Category: Leo Knepper

Best Budget Choice Ignored In Pennsylvania

Best Budget Choice Ignored In Pennsylvania

By Leo Knepper

Often times the news media, Gov. Wolf, and the allies of Big Government in both parties present Pennsylvania’s budget choices as raising taxes or shutting down “vital services.” Two weeks ago, we presented several corporate welfare programs and earmarks that were driving up spending. This week we wanted to let you know about legislation that would save taxpayers $370 million by targeting government overhead.

Most people are unaware that overhead, known as General Government Operations in budget parlance, will cost taxpayers roughly $3.7 billion this year. In the private sector, businesses have focused on cutting overhead for years if not decades. Our state government has not been as vigilant in cutting costs as it would have you believe. Most of the cost savings programs that have been implemented merely nibble around the edges. New legislation introduced by Rep. Frank Ryan, a CAP member, would take a bigger bite out of the problem.

HB 1691 would cut the overhead budget line items by 10 percent across the board. Opponents of the measure would present this an unreasonable cut. However, a ten percent cut would still give the Executive Branch, Attorney General’s office, and legislature over $3.4 billion to spend on overhead for the year; that is hardly a paltry sum.

Before Gov. Wolf and the General Assembly try to raise taxes, they should first look at ways to reduce costs. Please, take a moment to let your Representative know that there are options other than higher taxes to get the Commonwealth’s fiscal house in order.

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

Best Budget Choice Ignored In Pennsylvania

Jerry Oleksiak Ghost Teacher

Jerry Oleksiak Ghost Teacher — Last week, Governor Wolf once again put his ideology ahead of what is best for Pennsylvania when He nominated Jerry Oleksiak to be the new Labor Secretary. 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.

Mr. Oleksiak penned an editorial questioning the fitness of President Trump’s selection for Education Secretary because of her lack of experience in the classroom. Using experience as a measuring stick, how does Oleksiak stack up?

Has he ever dealt with the unemployment system as an employer? Has he ever had to appeal a workers’ compensation assessment? We can continue this line of inquiry for some time, and the answer would continue to show a dearth of experience on the part of Mr. Oleksiak.

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.

Oleksiak’s nomination will go to the Senate where there is an opportunity to stop it. Republicans have a supermajority in the Senate, but so far they have not been willing to use it to benefit taxpayers. Here is a chance for Senators to remedy that mistake.

— By Leo Knepper

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

Jerry Oleksiak Ghost Teacher

 

Jerry Oleksiak Ghost Teacher

Low Ranked Pennsylvania Won’t Be Helped With More Taxes

Low Ranked Pennsylvania Won’t Be Helped With More Taxes

By Leo Knepper

Pennsylvania has a lot of problems. In many rankings of the states, Pennsylvania is in the bottom ten. 24/7 Wall St, a business focused website, ranked Pennsylvania 42nd on its list of Best and Worst Run States. Being that close to the bottom places the Commonwealth squarely among the worst run states in the country. As if to prove that point, the General Assembly and Governor allowed a spending plan to become law without any clear way to make up $1.5 billion in revenue.

It is starting to become clear that the Governor, Senate Republican and Democratic leadership, and House Democratic leadership want to close the gap with higher taxes. The latest plan would have instituted a gross receipts tax on natural gas. House Republicans rightly walked away from this as a solution because it would have resulted in higher heating bills for Pennsylvanians next winter, and every winter going forward. House Republican leadership is not completely on the right track in closing the budget gap. Leadership in that chamber is content to engage in borrowing against future revenues to meet the shortfall.

As we noted in our blog last week, cutting spending has received far less attention than it should have for the sake of taxpayers. One of the more ambitious exceptions to that general rule is HB 1354, which would add work requirements to the welfare code as it relates to receiving medical assistance. It would also require medical assistance recipients who make over $250,000 to make copayments and engage in other cost sharing measures. (If you’re wondering why someone who is making over $250,000 is getting medical assistance, it has to do with automatic qualification for certain medical conditions.)

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.

