On Tuesday (April 17) the Pennsylvania House passed HB 2138 with bipartisan support. This legislation would make important changes to Pennsylvania’s Medical Assistance (MA) program. Welfare programs too often measure their success by the number of people enrolled; not how many people achieve independence. HB 2138 reforms the MA program by adding work requirements for able-bodied adults. Work requirements should be a cornerstone of any welfare reform proposal. According to the sponsor of the legislation, Rep. Matt Dowling, 51 percent of able-bodied MA recipients do not work.
At one-time MA was truly limited to the neediest, but that changed with Obamacare. Now nearly 20 percent of the US population are enrolled in MA plans. By adding work, job search, and training requirements, Rep. Dowling is ensuring that people who can work are encouraged to attain independence. It is worth noting that HB 2138 exempts several groups of people from the work search requirements. The exemptions include some of the most vulnerable members of society like pregnant women, people who are in a mental institution, children and senior citizens.
Adding work requirements does increase administrative costs for the state. However, those costs will be more than offset by the savings generated by people who are able to move off of MA. There are thousands of empty skilled labor and manufacturing jobs across the state, helping people prepare for that work and off of public assistance is a win for everyone.
Pennsylvania Shadow Budgets Are Font Of Corruption
By Leo Knepper
One of the only good things to come out of last year’s budget was a transfer of $300 million from Pennsylvania’s shadow budget to the General Fund to cover the overspending. The shadow budget is comprised of Special Funds that exist outside of the normal budgeting process. Several lawmakers found over $1 billion in excess money in these accounts last year. After a great deal of public pressure, the General Assembly agreed to transfer $300 million from the shadow accounts to the general fund. The $300 million was money already collected by the state and collecting interest in a savings account. To borrow from our favorite clickbait headlines, “You Won’t Believe What Happened Next!”
Rather than taking funds from the extra $1 billion that lawmakers identified, Governor Wolf created a new special fund. For this new special fund, Wolf borrowed $200 million against the State Farm Show Complex through a “leaseback” agreement. The arrangement is basically a loan that will cost taxpayers $191 million in interest over the next twenty-nine years. But wait, there’s more.
“The winner was Blackford Ventures, a Lancaster County development company that provides government entities and private businesses with cash. After Blackford won the bid, the company created a separate firm, Municipal Real Estate Funding, in December to handle the Farm Show transaction. Both Blackford and Municipal Real Estate are listed on the contract.
“The company is owned by Richard Welkowitz, a one-time Teamster laborer turned entrepreneur. Blackford’s chief executive officer is Mike Brubaker, a former Republican state senator.” (Emphasis added)
Several members of the Pennsylvania House are exploring legal options to halt the lease. True to form, the Wolf administration may have overstepped its legal authority in entering the agreement. Under the Pennsylvania Constitution, only the General Assembly must approve the issuance of new debt with very limited exceptions. The issue revolves around whether the deal is a lease or a loan. There is also the matter of Governor Wolf creating a Special Fund out of whole cloth in order to subvert the intent of the General Assembly. Given the PA Supreme Court’s recent willingness create new powers for itself, we are skeptical that they would be willing to intervene on behalf of taxpayers in this instance.
Lawmakers are exploring the option of requiring the Wolf administration to make the lease payments from the Executive Branch’s budget. We will let you know if they take that route.
