The Voluntary Deductions Facade

OCTOBER 29, 2015  | by BOB DICK

Paycheck protection detractors defend using taxpayer resources for partisan politics by insisting union members can voluntarily deduct political donations from their paychecks, but this excuse misses the point.

Taxpayers aren't offered a choice. They're forced to play a role in the political campaigns of government unions.

The purpose of paycheck protection is not to make all payroll deductions voluntary but to remove taxpayers from serving as the unions’ personal collection agency for political cash. Far from being voluntary, taxpayers are compelled to subsidize the political agenda of government unions.

But even if we ignore the forced association mandated by automatic dues and PAC deductions, there is still a problem with defending the practice as voluntary for union members. 

As my colleague Nate pointed out last month, many members don't know their union dues fund political activities. So if a state employee authorizes a payroll deduction for the full amount of union dues, it's possible they’re unknowingly sending their money to political causes they find distasteful.

John Cress, a teacher in Lawrence County, was just one of many who didn't know his union dues were being used for political activities

But what I didn't know was that the union would withold dues money out of my paycheck every month, like taxes, and spend it on political ads and causes that turn my stomach.

I'd always been told that union dues can't be used for politics—and I believed it.

If lawmakers were to pass paycheck protection legislation currently pending in the House, it would require unions to ask their members for a political donation, which is a much more transparent process than the one members operate under now. 

By adopting paycheck protection, teachers like John would no longer be left in the dark about their union's political spending habits, and taxpayers wouldn't be forced to subsidize the stealthy political operations of government unions.

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Holding All Schools Hostage


Fell Charter Elementary School near Scranton will stop paying teachers next month and the school is considering a four-day week thanks to the state budget stalemate.

Fell's announcement is just the latest reminder of Governor Wolf's strategy to leverage schools for tax hikes. First the governor withheld EITC and OSTC scholarship funds, which allow thousands of Pennsylvania kids to escape failing schools—even though these scholarships are part of the tax code which is still in effect.

Next, a handful of district schools stopped sending tuition payments to charter schools, which serve more than 100,000 kids in Pennsylvania. When the state began to pay charters by redirecting gaming revenue, districts vehmently protested, leading the Treasury to stop payments at the request of Senate Democrats.

It's not just students at charter schools that are pawns in Gov. Wolf's political game. District schools desperate for funding were told they could not seek loans from the state Treasury. This is in spite of the comparisons they made to a loan floated to House Democrats from the Treasury.

In short, all types of schools and students across the commonwealth are held hostage.

Yesterday, Auditor General Eugene DePasquale announced at least 27 school districts and two intermediate units are now borrowing money to stay open. That puts total borrowing at $431 million, plus an estimated $14 million in interest costs. DePasquale expects the number of borrowing districts to jump to 54 by Thanksgiving

Hours later, the state Senate tried once again to provide relief to schools by attempting a veto override of a stop-gap budget that would release four months of funding to schools and social service agencies. The move fell short by 3 votes.

As rumors of a new deal circulate one thing should be clear: No one wins by holding schools hostage for historic tax increases.

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Obamacare Premiums Rise, Again


Mark your calendars (for disappointment)! On November 1 will launch its third open enrollment season. Here in Pennsylvania, premiums for the second highest silver plan will climb, on average, by 11 percent. Nationally, premiums for these plans are rising an average of 7.5 percent.

The Department of Insurance recently announced roughly one-third of the companies offering individual plans were granted double-digit premium increases. Insurance Commissioner Miller noted the approved rates will save Pennsylvania consumers nearly $81 million compared to proposed rates in June. Pennsylvania insurers initially proposed premium hikes of more than 25 percent.

In other words, don't complain about your premiums rising because it could have been a lot worse. But premium hikes are just one part of the cost of health care.

Limits on premiums have led insurance companies to raise costs in other ways, such as higher deductibles and limiting or ending out-of-network coverage. In fact, consumers shopping on the exchange website still won't be able to see which doctors are "in-network." It's no wonder the federal government is predicting small gains in enrollment for 2016.

