the market to decide the number of outlets that can sell wine and spirits.  At the least, the number of licenses should be set to the national average of retail outlets based on population, to keep Pennsylvania competitive with the rest of the nation.
  • While beer distributors cannot expect to retain their protected oligopoly, proposals should treat them fairly in consideration of how much time and money they have invested in their business, including minimizing the cost of upgraded licenses and guaranteeing loan financing for new licenses.

Get a printable handout of these principles here.

Opponents of consumer choice will continue to employ the same scare tactics about privatization, but their arguments ring hollow (brush up on your facts and responses here). At the end of the day, government booze doesn't make us safer or economically stronger.

It's time to end Pennsylvania's Prohibition era once and for all.


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A School for the City, Not a Fortress from the City

FEBRUARY 26, 2015  | by ELIZABETH STELLE, JAMES PAUL

The plan was for Hudson to attend public school in Philadelphia—at least for one year. But after Andy, Hudson’s father, visited their neighborhood school, Horatio Hackett, he wanted something different for his soon-to-be kindergartner. Could classical school be a better fit for Hudson? 

At first, a private classical education didn’t seem like the most practical option for a 5 year-old. As far as Andy knew, classical education entailed speaking Latin. Sure, he was intrigued by Philadelphia Classical School (PCS)—a small, private school on the corner of 11th and Vine Street in Philadelphia’s Callowhill neighborhood. Andy heard good things about PCS, but would his family be able afford private school tuition?

Andy considered charter schools but found the enrollment process intimidating. Plus, he was concerned that Philadelphia’s School Reform Commission might crack down on charters in the coming years.

Thanks to the Opportunity Scholarship Tax Credit (OSTC), Andy and his wife learned they could enroll Hudson in PCS.

Reserved for students in Pennsylvania's lowest-performing public schools, the OSTC provides hope in largely hopeless situations. The program has helped thousands of students escape failing schools. Both the OSTC and the Educational Improvement Tax Credit (EITC) allow businesses to contribute to private scholarships in exchange for tax credits, so students like Hudson can receive high quality education.

More than halfway through his first year at PCS, Hudson excels in the classroom. His favorite subject is “handwriting,” he’s becoming proficient at reading, and he regularly impresses his father with knowledge of history.

“How does a kindergartner know about Mesopotamia?” Andy asks incredulously. He’s also blown away that Hudson can recite all 44 U.S. presidents in chronological order.

Hudson blogPCS opened in the fall of 2013. It’s a small school—serving 38 students from 29 families—but plans to expand, according to Ross Hatton, Head of School, and Katharine Savage, founder, at PCS. While the school’s mission is Christ-centered, not all families share the same religious background. Some are non-religious, others are Mormon or follow orthodox traditions. Many students are second-generation immigrants, and the PCS student body speaks six different languages at home.

The full cost of PCS tuition is $12,145, though most students pay significantly less. In fact, 40 percent of seats are reserved for low-income students, and the average cost for each family is $4,500. PCS provided over $250,000 in financial aid during the current school year, including nearly $30,000 through Pennsylvania’s EITC and OSTC programs.

PCS worked with Hudson’s family to find a suitable tuition arrangement. Hudson received an Opportunity Scholarship to cover 75 percent of the cost—and a private donor pitched in to pay the remaining balance.

Just as no parent is turned away for inability to pay, no prospective student is turned away for lack of academic ability. The current kindergarten class has a wide range of skills—some students could read before the first day of school, while others came to PCS without basic understanding of the alphabet. 

PCS is not “skimming” from public schools; its mission is to be part of a revitalization of education in Philadelphia. Indeed the school is breaking down economic and social barriers to build a stronger community.

PCS regularly organizes family events, such as pot-luck dinners and ice skating. Parents even launched a Google Hangout Group where families can ask questions and discuss issues unrelated to school. Where’s the best place to buy children’s pants that won’t rip at the knees? Can anyone recommend a babysitter? These are all questions that families discuss online.

For Andy, “it was very important that PCS be a school for the city, not a fortress from the city.” He urges other parents to “be part of the solution” to public education and community involvement, “but don’t sacrifice your own kids to that solution.”

Jess Scott, mother of PCS second grader Maggie, shared Andy’s concerns about walling herself off from traditional public schools but wouldn't "sacrifice her kids to an ideology." According to Jess, “PCS saved our family” and is a “gift to our kids.” The Scotts live in University Place, but cannot afford typical private school tuition. Jess had to go back to work just to afford PCS’s discounted rate.

Maggie PCS

It’s obvious that families truly care for one another at PCS. There is no better example than one family who anonymously paid for another student’s school uniform. “I wanted to make Saniyah feel supported and encouraged,” the mom explained. The family purchased Saniyah’s uniforms for the current year and then made a pledge to continue this practice for the rest of Saniyah's career at PCS. Recently the family moved to New York, but they intend to keep their promise to Saniyah. “We’re always looking for ways to serve and this was something we could do. We made a commitment.”

Thanks to Hatton and Savage's vision, as well as the EITC and OSTC programs, PCS occupies a unique space in Philadelphia: A classical school that strengthens communities, brings families together, and offers hope for a brighter future.


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Talk of Severance Tax Reduces Drilling

FEBRUARY 26, 2015  | by GORDON TOMB

Pitfalls of Natural Gas Tax

What a shock! A gas exploration company says it is reevaluating plans to drill for natural gas in Southwestern Pennsylvania because of Gov. Wolf’s proposed severance tax, reports TribLive.

Paul Burke, vice president and general counsel of Huntley & Huntley Energy Exploration, is quoted by the website: “We have to invest serious capital in our business. We want to see what’s going on in this commonwealth before we invest.”

Indeed.