The Pennsylvania Supreme Court released its version (see image) of the congressional districts map on Monday. As we noted previously, the Court lacks authority under the Pennsylvania Constitution to draw districts. It is likely that Republicans will file suit in federal court to stop the Court-created Congressional districts from being used in the 2018 elections. One avenue for seeking a federal injunction is summarized by Justice Max Baer, the lone Democrat to dissent from the final opinion:
“While I have expressed my misgivings with allowing an election to proceed based upon a constitutionally-flawed map, I continue to conclude that the compressed schedule failed to provide a reasonable opportunity for the General Assembly to legislate a new map in compliance with the federal Constitution’s delegation of redistricting authority to state legislatures.[US Constitution, Article 1, Section 4]
“My skepticism regarding the time allotted the Legislature has been borne out. Democracy generally, and legislation specifically, entails elaborate and time-consuming processes. Here, regardless of culpability, the Legislature has been unable to pass a remedial map to place on the Governor’s desk for signature or veto.Under these circumstances, Pennsylvania and federal law permit the use of the existing, albeit unconstitutional, map for one final election.” [Emphasis added]
A second issue is the Court’s districts do not minimize the number of splits to local governments (i.e., townships, municipalities, counties, etc.). An analysis by Amanda Holt found that the districts adopted by the Court resulted in more splits (79) than the district maps submitted by Republicans (61) and a separate plan offered by the Senate Democrats (60). You may not recognize her name, but Ms. Holt’s research in 2011 was the primary evidence used to throw out the state House and Senate districts for constitutional reasons. Her current finding is significant because the Pennsylvania Supreme Court stated in their original decision that local governments could only be split to ensure equal population. Furthermore, as she notes on her blog, the fact that the Court’s districts are drawn with more splits could demonstrate to a federal judge a lack of “good faith effort.”
The high likelihood of another lawsuit being brought by Republicans to the federal court regarding the Congressional districts means the issue is still up in the air. We will keep you posted as the story continues to develop.
Pennsylvania Already Spends More Than Most States, Gov.
By Leo Knepper
Last week, Governor Wolf presented his budget proposal to the General Assembly. He primarily recycled talking points from his first three budgets and added an Eagles hat to demonstrate how “in touch” he is with people. The three key points from Gov. Wolf’s proposals are more spending on education, more taxes on natural gas, and a higher minimum wage. None of these ideas are new, nor are any of them sound ideas.
On the issue of education spending, Pennsylvania currently spends more on education than 41 other states. More money is not going to help students in failing schools. A quick look at the 50 worst performing school districts illustrates this point. Many of the schools on the list spend more per student than the cost of tuition at a college or trade school. The worst performing school district, Wilkinsburg Borough, spends over $30,000 per pupil. However, only fifteen percent of their students are proficient in math, and twenty-six percent are proficient in reading. On top of poor performance in math and reading, less than half of Wilkinsburg’s students graduate. More money is not the solution for our education system’s failings, but considering the hundreds of thousands of dollars Governor Wolf stands to receive from the state teachers’ union in his upcoming election, we shouldn’t be surprised that he wants more money instead of increased accountability for schools.
In his budget address, Wolf repeated the lie that natural gas companies aren’t paying their “fair share” and he advocated for raising their taxes. He stated that Pennsylvania was the only state not collecting an extraction tax, but the Governor failed to mention that we are the only state to levy an impact fee. In 2017, the natural gas companies paid over $200 million into Pennsylvania’s coffers due to our impact fee. Natural gas companies are also subject to the Commonwealth’s corporate net income tax, which happens to be the second highest in the country. On top of that, the Treasury gets a cut of any royalties paid to individuals by the gas companies. At what point will Governor Wolf be satisfied that natural gas companies are paying their fair share?
The final item trotted out by the Governor was an increase in the minimum wage. If Governor Wolf wants to make it harder for lower-skilled workers to find employment, setting an artificially high wage floor will undoubtedly make that happen. Minimum wage increases enacted by other states and localities have resulted in the loss of hundreds of thousands of jobs and Pennsylvania would not be exempt from that trend. Instead of declaring that employers should pay a certain amount and be surprised that people lose their jobs, Governor Wolf should take a lesson from President Trump and make it less expensive for business.
Thanks to tax changes at the federal level, at least thirty-three major corporations have announced higher wages, bonuses, and increased employee benefits. Keep in mind those are just major corporations. How many small and medium-sized businesses can now afford to reinvest in their employees or expand their businesses? If Governor Wolf wants to help Pennsylvania’s workers, he should be focused on the regulations that drive up costs in the Commonwealth and the tax policies that make us uncompetitive.