PA Exchange Rate Increases of 10 Percent or Greater

Company Name Market Exchange/SHOP % Requested % Approved​
First Priority Life Insurance Company   Individual On/Off 29.50% 21.5%
Geisinger Health Plan Individual On/Off 40.60% ​20.0%
Geisinger Quality Options Individual On/Off 58.40% ​20.0%
Highmark Individual On/Off 25.50% ​20.1%
Highmark Small Group   On/Off 15.50% ​9.9%
Highmark Benefits Group Small Group Off 13.50% ​9.9%
HM Health Insurance Company Individual On/Off 35.90% ​26.2%
Keystone Health Plan West Individual Off 36.60% ​26.7%

Many Pennsylvanians, and many Americans, are paying more for individual health insurance since the passage of the Affordable Care Act. The top-down approach to health care just isn't working. If quality and affordable health care is the goal, patients and consumers need more control.  

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Justice for All

OCTOBER 28, 2015  | by BOB DICK

Sarina Rose counted on the justice system to punish the person who harassed her during a labor dispute. The system let her down. The Philadelphia Inquirer covered her ordeal last year:

When Rose spotted Sweeney on March 14 at the nearby Jany's Restaurant, she was not surprised to see him. But as she told Hayden during a nonjury trial in November, the union leader's actions that day left her unnerved.

As she headed toward the restroom, Sweeney cursed at her, loudly and repeatedly, calling her a scab and worse, she said. When a security guard attempted to intervene, Sweeney backed her against a counter and was soon joined by union colleagues.

"We were stuck in this tight restaurant, and they were yelling and surrounding us," she recalled Wednesday. "It was definitely a bad situation."

Rose escaped. But when she left her company's work site later that morning, she noticed Sweeney in her car mirror. His hand shaped like a gun, he pointed it at her and mouthed, "Bang, bang, bang," she said.

Seeking justice, Rose pressed charges against Edward Sweeney, a longtime Ironworkers official. Little did she know a loophole in Pennsylvania Crimes Code would deny her the justice she sought. The judge dismissed the case specifically citing an exemption for harassment during a labor dispute.

Remarkably, anyone in a labor dispute can stalk, harass, or even threaten to use weapons of mass destruction against another person without punishment. But the absurdity of this injustice may finally be coming to an end.

Yesterday, lawmakers voted 107-91 to end the indefensible exemption and protect both workers and management from belligerent behavior.

The bill now heads to Gov. Wolf’s desk, giving him a golden opportunity to ensure Pennsylvania is a place where bullying and thuggery aren't tolerated by anyone against anyone.

Union and non-union workers alike deserve to know they will be protected under the law should someone seek to harm them.

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A Revolving Door of Corruption

OCTOBER 26, 2015  | by JAMES PAUL

The revolving door of politics—when top government officials change careers and become consultants for the industry they once regulated—is alive and well in Pennsylvania. Except in the case of the commonwealth’s Liquor Control Board (LCB), the revolving door involves regulators who were previously cited for improperly accepting gifts and other forms of outright corruption.

Kari Andren of the Tribune Review has the story of formerly sanctioned LCB officials now representing the wine and spirits industry before the LCB:  

From January through mid-September, the former officials — and vendors who provided the gifts — collectively visited LCB offices more than 120 times, according to visitor logs for the Northwest Office Building in Harrisburg, obtained under the state's Right to Know Law.

The logs show:

• [Matt] Schwenk, now a spirits sales representative for Palm Bay International, visited LCB officials six times, typically in the product selection division. Palm Bay imports dozens of brands of wines and spirits. Schwenk was cited by the state Ethics Commission in 2014 for taking gifts of golf outings and trips from vendors.

• Former CEO Joe Conti, who accepted golf outings, dinners and gifts from vendors, attended board meetings and met with LCB attorneys and board Chairman Tim Holden. He's a registered lobbyist who counts among his clients Majestic Wine and Spirits, which distributed all but one of the LCB's controversial in-house brands of wines and spirits, and the United Food and Commercial Workers union representing liquor store clerks.

