Pennsylvania Budget Violates TPA

Pennsylvania Budget Violates TPA

By Leo Knepper

Last week the Pennsylvania House and Senate adopted the 2018-2019 budget by overwhelming margins. Thanks in large part to the economic growth generated by federal tax cuts enacted by the Trump administration, and the fact that it is an election year, the voices calling for tax increases were more subdued than usual this year. Because the underlying cost drivers were not dealt with in any meaningful way in this budget, the reprieve will be temporary.

The first problem with the budget was that it exceeded the growth cap established by the Taxpayer Protection Act (TPA). The TPA limits spending growth to the rate of inflation plus population growth. As noted by the Commonwealth Foundation:

“The budget plan increases General Fund spending by more than $718 million—an increase of 2.2 percent. (Note that House leaders place the increase at 1.7 percent—adding $159 million of ‘2017-18 spending enacted in 2016-17’ to the baseline.) That means Harrisburg is demanding nearly $300 million morefrom Pennsylvanians than it would under TPA.”

In addition to the accounting gimmicks used to hide a portion of the spending increase, this year’s budget continues to underfund the Commonwealth’s substantial pension obligations. Members of the General Assembly will argue that this budget meets the actuarily recommended contribution (ARC). Meeting the ARC would be meaningful if the calculations were based on realistic assumptions; sadly, that is not the case. The ARC is artificially constructed and significantly underestimates pension liabilities and overestimates the overall return on the pension assets.

An on-time budget would be something to celebrate if it made significant changes to the Commonwealth’s fiscal trajectory. The 2018-2019 budget avoids making any tough choices. It overspends and fails to prioritize in any meaningful way. We are running out of road for the proverbial can to be kicked down. The longer the General Assembly postpones reform, the fewer options we will have, and the more painful the changes will be for everyone.

Mr. Knepper is executive director of Citizens Alliance of Pennsylvania.

Pennsylvania Budget Violates TPA

Pennsylvania Budget Violates TPA

Education Access Now Piggy Bank

Education Access Now Piggy Bank

By Leo Knepper

The Education Access Program (EAP) budget item has increased by nearly 600 percent since the 2014-2015 budget cycle. Initially, the EAP had a $3.95 million budget. It grew to over $23 million last year. If you dig into it a little, you’ll find that the funds from the Program have been requested and spent on projects mainly to benefit Senate Democrats. In some cases, the funds go to school districts directly, but the majority of the funds have gone to support organizations like: The Philadelphia Clef Club of Jazz and Performing Arts, The Bryn Mawr Film Institute, and The Pittsburgh Opera.

Private individuals making donations to charitable organizations is a vital part of civil society. When government forces taxpayers to support particular organizations, that is another matter entirely. Lawmakers’ ability to present giant cardboard checks to local charities is a pernicious part of the “incumbent protection” program designed to make it harder to dislodge elected officials once they are elected to office. Furthermore, over the course of recent history, we have seen members of the General Assembly direct tax-dollars to “charities” that directly benefited them financially, or organizations that were run by their campaign contributors.

Beyond the problems associated with doling out tax dollars to favored charities for good public relations, sending funds to school districts via the EAP is never a one-time deal. One of the quirks in how Pennsylvania funds school districts is a “hold harmless” provision. Essentially, the amount of money sent to a school district from state taxpayers cannot be decreased. In other words, the payments from the EAP to school districts will always be included in the “Basic Education Funding” the school receives from the Commonwealth. A $10,000 grant automatically turns into an additional $10,000 included in the next year’s (and the next, etc.) baseline funding.

Despite an insistence almost every year that the state budget is “cut to the bone,” questionable spending through the EAP and other programs illustrates that that is not the case. Too many members of the General Assembly confuse wants and needs when it comes to spending tax dollars. As we move through the budget process, our elected officials would be wise to take a closer look at where our money is actually going.

Mr. Knepper is executive director of Citizens Alliance of Pennsylvania.

Education Access Now Piggy Bank  By Leo Knepper  The Education Access Program (EAP) budget item has increased by nearly

Pennsylvania Spends More, Gets Less

Pennsylvania Spends More, Gets Less

By Leo Knepper

Every June an unholy alliance of Big Government special interests and politicians gathers in Harrisburg to decide how to spend your money. Governor Wolf provided an outline of what he wanted to see back in February. His focus was on more education spending, more taxes on natural gas, and a higher minimum wage. As we noted at the time:

Pennsylvania currently spends more on education than forty-one other states. More money is not going to help students in failing schools…The worst performing school district [in Pennsylvania], 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…

“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.”