There is no doubt that Pennsylvanians face struggles, but Governor Wolf’s solutions represent a continuation of the same policies that have failed for the last fifty years. Higher taxes and more spending has predictably failed to improve the Commonwealth. It’s unfortunate that the Governor intends to keep going down the same road.
Pennsylvania Already Spends More Than Most States, Gov.
Jerry Oleksiak Pick Shows Wolf Not Interested In Reform
By Leo Knepper
Back in July, Governor Wolf nominated a union president, Jerry Oleksiak, to be Labor Secretary. As we said at the time:
“Mr. Oleksiak is the President of the Pennsylvania State Education Association (PSEA), the largest teachers’ union in the Commonwealth. Making matters worse, Oleksiak also took part in one of the most tax-payer abusive practices available to union officials: he was a ghost teacher.
“As a ghost teacher, Oleksiak worked full time for the PSEA, but he collected a paycheck, accumulated seniority, and pension benefits from the Upper Merion School District. Although the district was reimbursed for his salary and health benefits, Oleksiak and the PSEA still rely on the generosity of taxpayers to cover his lifetime pension benefits…
“In our conversations with business owners and employers, no one has ever complained to us that Pennsylvania wasn’t pro-organized labor enough. According to most recent studies, Pennsylvania ranks at the bottom of places to do business; our labor regulations are a significant reason why. A Labor Secretary with no experience in the private sector and a decade’s worth of experience advocating for policies hostile to the best interest of taxpayers would make the Commonwealth even less appealing to job creators.”
The Pennsylvania Senate had an opportunity to stop this nominee. The leadership of the Senate abdicated their responsibility by allowing him to become Secretary without a vote. Under the Pennsylvania Constitution, nominees automatically assume the position if a vote isn’t held in twenty-five legislative days. Senate Republican leaders asked the Governor to withdraw the nomination because they rightly had concerns about Oleksiak’s qualifications. The Governor refused to withdraw the nomination. Rather than putting Senate members on record as either supporting or opposing an unqualified Labor Secretary, Senate leaders allowed him to walk into the position.
Senate Republican leadership, Senators Joe Scarnati and Jake Corman in particular, had an opportunity to stop an unqualified nominee from becoming Secretary of Labor or at worst putting members of the chamber on record. When they failed to take a vote, Scarnati and Corman deprived constituents information about their senators’ priorities. Denying voters this valuable information is a disservice to taxpayers and a shameful example of politics as usual in Pennsylvania.
On Jan. 22, the Pennsylvania Supreme Court issued an opinion striking down the Congressional districts adopted in 2011. The decision requires that new districts be adopted by the General Assembly and approved by the Governor by Feb. 15. If new Congressional districts are not adopted by that time, the Supreme Court will establish new districts. (Why the plaintiffs waited six years to bring the lawsuit is open for discussion. However, a cynic would note that it coincided nicely with Democrats obtaining a majority on the Supreme Court.)
The timeline of the case or even the timeline required for the adoption of new districts is not the biggest problem. What is most concerning is the Court’s threat to adopt districts it devises should its timeline not be met by the legislature. Nowhere in the Pennsylvania Constitution is the Judiciary delegated the responsibility of creating legislative districts. The power to create Congressional districts is reserved for the General Assembly. The Judiciary may invalidate the General Assembly’s districts and require new maps to be drawn. The Supreme Court’s threat to create and adopt its own maps represents a dangerous departure from the separation of powers.
Make no mistake, some of Pennsylvania’s Congressional districts were among the most outrageous examples of gerrymandering in the country. The Court has the ability and authority to invalidate the districts, but it does not have the authority to impose its own districts. This would represent a dangerous precedent and makes the judiciary a super-legislature. If the Supreme Court is successful in seizing the power it has just granted itself out of thin air, we have more significant problems than poorly drawn districts. From redistricting, it is only a short distance to the Courts writing and adopting a state budget if the General Assembly doesn’t get it done in time.
