Note: This commentary first appeared at PublicSectorInc.org.
Observers of Pennsylvania governor’s race have been treated to a lot of adult-themed content in recent weeks. Pornographic emails sent and received by former officials in the state Attorney General’s office; an actor from ultraviolent, gross-out films who also appeared in a campaign ad; racy job postings that made it from Craigslist to a state website—these are the stories Pennsylvania voters are reading about.
Unfortunately, this prurient focus is distracting from a discussion of real policy differences between the candidates, particularly in areas of pension reform, education, and taxes.
One of the biggest issues facing the next governor will be Pennsylvania’s pension crisis. Between its plans for state employees and for public school employees, the commonwealth has more than $50 billion in unfunded liabilities. In the last few years, rating agencies have downgraded Pennsylvania’s bond rating five times, in each instance citing state pensions as a cause.
Pension costs are the number one reason school property taxes are rising, and why many school districts are laying off teachers and other staff despite record high revenues. Over the next five years, we estimate school district pension contributions will rise by $550 per homeowner. Contributions to the plan for state workers mirrors that, as pension costs will consume a growing share of the state budget, crowding out spending for transportation, education, or human services.
Gov. Tom Corbett, a Republican, proposed moving all new state and school employees into a 401k-style defined contribution plan, and has recently backed a hybrid-plan that combines aspects of the current system and 401(k)s. In contrast, Democratic nominee Tom Wolf has stated that there is “no crisis,” only “a problem,” and retaining the traditional defined benefit pension is necessary to attract workers.
Tied to pension costs, education funding is one of the top issues on voters’ minds, as recent polls show. The rhetoric that Gov. Corbett “cut $1 billion” from public schools, claimed by both Wolf and by teacher union executives, has dominated the airwaves.
In reality, Corbett’s first budget saw the loss of federal stimulus money, which, despite an increase in state tax dollars for education, meant school districts received less in total revenue. In the years since, state funding for public schools has reached an all-time high,yet the rhetoric remains. Indeed, as a Commonwealth Foundation survey revealed, voters grossly underestimate how much Pennsylvania spends on education.
Wolf has focused much of his campaign on education spending, promising to “restore the $1 billion cut”, while also proposing to increase the state share of school funding to 50 percent. Currently, 35 percent of school revenue comes from the state, though the total per-student amount matches the national average. We have estimated that Wolf’s education spending initiatives would cost state taxpayers an additional $4.6 billion annually.
In contrast, Gov. Corbett has largely defended his education record, citing figures showing state aid to school districts is at a record high. He has touted reforms passed during his term, including a new school evaluation system and an expansion of Pennsylvania’sscholarship tax credit school choice program.
Of course, the spending debate leads to another issue on which the two candidates have shown wide disagreement—taxes. Pennsylvania currently has the 10th highest state and local tax burden, according to the Tax Foundation.
Gov. Corbett has stated he would not sign a “no tax” pledge, as he did prior to his first term. He has, however, remained committed to not increasing either the state income tax or state sales tax.
Wolf has outlined plans to introduce a new tax on natural gas extraction (this would replace an “impact fee” signed by Gov. Corbett) as well as a significant state income tax increase. His proposal would include a “universal deduction” to make the tax more progressive—though many experts think such a proposal would violate the state constitutional provision that all taxes be uniform.
Our analysis of this proposal, combined with Wolf’s spending proposal, would require a 180 percent increase in the tax rate (on income above the exemption threshold).
Public Sector Unions
The elephant in the room in the governor’s race has been public sector union leaders. Government unions have spent enormous resources advocating for the status quo on pensions and to increase taxes and education spending.
The Philadelphia Federation of Teachers, for example has run TV ads—costing more than $70,000 for just one minute during a Philadelphia Eagles’ game—and newspaper adsattacking Gov. Corbett for the aforementioned “$1 billion education cut.” Meanwhile, the state’s largest government union, the Pennsylvania State Education Association, has run an intense lobbying campaign to block any sort of pension reform.
Wolf has benefited enormously from government union influence. Since capturing his party’s nomination in May, he has received $2.6 million in direct contributions from public sector union PACs. Meanwhile he has been aided by independent ads from a “SuperPAC” calling itself PA Families First, which received $1.55 million directly from union dues.
Indeed, it is the undue political influence and partisan agenda of public sector union leaders that have many lawmakers pushing a “paycheck protection” law. Paycheck protection legislation would end taxpayer-collection of union political money, requiring union leaders to solicit campaign contributions and dues used for political causes directly from members.
While paycheck protection has not been addressed directly during any of the three gubernatorial debates, it underlies all the other issues and the direction Pennsylvania will head on Nov. 4.
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Nathan A. Benefield is vice president of policy analysis for the Commonwealth Foundation(CommonwealthFoundation.org), Pennsylvania’s free market think tank.