Senator Jake Corman (R-Centre) and other members of Senate Republican leadership have so far not publicly expressed any interest in enacting work requirements for medical assistance. If their position changes, we will let you know.

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

 

Low Ranked Pennsylvania Won’t Be Helped With More Taxes

 

Low Ranked Pennsylvania Won't Be Helped With More Taxes

Budget Approaches Fail Taxpayer

Budget Approaches Fail Taxpayer

By Leo Knepper

On Monday, (July 10) Gov. Wolf allowed the state budget to become law without his signature despite the fact that the budget didn’t balance. The budget passed by the House and Senate spends more than the Treasury is likely to collect. The House and Senate shouldn’t have passed the budget without a clear plan to fund the expenditures. The Governor should have either vetoed or line-item vetoed the budget. As it stands, credit rating agencies may downgrade the Commonwealth again. A downgrade won’t solve our problems, and the two “solutions” under consideration won’t be good for taxpayers.

On one side: a Democrat governor who wants to raise taxes and leave a legacy of suffocating costs. On the other side: a Republican House and Senate looking to borrow their way out of trouble and leave a legacy of crushing debt. The solution nobody in Harrisburg wants to discuss? Spending reduction, which would leave a legacy of budget corrections that would eventually pay off for taxpayers.

There are ways that the General Assembly could cut costs. First, they could dissolve the Race Horse Development Fund. The Fund subsidizes “purses” for horse racing. In 2015, some of that money went to a billionaire from the United Arab Emirates.  Considering Pennsylvania’s financial needs, this doesn’t sound like the best use of resources. A second option, would be to reform the welfare code to add work requirements. In 2014, Maine added a work requirement for able-bodied childless adults. In two years the number of able-bodied childless adults receiving food stamps dropped by over 90 percent. This change not only saved taxpayers money, but it also added people to the tax rolls.

There are a number of other ways that the General Assembly could put taxpayers first. It’s up to “leadership” in the General Assembly to step up to plate to make that happen. And, based on their track record that doesn’t seem likely.

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

Budget Approaches Fail Taxpayer

Budget Approaches Fail Taxpayer By Leo Knepper On Monday, Governor Wolf allowed the state budget to become law without his signature despite the fact

Spending Cuts Missing In Pa. Budget

Spending Cuts Missing In Pa. Budget

By Leo Knepper

It looks like the General Assembly is in full-on “kick the can” mode on the budget. An article from the Patriot-News lays out the options the General Assembly is considering for closing the budget gap. None of them involve cutting spending.

One of the top contenders is using the tobacco settlement fund as collateral for a loan. Other options include expanded gambling and a “by the drink” tax for bars and restaurants on alcoholic drinks. Right now, the tax is somewhat hidden from patrons because it is collected at the wholesale level, i.e. per bottle paid by the establishment. The new proposal would move that to a per drink tax paid directly by the consumer. From the budget crafters perspective, they’re missing out on revenue because the price paid for a bottle of alcohol is much less than the price the establishment collects by selling by the glass, etc.

Another item under consideration would be to add a financial transaction tax on electricity transmissions. From the Patriot-News article:

“Senate Republicans are also vetting a new financial transactions tax that would be centered solely on the obscure business of buying and selling space on energy transmission lines.

“Pennsylvania plays host to this roughly $2.5 billion-plus market by virtue of our role as host to the business end of PJM energy grid. Some have drawn a parallel here to the state taxes collected by New York on Wall Street transactions.

“Those familiar with the issue say a 5 percent tax on this relatively small slice of PJM’s activities could net the state about $125 million per year, with minimal impact on the industry.”

Remember when Governor Corbett and the members of the General Assembly assured us that the tax they were raising on gasoline wouldn’t be passed onto consumers? That fallacious argument is rearing its head again on this tax. If this goes through, don’t be surprised to see your energy bill go up to recoup the cost.

Please, take a moment to contact the General Assembly. Tell them to get serious about cutting spending and stop the tax and spend shell game.

PS: CAP is trying to raise $5000 in the month of June. If you value our work, please make an investment in our organization today.