• Former LCB Chairman Patrick “P.J.” Stapleton, who accepted rounds of golf, meals and Philadelphia Phillies tickets, has made three trips to the agency. He is a partner at the law firm Weber Gallagher in Philadelphia, where his biography notes that he has represented alcohol suppliers regarding recent changes to the state liquor code.

As Andren explains, sanctions against LCB officials are not roadblocks for these same individuals to gain lucrative employment in the alcohol industry. This lack of accountability could explain why LCB officials hindered the release of information that, according to Pennsylvania’s open record law, should be matter of public record. Why follow the law when there are no consequences?

My CF colleague Dawn Toguchi said it best: You can’t spell corruption without L-C-B. The state's monopoly over the wine and spirits industry has produced numerous scandals on top of its shoddy service and uncompetitive prices. 

Now add the revolving door of corruption to the endless list of reasons to get the government out of the alcohol business, once and for all.

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Corporate Welfare Fails Again

OCTOBER 26, 2015  | by BOB DICK

Two stories published in the past week offer perfect examples of questionable returns from economic development spending, otherwise known as corporate welfare.

In the first story, Keystone Crossroads examined the City Revitalization & Improvement Zones (CRIZ) program. The program is designed to fund development and improvement projects with state and local tax revenue generated inside the zone. State officials designate CRIZ areas, which has proved controversial among local lawmakers:

The state picked Bethlehem and Lancaster, prompting officials elsewhere to cry foul. They complained that other municipalities, like Altoona, needed the revenue injection more than places where revitalization efforts already seemed fruitful, self-catalyzing, even exemplary compared to other small cities in the Commonwealth.

The arbitrary nature of the CRIZ program isn’t its only downside. In Lancaster, the program generated well below the cost of the zone’s planned projects:

The businesses in Lancaster's CRIZ generated nearly $127,000 more in local income and services taxes last year than in 2013. State tax revenue grew by $2,870, according to the Department of Revenue.

That's far less than the $500,000 in annual repayment obligations expected to be tied to a borrowing planned by Lancaster CRIZ's authority.

Scholars at the Cato Institute and Lincoln Institute of Land Policy caution against using CRIZ-type programs (also known as tax increment financing (TIF) tools) because they are subject to political manipulation and do not contribute to overall economic growth.

The latter finding is consistent with Commonwealth Foundation research. From 2003 until 2013, Pennsylvania was a leader in corporate welfare handouts, but our job growth lagged states with less corporate welfare. Overall, 10 states with the highest total subsidies saw slower growth than states with the lowest amount of handouts.

Another example of failed corporate welfare is horse racing. Nearly 36 percent of the $700 million in state corporate welfare subsidies is dedicated to the Race Horse Development Fund, which subsidizes racetrack prizes for wealthy horse owners. Horse racing made the news last week after the governor noted the fund used to regulate racing is in shaky fiscal condition.

This raises some obvious questions. Why is the state subsidizing horse racing? And secondly, if corporate welfare is so effective why is the industry struggling to raise enough money for drug testing and other safety procedures?

Corporate welfare’s poor track record is one reason why CF has called for eliminating the nearly $700 million of special subsidies to help balance the state budget. Rather than proposing massive tax increases on the middle class, it's time to cut subsidies designed to benefit a select few.


Five Ways Gov. Wolf is Sustaining the Status Quo


Wolf Status Quo Meme

During his budget address, Gov. Tom Wolf said "It's not good enough to just say no and continue with the same old same old."

More recently, taking to social media, the governor said "We cannot continue with the status quo in Pennsylvania" while his press office put out scary rhetoric about what happens if "Republican leaders fail to take on the status quo."

Ironically, it is Wolf who is clinging to the same failed policies of the past by offering warmed-over ideas. Here are just five examples of the governor’s reluctance to embrace change:

Higher taxes on working families

For 45 years, government spending has steadily risen, increasing by an inflation-adjusted $13,800 per family of four or $3,450 more per resident.

The steady rise in spending has pushed up the tax burden on Pennsylvania families to the 10th highest in the nation, up from 25th in 1991. As Philadelphia Daily News columnist John Baer has pointed out, every governor since the 1970s has helped to increase the burden.