The General Assembly adopted awful Congressional districts six years ago. The problem should have been addressed then via the Constitutionally provided remedy. In the long term, significant redistricting reform is necessary, and that can be accomplished via legislation or changing the state constitution. The Supreme Court’s decision represents a threat to the separation of powers, and that shouldn’t be taken lightly by anyone.
In late 2014 and early 2015, five current and former members of the General Assembly were charged with bribery and other charges related to their acceptance of cash “gifts” from a lobbyist. Despite a flurry of legislation at the time to ban cash gifts, it never happened. The House and Senate changed their chambers’ rules to prohibit the acceptance of cash gifts from lobbyists, but the law hasn’t changed. The law hasn’t changed because banning only cash gifts would raise some very uncomfortable questions for lawmakers about the kinds of gifts they can still accept.
What kinds of gifts can they accept? Virtually anything as long as they follow the disclosure rules. In order to comply with Pennsylvania’s lax ethics laws, lawmakers are simply required to disclose gifts of more than $250 per year from any source and transportation, lodging, and hospitality worth more than $650. Over the years those gifts have included everything from Super Bowl tickets to Turkish rugs.
At CAP, we generally aren’t a fan of banning things and unnecessary regulations. However, given the sheer number of public officials from Pennsylvania who end up in prison we think that enacting a commonsense “gift ban” makes a lot of sense.
CAP member Representative Rick Saccone introduced HB 39 in early 2017 to accomplish that goal. Many attempts at banning gifts to lawmakers are impossible to enforce because they are written in a way that is overly broad and includes activities that could be genuinely related to lawmaking. Rep. Saccone’s legislation does not fall into that trap.
Despite being introduced and assigned to the House State Government Committee in January of this year, there has never been a hearing on this or any other gift ban related legislation. Citizens of the Commonwealth have been victimized by corrupt politicians of both parties for years and rightly have a low opinion of their government. We believe that passage of this legislation would certainly show that lawmakers are getting the message and are willing to take concrete actions to get their house in order.
Please take a moment to email your Representative. Ask them to become a cosponsor of HB 39. Encourage them to speak to the Chairman of the State Government Committee, Rep. Daryl Metcalfe about scheduling a hearing and a vote on the measure. It is going to take a lot to restore people’s faith in Pennsylvania state government, but this is a step in the right direction.
Most people don’t realize it, but the state government and localities across the commonwealth collect campaign contributions for political action committees (PACs) controlled by government unions.
In February, the Senate sent legislation to the House (SB 166 and 167) to end this practice. As we noted then:
“Over the course of the last ten years, various elected officials in Pennsylvania have gone to jail for using public systems for political gain. However, government unions have been using the public employees’ payroll system to collect funds that are spent directly on candidates and influencing elections (PACs) and funds used to engage in lobbying, voter registrations, get out the vote, and a host of other political activities.
“Why should it be legal for unions to use the public payroll system for political purposes, but illegal for former-Speaker John Perzel to use the constituent data system to help sway elections? There is no difference between these two activities; both are political, both are on the public dime, and both should be illegal.”
The good news is that the House State Government Committee sent two pieces of legislation, SB 166 and HB 1174, to the floor of the House for final passage. We would prefer government getting out of the business of collecting union dues and political contributions entirely. However, the passage of either of these bills would be a drastic improvement over the status quo.
The main difference between the two bills is that HB 1174 would still allow the collection of political contributions from the state police, corrections officers, and other “public safety” employees. SB 166 does not make a distinction between public safety and standard employees; it prohibits the collection of campaign contributions from all government employees.
Please take a moment to contact your Representative and encourage them to support both of these pieces of legislation.
Wolf Vetoes Work Requirement For Adults On Welfare
By Leo Knepper
Back in July the House passed legislation that would have added work requirements to the welfare code. As we noted then:
“In our research, we found that nearly 60 percent of Pennsylvania families who were required to engage in job search activities or training for the federal “Temporary Assistance for Needy Families”(TANF) program participated in ZERO hours of qualified activities (see page 17). Although the qualifications for TANF are different than for medical assistance, the similarities of the populations made it a reasonable comparison. If a greater percentage of medical assistance recipients specifically, and welfare recipients in general, were required to engage in work search activities it could have a remarkable effect reducing the number of families needing assistance and a positive impact on Pennsylvania’s finances in the medium to long term.