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

Spending Cuts Missing In Pa. Budget

Spending Cuts Missing In Pa. Budget

Citizens Alliance Exposes Political Scams

Citizens Alliance Exposes Political Scams

By Leo Kepper

Much has been made of the “historic” pension reform just signed by Democrat Gov. Tom Wolf. Politicos and the media are making it out to be a great compromise between Democrats and Republicans.

But our regular readers know better…

Thanks to Citizens Alliance of Pennsylvania (CAP) voters are aware of just how ridiculous a claim it is to say this pension reform legislation actually solves the problem.

While the bill is a marginal improvement for taxpayers, it does little to nothing to address the $74 billion shortfall the state has for current employees, allows current General Assembly members to keep their Cadillac pension benefits, and likely adds to our state’s overall debt burden in the years to come. “Historic” indeed.

But results are what matter to Pennsylvanians, and they’re what matter to us at CAP. It’s not about who gets credit or who’s remembered a generation from now, it’s about strengthening our Commonwealth so citizens can exercise their God-given rights without government getting in the way.

Because of CAPs efforts citizens are onto the games being played in Harrisburg; they aren’t buying the hype.

Instead, they’re demanding real results on pensions and other issues.

With your support we’ll continue to make sure voters know the truth. Will you consider making an investment in our work today?

Pensions are but one obstacle our Commonwealth faces, and our only line of defense is an informed and empowered citizenry.

With your help we will continue educating voters on these issues. Together we can – and will – ensure a brighter future for Pennsylvania.

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

Citizens Alliance Exposes Political Scams

 

Meaningless Pension Reform Passes Pa. Senate

Meaningless Pension Reform Passes Pa. Senate

By Leo Knepper

On Monday, the Pennsylvania Senate passed SB 1 with an overwhelming majority, 40-9, vote. The House is widely expected to pass the pension “reform” legislation this week and send it to Governor Wolf’s desk; where he is widely expected to sign it. One of the things absent this year is the usual wailing and gnashing of teeth from government unions on the reform measure. An article from the Patriot-Newsexplains why:

“There is a hope that this bill, by representing another show of cooperative government between Democrat Gov. Tom Wolf and the Legislature, will help disarm a tricky issue for Wolf’s 2018 re-election effort.

“No unions are supporting Senate Bill 1, to be sure.

“But, in the words of AFSCME District Council 13 Executive Director David Fillman, ‘we’re not throwing bombs at it.'[…] Everyone reached for this story said they want to help give Wolf something that he can call a win on this issue.”(Emphasis added)

As Mike Manzo, a lobbyist for the SEIU, stated in the same article, “I think it sets up a pretty nice narrative for the governor that on some of the issues that people thought were the most intractable in the building…He will be the governor who could achieve what no other governor could, not only on pensions, but liquor reform and money for schools (emphasis added).”

While Republicans will be technically correct about the legislation being “historic” in nature because it represents a marginal improvement for taxpayers, they are wildly overstating how much of an impact this will have on the Commonwealth’s financial future. According to a CapitolWire article (paywall):

“The actuarial note analyzing the legislation indicates there will be no pension system savings, and the risk-shifting within SB1 only matters should the systems incur significant investment shortfalls a couple decades from now. Those shortfalls, should they occur two to three decades from now, will still add more debt to our debt-ridden systems, it just won’t be quite as much added debt – the ‘historic’ savings we’re told SB1 would deliver would come at a significant cost.

“It’s pretty clear passing anything with the title ‘pension reform’ has become the goal, not passing something that’s worth passing.

“…The comparison between current law and SB1 for both the State Employees’ Retirement System (SERS) and the Public School Employees’ Retirement System (PSERS) shows little-to-no difference regarding the impacts on employer contribution rates, pension funding ratios and the unfunded accrued liability going forward during the next three decades.“(Emphasis added)

Senate Bill 1 does not solve Pennsylvania’s pension problems. We will still have a$74 billion unfunded liability for current employees, and that number is likely to grow because there doesn’t seem to be the political will to address it. Furthermore, as Michigan illustrates, the hybrid plan can (and likely will) accumulate unfunded liabilities. Finally, the legislation permits current members of the General Assembly to continue to accrue their Cadillac pension benefits if they refuse to opt into the 401(k)-style system.