Wolf’s tax increase proposals—whether his initial proposal of $1,400 more per family of four, his second of $1,000 per family of four, or his third of $750 per family—would prolong the troubling trend.

Fewer jobs and slower economic growth for Pennsylvanians

As a result of the burden of government spending and taxation, Pennsylvania has lagged the rest of the nation in economic growth.

From 1970 to 2014, Pennsylvania ranked a dismal

  • 49th in job growth,
  • 45th in personal income growth, and
  • 48th in population growth.

Gov. Wolf’s tax proposals would accelerate the decline in Pennsylvania’s economy. In fact, Wolf’s original tax plan would have cost the state 40,000 private sector jobs.

A prohibition-era government-run liquor monopoly

Pennsylvania remains one of only two states with a complete government monopoly over wine and liquor sales. A majority of Pennsylvanians support letting private retailers and grocery stores sell wine and liquor, but Gov. Wolf vetoed such a plan to the delight of union executives.

Not only does the state store system deny consumers choice and convenience, its existence creates a conflict of interest in which government regulates and promotes alcohol purchases.

Moreover, the government liquor monopoly preserves a corrupt system in which bureaucrats have been indicted and convicted for taking bribes and accepting gifts (and trips to strip clubs) from vendors.

The culture of corruption at the PLCB shows precisely why Gov. Wolf was wrong to veto liquor privatization this summer. When a few bureaucrats control what products Pennsylvania residents can buy, it's no surprise vendors offer lavish gifts to earn bureaucrats’ favor.

A broken pension system fueling the property tax crisis

In July, Gov. Wolf vetoed a pension reform bill that would put new state and school employees into a plan with a defined contribution component (like a 401k). Despite some of Wolf’s rhetoric, credit rating agencies actually look favorable on moving employees to a defined-contribution plan.

Wolf has resisted any real reform to the state’s pension systems, the costs of which have led to higher property taxes and teacher layoffs.

Just this month, the pension plan for school teachers announced investment returns failed to meet projections last year.  School districts and state taxpayers will have to find even more cash to make good on retirement promises, putting the squeeze on the state and local budgets.

Political privileges at taxpayers’ expense

During the 2014 campaign, 12 government unions gave Wolf $3.4 million in direct campaign contributions and millions more in indirect support from union dues. Since taking office, Wolf has been negotiating—behind closed doors—contracts worth billions with many of those same unions.

Two reforms would create greater transparency and accountability in government unions’ political activities. The first would require the terms and costs of union contracts to be posted publicly before they go into effect. The second reform—paycheck protection—would end taxpayer collection of union political money.

But Wolf has refused to support these commonsense reform measures.

The governor is right when he says we can’t continue with the status quo. Unfortunately, he’s the one blocking the reforms Pennsylvania needs: lower taxes on working families, pension reform, liquor privatization, paycheck protection, contract transparency, and more jobs so that all Pennsylvanians can flourish. 


Lawmakers Move to Protect Posterity

OCTOBER 23, 2015  | by BOB DICK

The State House recently passed two bills designed to chip away at the commonwealth’s mountain of debt—12th highest among states as recently as 2012, and only growing since.

The first—House Bill 928—would impose annual spending limits on new Redevelopment Assistance Capital Program (RACP) projects and Public Improvement Projects (PIP). The second—House Bill 930—would lower the RACP debt ceiling by $50 million each year starting in 2018 until it reaches $2.95 billion in 2027. The ceiling is currently $3.45 billion, due to a similar reformed passed in 2013.

Restraining government’s borrowing power helps keep more money in the pockets of workers, who can spend it on their own needs rather than having it siphoned away to pay for government debt. Leaving spending decisions with the people who earn their money also benefits the economy

But not everyone is convinced. Some say the bills would hurt investment in the state (paywall):

“Make no mistake about it, House Bill 928 means a reduced RACP program,” said [House Democratic Appropriations Chair Joe] Markosek. “It means less investment in our communities. It means fewer projects and ensures that inflation will eat away at the buying power of those projects. It means less matching dollars invested by businesses, and less matching dollars invested by other private entities who want to create jobs here in Pennsylvania.”