As far as we can tell, none of the Governor’s proposals are entirely off the table. In fact, Senate Republican leaders and Democrats included another shale gas tax in their fiscal code last year, along with several other tax increases. The House nixed the worst of the fiscal code, including the shale tax increase. So far this year, we haven’t heard anything from Senate Republican leaders shutting the door on targeted tax increases.

We have yet to see a budget proposal from the Pennsylvania House or Senate. The General Assembly doesn’t provide a budget framework until closer to the June 30th deadline, making it harder for taxpayers to weigh in on how their money will be spent over the next year. We will be sure to update you as soon as there is anything to report.

Pennsylvania Spends More, Gets Less

Pennsylvania Spends More, Gets Less

CAP Happy With Election Results

CAP Happy With Election Results

By Leo Knepper

(May 15) was a fantastic night for CAP (Citizens Alliance for Pennsylvania), and CAP PAC supported candidates. Scott Wagner, the CAP PAC endorsed candidate for Governor, won by a comfortable margin. We look forward to an exciting gubernatorial race in the fall. Pennsylvanians will be able to draw clear distinctions between the candidates. One option will be Gov. Tom Wolf, who has never met a tax increase he didn’t like. The other option will be Scott Wagner, a man who understands that every dollar that government spends is coming out of someone’s pocket.

Both of the candidates CAP PAC supported for the Senate won commanding victories. Kristin Phillips-Hill (York County) and Jeremy Shaffer (Allegheny County) both ran fantastic campaigns. Shaffer’s campaign is especially noteworthy. Jeremy defeated an incumbent Senator, Randy Vulakovich, by over 15 points! Senate Republican leadership pulled out all the stops to defend Vulakovich, including filing a baseless complaint against CAP. Senate Republican leadership is trying to weaponize the Pennsylvania Department of State. Their goal is to violate the privacy of the donors to our 501c4, despite the protections granted to donors by federal law and precedent. (We will keep you posted on this issue.)

We would also like to congratulate Representatives Dawn Keefer (York County) and Justin Simmons (Lehigh County) for their victories. The final triumph we’d like to report is Mike Jones (York County). Mike won nearly 85 percent of the primary vote. He had by far the most significant margin of victory for any of the CAP or CAP PAC supported candidates.

We are looking forward to an exciting November.

Mr. Knepper is executive director of Citizens Alliance of Pennsylvania.

CAP Happy With Election Results

CAP Happy With Election Results

Medical Assistance Work Requirement Before Senate

Medical Assistance Work Requirement Before Senate

By Leo Knepper

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.

HB 2138 now moves to the Senate.

Mr. Knepper is executive director of Citizens Alliance of Pennsylvania.

Pennsylvania Shadow Budgets Are Font Of Corruption

Pennsylvania Shadow Budgets Are Font Of Corruption

By Leo Knepper

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
Shadowy Spender

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.

According to reporting on the deal:

“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.

Mr. Knepper is executive director of Citizens Alliance of Pennsylvania.

Pennsylvania Shadow Budgets Are Font Of Corruption

 

 

Court Created Congressional Mess

Court Created Congressional Mess

By Leo Knepper

Court Created Congressional MessThe 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.

Mr. Knepper is executive director of Citizens Alliance of Pennsylvania.

Court Created Congressional Mess

 

Pennsylvania Already Spends More Than Most States, Gov.

Pennsylvania Already Spends More Than Most States, Gov.

By Leo Knepper

Pennsylvania Already Spends More Than Most States, Gov.
The governor of special interests

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

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.

Mr. Knepper is executive director of Citizens Alliance of Pennsylvania.

Jerry Oleksiak Pick Shows Wolf Not Interested In Reform

Jerry Oleksiak Pick Shows Wolf Not Interested In Reform

Gerrymandering Bad, Court Decision Worse

Gerrymandering Bad, Court Decision Worse

By Leo Knepper

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.

Mr. Knepper is executive director of Citizens Alliance of Pennsylvania.

Gerrymandering Bad, Court Decision Worse

Gerrymandering Bad