Be sure to keep all of this in mind when you’re reading the news about the “historic” pension reform and hear about it from politicians seeking your vote. Taxpayers are still on the hook for a massive amount of money and current members of the General Assembly can continue to accumulate benefits making the matter worse.

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

 

Meaningless Pension Reform Passes Pa. Senate

Meaningless Pension Reform Passes Pa. Senate

Pennsylvania Repeating Michigan Mistake?

Pennsylvania Repeating Michigan Mistake?

By Leo Knepper

Some members of the Pennsylvania General Assembly continue to push a “hybrid” defined benefit (DB) and defined contribution (DC) plan as the solution to the Commonwealth’s pension problems. Senate Bill 1 is the latest iteration of this “reform” proposal. As we have previously noted, plan design changes for future employees will not address the current unfunded liability. The only way to address the unfunded liability is to modify the pension benefits for current employees or enact funding reform. Adjusting pension benefits for current employees would run into legal challenges, leaving funding reform as the more likely option.

Switching from a traditional DB pension to a hybrid plan will not solve our problems in the long run. We need to look no further than the state of Michigan to see how hybrid plans fail to live up to their promises. A recent article from CapitolWire(paywall) summarizes the situation:

“What Michigan did in 2010 is exactly what some Pennsylvania Republican lawmakers want to do for both state and public school employees starting in 2018…While some Pennsylvania lawmakers are trying to convince their colleagues to embrace a hybrid plan (in Senate Bill 1), Michigan lawmakers want to end theirs in favor of a standalone defined contribution plan…One of the sponsors of the new effort in Michigan, Rep. Thomas Albert, called the 2010 MPSERS hybrid, ‘A Band-Aid for a bullet wound,’ while Michigan’s Speaker of the House, Tom Leonard, penned a column in which he called MPSERS ‘little more than one big I.O.U., a shaky promise signed by long-gone Lansing politicians…Michigan’s historic failure to reform the pension system has been a terrible deal for the hard-working people who take care of and educate our children. It is well past time we fix that mistake and give teachers the benefits they deserve.'”(Emphasis added)

After switching to a hybrid plan, Michigan’s unfunded liability grew because lawmakers there relied on overly optimistic assumptions and continued to underfund the system. Using history as a guide, why should we think Pennsylvania would be any different? Our current unfunded liability is over $74 billion because politicians make promises and don’t have the will to pay for them. An unwillingness on the part of politicians to pay for their promises  is not just a Pennsylvania problem, as noted in a recent column from Heritage Foundation analyst.

Harrisburg’s “long-gone” politicians increased government employees’ and teachers’ pensions by 25 percent in 2001; lawmakers increased their pensions by 50 percent at the same time. This act became law with a signature from Gov. Tom Ridge and illustrates that our pension problem is bipartisan in its origin.

The only way to remove political gamesmanship from the equation is for the Commonwealth to adopt a straight 401(k) DC-type plan and enact pension reform to address our current unfunded liabilities. Leadership in the House and Senate like to point out that Governor Wolf wouldn’t sign legislation establishing a DC plan. If they were smart, they would put it on his desk anyway, let the Wolf veto it, and then work to elect a governor who would enact the kind of reform Pennsylvania needs.

Please, take 30 seconds to email the General Assembly about pension reform.

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

Pennsylvania Repeating Michigan Mistake?

Pennsylvania Repeating Michigan Mistake?

Pa School Districts Reserves Are $4.4 B

Pa School Districts Reserves Are $4.4 B

By Leo Knepper

The amount of money held by school districts in “reserve” has more than doubled over the last 10 years according to a new report by the Commonwealth Foundation. At the end of the 2015-2016 school year, district reserves were over $4.4 billion. According to that same report, there were 13 school districts who held more than 20 percent of their budget in reserves and requested property tax increases well above the limit established by the Department of Education. Not only did they request higher taxes, they did it between eight and ten times in a ten year period. In other words, the school districts could operate on their savings accounts for more than 20 percent of the year, but still wanted taxpayers to pad the accounts even more.