Is a reduced RACP program necessarily a bad thing? A recent Mercatus Center study authored by Dr. Adam Millsap suggests not:

Instead of spending time and energy inventing new products or improving production processes, entrepreneurs are incentivized to expend resources pursuing government grants. Since the grant is simply a transfer of resources from one group to another—in this case from taxpayers to the winning businesses—the resources spent acquiring the grant do not create new output…

Critics of debt reduction believe government spending adds to the economy. But government has no money of its own. Only taxation, borrowing, and inflation make government spending possible, and all take resources out of the private sector, hurting job and income growth.

Moreover, reducing government debt doesn’t mean “less investment in our communities.” It means government will take less from the private sector, enabling people to invest in their own communities.

Contrary to what some say, if government doesn't do it, it doesn't mean it won't get done. 

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Wolf's Good Cop, Bad Cop Act


During 100-plus days of the state budget impasse, Gov. Wolf’s words and actions have been consistently inconsistent, leaving taxpayers and lawmakers confused. Commonwealth Foundation President and CEO Matt Brouillette noted, "One minute, Governor Wolf puts on a conciliatory face and the next he pulls out his boxing gloves," making negotiations a difficult affair.

Here are few examples of Gov. Wolf's dizzying rhetoric:

Good Cop: “It’s time for Republicans and Democrats to work together.” (Oct. 7)
Bad Cop: “I want a fight.”(Sept. 29)

Good Cop: “I think we have to be open to everything.” (Oct. 7)
Bad Cop: “I’m not open to a stopgap.” (Oct. 7)

Good Cop: “Every child must have access to a great education, and teachers must have the resources they need to deliver a great education.” (March 3)
Bad Cop: “I want to keep the pressure up.” (Sept. 29)

Good Cop: Wolf-appointed Treasurer advances House Democratic Caucus $1.9 million for payroll. (Sept. 10)
Bad Cop: Wolf administration refuses to advance school districts funds to keep doors open. (Oct. 20)

Good Cop: "We need to agree that you can’t take money away from anything and expect to get to a good outcome." (Oct. 16)
Bad Cop: Proposes highest in state history tax hikes amounting to $1,400 per family of four. (March 3)

Good Cop: “I pledged to be a different kind of governor, and I will keep that promise.” (Jan. 20)
Bad Cop:Your lack of emotion about our children’s future is exactly what is wrong with Harrisburg.” (Tweet to Majority Leader Jake Corman, Sept. 18)

Good Cop: “I’ve made concession after concession after concession.” (press conference, Oct. 16)
Bad Cop:I’m not going to cave on this. I can’t cave on this.” (Oct. 13)

Matt goes on to say, "Pennsylvanians deserve more than 100 days of ‘good cop-bad cop’ political games. They deserve more than students held hostage to tax hikes. They deserve true leadership."

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Audio: Guilty Until Proven Innocent?


In Pennsylvania, civil asset forfeiture laws allow law enforcement agents to legally seize property without convicting an individual of a crime. These laws turn justice on its head, allowing police to presume individuals are guilty until proven innocent.

CF’s Bob Dick sat down with WURD Radio's Stephanie Renée to talk about the abusive nature of civil asset forfeiture.

[Civil asset forfeiture] allows the government to come in and take the property away from someone who may be innocent, or in many cases is innocent…in order for that person to get their property back, they have to go to the government and prove their innocence.

This legalized abuse can be overwhelming for individuals and families with limited financial resources because they are forced to prove their innocence through long, expensive legal battles.

Bob recounts the story of Chris and Markela Sourovelis who had their home seized because their son had been caught with $40 worth of narcotics. The parents committed no crime, but prosecutors determined their house, “an inanimate object”, to be guilty.

Click here or listen below to hear more.

The Mid-Morning MOJO with Stephanie Renée airs Mondays through Thursdays on 900AM-WURD. 

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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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.