Diet Tip of the Week, Issue 3 - Commonwealth Foundation

:: Fat Facts of the Week ::

One of the most notorious abuses of taxpayers’ money is the exercise of Walking-Around-Money (WAMs). These funds are set aside for use at each legislator’s discretion to dish out to various projects, organizations, and businesses in their district. The “Community Revitalization Program,” which received $44 million in the FY 2006-07 budget, gets the most attention, although several line items in the budget, totaling over $180 million, represent discretionary funds used by both the governor and lawmakers and should be considered WAMs.

Under the guise of “economic development,” taxpayers’ money is wasted on trivial and sometimes unscrupulous enterprises. Lawmakers use WAMs as a public relations tool-posing with oversized cardboard checks and issuing news releases about how they “helped the community.” The result: the wallets of the politically connected get fatter, while lawmakers pick the pocketbooks of taxpayers.

Former House Democratic Whip Rep. Mike Veon was a master of WAMs. Veon directed funds to the Beaver Initiative for Growth (BIG), a non-profit “economic development” organization. Veon and Sen. Gerald LaValle were the lone board members of the organization and completely controlled how BIG dispersed taxpayer funds. Following media stories about BIG practices, the failure of BIG to comply with an audit, and, most importantly, Mr. Veon’s defeat at the polls, BIG will close down this year.

Another WAM abuser, Vince Fumo, Senate Appropriations Democratic Chairman until he stepped down after a more than 100-count federal indictment, also directed taxpayers’ money to his non-profit organization, Citizens Alliance for Better Neighborhoods. As chairman, Fumo controlled Citizens Alliance’s budget, which he allegedly used for personal expenses. He is charged with siphoning over $60,000 from the “charity” to block a project that would have eliminated the ocean view from one of his four homes. He also is accused of using the charity’s money to finance a lawsuit; commission political polls; various shopping sprees and to purchase tools, mosquito magnets, a meat grinder, and nineteen Oreck vacuum cleaners for every floor of his many homes.

Following the revelation of these (and other) abuses of taxpayers’ money, WAMs caught the attention of some Representatives. Recent changes to the rules now ban House members from running (and directing taxpayer funds) to entities like BIG and Citizens Alliance for Better Neighborhoods. The good news is that, most WAMs, including the Community Revitalization Program, have been cut from the FY 2007-08 budget passed by the Senate last week. But will WAMs stay out of the budget for good?

:: Diet Tip of the Week ::

Each year, Pennsylvania House and Senate leaders receive discretionary funds in “leadership accounts” for miscellaneous expenses. In FY 2006-07, the House Special Leadership Accounts account received $23 million, and the Senate Caucus Operations account received $38.5 million, which include leadership-directed spending. But the legislature is not required to report its expenses and these funds are un-audited and, until recently, a mystery to taxpayers.

How is that money being spent?

Legislative staff received $3.6 million in bonuses from 2005 to 2006, though more than two-thirds of the bonuses were handed out in 2006-an election year. The State Attorney General’s office is in the process of conducting an investigation into the legality of the Senate and House bonuses-a few staff members received over $20,000 in bonuses, while spending much of the year on leave to work on political campaigns. Fortunately for taxpayers, Senator Eichelberger has proposed a bill (SB 986) that would ban all bonuses occurring outside of the established payroll for all branches of state government.
Over $6 million has been spent on public service ads since 2005. These “public service announcements” are thinly veiled taxpayer-paid campaign commercials. The ads often describe state programs, but typically feature a state legislator’s name, picture, and voice touting the program (and themselves). The House officially banned ads broadcasting 60 days prior to an election. But taxpayers shouldn’t subsidize these “incumbent protection ads” at all.
Catered meals for lawmakers cost taxpayers an estimated $200,000 annually. Caucus and committee lunches, along with special receptions, are placed on Pennsylvania taxpayers’ tab each year. This is on top of the $146 per diem lawmakers get each day they are in Harrisburg, ostensibly to cover their meals and lodging.
Over $31,000 to finance Rep. Mark Cohen’s personal library from 2004 to 2006. From 2004 to 2005 Representative Cohen purchased over 800 books for his personal library. After receiving criticism for his reading habits, Cohen cut down purchases to 63 books in 2006. Rock the Capital’s Eric Epstein notes, “Apparently, the only book he hasn’t purchased is Self-Restraint for Dummies.”
With a reported $219 million stockpiled as reserve to fund such misuses of taxpayers’ money, it is time to trim the “wasteline” of legislative leadership accounts.

:: Towards a Healthy State ::

Sallie Mae, the leading student loan agency, began as a federal agency but was completely privatized by 2004. Pennsylvania should follow their lead and do the same with PHEAA.

The Pennsylvania Higher Education Assistance Agency (PHEAA) is a state-run organization riddled with wasteful spending habits. While it offers loans to students (competing with private loan providers), it also lavishes special treatment on its board members, who are predominantly state legislators. Between 2002 and 2005, the ostensibly non-profit agency ferried members and their wives to resorts where they indulged in posh perks. The tab includes:

PHEAA spent over $400,000 in legal fees in a lawsuit to hide these expenses from media inquiries. Despite losing that legal battle, PHEAA continues to spend nearly $1 million annually on lobbying, attempting to protect their fiefdoms from threats of privatization.

Another way to slim down Pennsylvania’s spending is to look at privatizing the Turnpike Commission, which has long been a cesspool of political patronage and nepotism.

In 2005, approximately 2,300 people were employed by the Commission, including about 500 middle managers (nearly one per mile of the Turnpike), many of whom were hired as political favors. Joseph Brimmeier, CEO of the Commission, hired his son, a cousin, two sisters, the son of his godmother, the son of a county party chairman, and the son of a Congressman. Also on the Turnpike’s payroll as a consultant-earning $220,000 over two years-was Mike Palermo, who apparently completed no work for the Turnpike Commission, but did find time to manage Senator Fumo’s 100-acre Harrisburg farm.
While privatization of the Turnpike could rake in upwards of $1.6 billion per year for Pennsylvania, and result in higher quality roadways and lower toll prices, the Commission created their own plan to issue new debt, raise existing toll rates, and add tolls on I-80. To push their plan, the Commission is spending $26,000 per month on lobbyists.

Many other states have privatized or used public-private partnerships in these areas, and there is little rationale to justify public monopolies in these services in Pennsylvania. Privatizing both PHEAA and the Turnpike could provide a windfall for the state and alleviate the need for higher taxes and fees. Privatization efforts would also reduce graft and abuse in these quasi-private entities, which offer too great a temptation to misuse public monies.

:: More Information ::

:: For more on the Turnpike, see this Study

:: For more on PHEAA, see this Commentary