One of the names on the list, Lower Merion School District, has been sued by local taxpayers for their budget practices. A Commonwealth Judge found their budget practices so egregious that the district was ordered to roll back their 2016 tax increase. despite a $56 million reserve fund, Lower Merion is seeking a tax increase again this year that exceeds the state cap.

The worst offenders among schools seeking unnecessary tax increases are not confined geographically. Rather, it seems that there is a systemic problem among school boards. It is hard to argue against keeping a rainy day fund in reserve. At some point, the reserve fund becomes an insult to taxpayers. Although school district finances do not garner the same attention as national, or even state-level scandals, understanding how they are spending your money is vital.

To see how your local school district stacks up, take a few minutes and review the financial data collected by the Department of Education. You will probably be surprised by what you find.

PS-The Senate will begin working to advance pension reform legislation later this week. Their legislation does not include funding reform at this point. Please, take a moment and contact the General Assembly about this important issue.

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

Pa School Districts Reserves Are $4.4 B

Pa School Districts Reserves Are $4.4 B

Convict Mellow Wants $240 G Pension Back

Convict Mellow Wants $240 G Pension Back

By Leo Knepper

In 2012, former Senator Robert Mellow was sentenced to 16 months in prison, three years parole, and ordered to pay nearly $150,000 in fines and restitution. Now he wants his $20,000 per month pension back.

Although one lawmaker having a pension of $240,000 per year is one of the causes of the pension system’s $74 billion unfunded liability, lets focus on Mellow’s legal argument. According to Pennsylvania state law, a state employee forfeits their pension if convicted of any one of 23 specific state crimes. The law also stipulates, “no public official…shall be entitled to receive any retirement or other benefit or payment of any kind except a return of the contribution paid into any pension fund without interest, if such public official or public employee is convicted or pleads guilty or no defense to any crime related to public office or public employment.” (Emphasis added)

According to an article published by the Philadelphia Inquirer, Mellow’s lawyers are arguing that since he was convicted of the federal charge of conspiracy and conspiracy is not one of the crimes listed, he should have his pension restored. According to the same Inquirer article:

“A similar argument has worked before. In 1999, Commonwealth Court reversed the pension forfeiture of a corrections officer who pleaded guilty to a federal charge of making a false declaration before a grand jury, finding that SERS was wrong to conclude the crime was “substantially the same” as the Pennsylvania crime of perjury.”

With this legal precedent in hand, Mellow’s lawyers would be negligent not to argue that he should have his pension restored. However, that doesn’t mean that they have a good case. As with most things legal, the devil is in the details. According to the press release from the FBI announcing Mellow’s sentencing:

“Mellow, in his capacity as a state senator and the Democratic Leader during 2006 through 2010, conspired with others to misuse the staff and resources of the Pennsylvania Senate for political fund-raising and campaign purposes.

“As part of the scheme, Mellow caused and knowingly permitted, through willful blindness, the submission to the chief clerk of the senate of false job classification and reclassification forms and memos for senate staff who performed political fundraising and campaign work while being compensated by the senate.

“Mellow conspired with others to misuse senate staff and resources to raise hundreds of thousands of dollars for an organization known as the Friends of Bob Mellow and the Democratic State Senate Campaign Committee and to support political candidates and causes throughout Pennsylvania.”

Based on the emphasized text, it sounds like Mellow clearly violated the clause in the forfeiture law highlighting crimes “related to public office.” The state employee pension board will vote on whether or not to restore Mellow’s pension. Regardless of that decision, someone will be appealing it to the courts and judges will ultimately decide the fate of Mellow’s pension.

We will keep you posted as the process moves forward, but you should not expect a speedy resolution.

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

Convict Mellow Wants $240 G Pension Back

Convict Mellow Wants $240 G Pension Back