The company made its concerns known in a letter to Harmar Township, saying it was withdrawing a subsurface lease offer for approximately 90 acres of township-owned land. The company had proposed a payment of $3,500 an acre, plus a 15 percent royalty.

Harmar township's supervisor, Bob Exler, expressed his disappointment: “It’s big money for a small township. It was something I thought would be a windfall for us, and I’m sad they canceled.”

We can only guess at the loss of jobs, taxes and associated business, not to mention the other drillers who may be reversing plans without publicly saying so.

Meanwhile, numerous companies across the state have announced reductions in investment and employment because of excess supply and resulting decreases in energy prices. Among them are Chevron Corp., Range Resources, Antero Resources, Rex Energy, PennEnergy Resources, Cabot Oil & Gas Corp. and Universal Well Services. Tax uncertainty could even jeapodize the building of a Shell petrochemical plant in Beaver County.

While the cutbacks are considered by many to be temporary, they belie statements of proponents for additional taxes on the industry that insist companies won't leave Pennsylvania's rich natural gas desposits.

The current business climate for the industry underscores that energy companies have risks as well as rewards to consider. Just as other businesses, they should not be treated as money trees to be picked by politicians with budget gaps to fill.


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Culture, Not Government, Drives Alcohol Use

FEBRUARY 25, 2015  | by BOB DICK

Practically three-quarters of Pennsylvania’s twelfth graders tried alcohol at least once in their lifetimes, according to a Pennsylvania Liquor Control Board (PLCB) report. This eye-opening statistic confirms the obvious: government control of liquor does not minimize underage drinking.

As a matter of fact, alcohol use among Pennsylvania students in the eighth, tenth, and twelfth grades ranks above the national average. These facts run counter to the narrative of liquor privatization opponents who tout government control as the solution to mitigate social problems, such as underage drinking and binge drinking.

According to the report, the rate of twelfth graders who admitted to binge drinking (defined as consuming five or more drinks in a row in the last two weeks) was slightly below the national average, but the percentage of Pennsylvania college students who admitted to binge drinking was above the national average.

If we're to believe that government control can prevent these social problems, shouldn’t the rate of binge drinking be well below the national average for both twelfth graders and college students? After all, Pennsylvania has one of the most tightly regulated liquor systems in the country, with government operating both the retail and wholesale side of liquor sales.

The answer, of course, is no. As Dr. Raymond Scalettar, the former chair of the American Medical Association pointed out, “Alcohol consumption habits tend to be culturally driven and macro-level control policies have little to do with drinking patterns." Dr. Scalettar’s claim is consistent with the findings in the PLCB report:

Youth who drink underage report they are most likely to get their alcohol for free (93.4 percent), with 44.8 percent reporting they got alcohol from family members or their home. And when they drink, they are consuming “more than 90 percent of their alcohol by binge drinking."

Government's inability to prevent social problems is just one more reason to privatize Pennsylvania’s dysfunctional liquor system.


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PA Union Campaign Contributions Exceed $10 Million

FEBRUARY 25, 2015  | by NATHAN BENEFIELD

Pennsylvania government unions gave more than $10.5 million to candidates last election cycle. We updated our analysis of union political spending using the latest reports filed with the PA Department of State.

Total Pennsylvania Government Union PAC Spending for 2014 Election Cycle
Union 2013 2014 Total
Pennsylvania State Education Association (PSEA-PACE) $469,654 $2,711,333 $3,180,987
Philadelphia Federation of Teachers (PFT) $115,309 $288,676 $403,985
American Federation of State, County and Municipal Employees (AFSCME) Council 13 $541,093 $686,040 $1,227,133
AFSCME People $401,736 $1,123,506 $1,525,242
PA Service Employees International Union (SEIU)* $267,264 $2,144,011 $2,411,275
United Food and Commercial Workers (UFCW) 1776 $187,986 $206,944 $394,930
PA American Federation of Labor and Congress of Industrial Organizations (AFL-CIO) $60,347 $93,715 $154,062
American Federation of Teachers Pennsylvania (AFT-PA) $8,500 $33,300 $41,800
American Federation of Teachers (Washington, DC - National) $0 $1,057,315 $1,057,315
Pittsburgh Federation of Teachers (PFT Pol Action Fund) $15,187 $56,438 $71,625
Total $2,067,075 $8,401,278 $10,468,353
*Includes political expenditures from PSSU Local SEIU 668 COPE Fund
Source: https://www.campaignfinanceonline.state.pa.us

Most of these campaign contributions were collected not by unions but with the help of you the taxpayer. State and local governments, along with school districts, deduct campaign contributions from the paychecks of employees, bundle it, and send the money onto union leaders.

Of course, this $10.5 million in direct campaign contributions is only the tip of the iceberg. Unions spend millions more each year on political activity from workers' dues—including contributions to SuperPACs, which run "independent" campaign ads supporting or attacking candidates.

Legislation ending the taxpayer collection of union political monies—known as paycheck protection or "Mary's Law"—is currently advancing through the state Senate.


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Setting the Record Straight on Liquor Privatization

FEBRUARY 24, 2015  | by BOB DICK

Liquor Privatization Bootleggers

It’s back! Liquor privatization is once again up for debate and has already cleared its first hurdle, as lawmakers voted yesterday to advance the bill out of a House committee. But not everyone is pleased.

Liquor privatization detractors have reemerged, and they are pushing the same stale arguments against liquor liberty that have been debunked many times over.

Because more misleading attacks are inevitable, we thought it would be helpful to provide some links to our research as a refresher in the fight to free our booze:

Will privatizing liquor sales diminish revenue to state government?

Do government liquor systems provide more safety?

Has the PLCB served Pennsylvanians well?

Is privatizing the PLCB ideological?

Where else has privatization worked?


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