“In 2014, Maine required “able-bodied childless adults” (ABCAs) to work, train, or volunteer on a part-time basis to continue to qualify for food stamps. In two years the number of ABCAs receiving food stamps dropped by 90 percent. First, imagine the saving that taxpayers in Pennsylvania would reap if we instituted the same requirements. Second, imagine how that would benefit the states revenue collection. If all of those people who were currently receiving assistance that could work but weren’t, returned to the workforce it would be a long-term boon for Pennsylvania.”
Similar language to the House bill made it into the final welfare code. Although it was narrower in scope than the House legislation, Governor Wolf vetoed the changes. Medical assistance payments account for nearly 30 percent of the Pennsylvania budget. Based on what happened in other states, adding work requirements for able bodied adults is a commonsense way to lower costs and encourage beneficiaries to reenter the workforce. Unfortunately, Governor Wolf is not interested in lowering the bill for taxpayers. He only seems interested in raising taxes on hardworking Pennsylvanians.
Not much has changed on the budget since last week. On the plus side, Governor Wolf changed his position on using fund transfers to balance the budget. He went from saying all of the money proposed in the fund transfers (see here) was promised to other projects and there was no way it could be used to balance the budget; his current position is that $500 million is available to use to balance the budget.
On the downside, Republican leadership in both chambers of the General Assembly seem dead-set on making Pennsylvania less competitive by raising taxes on targeted industries. The first target, which now seems to be off the table, was commercial warehousing. According our sources, Rep. Dave Reed (R-Indiana County) was advocated for making lease payments on warehouse space subject to the sales tax. The fact that this tax would have made Pennsylvania non-competitive and put thousands of people out of work seems to have eliminated this proposal from consideration. The latest proposal would be to nearly double the Commonwealth’s hotel tax rate. Again, one of the chief advocates for the higher tax rate is Rep. Dave Reed.
As we have repeatedly noted, a better long-term solution would be to actually cut spending rather robbing from Peter to pay Paul. We’ll let you know about any changes as they develop.
Politicians have long used Orwellian double-speak to hide their true intentions. The latest iteration of this trend in Pennsylvania is the Governor’s, Senate’s and House Democrat’s insistence on including “recurring revenue” in any budget agreement. Recurring revenue sounds much more pleasant than what they’re really talking about: tax increases.
Roughly three months ago Republican leadership in the Senate, ceded their super-majority when fourteen Republicans voted with twelve Democrats to pass a Fiscal Code that balanced the budget on the backs of taxpayers. The Senate’s plan, supported by Governor Wolf, would raise taxes on heating bills, cell phone bills, and online purchases. As our friends at the Commonwealth Foundation noted in a recent blog post, the General Assembly has raised taxes four times in the last eight years. These previous tax hikes haven’t solved Pennsylvania’s financial problems. Instead, it has been like a death from a thousand cuts for taxpayers.
Departing from the usual routine of raising taxes, House Republicans offered alternatives to the status quo. The first plan we told you about would have reduced overhead expenses and saved tax payers $370 million. A second plan, which ultimately passed the House would have used surplus, off-budget funds to fill the gap. Unfortunately, only seven Senators sided with taxpayers and voted in favor of using funds already in state coffers.
The next step in the budget process is House and Senate leadership will establish a conference committee and try to work out their differences. The deals hashed out by conference committees rarely work out in taxpayer’s favor because it is a closed-door process. The public, and most lawmakers, usually do not have time to review the finished product. Remember the 2005 middle-of-the night pay raise? That legislation came out of a conference committee too.
Please, take a few moments and email the General Assembly. Let them know that you will be watching their actions closely and that they need to cut spending and use money already collected by the Treasury in order to balance the budget.