Category: Leo Knepper

Wolf Condemns Children To Failed Schools

Wolf Condemns Children To Failed Schools

By Leo Knepper

In 2018, over 50,000 students were denied education scholarships through the EITC (Education Improvement Tax Credit) and OSTC (Opportunity Scholarship Tax Credit) due to a lack of funds thanks to statutory limits. There is currently a waiting list of eligible businesses willing to provide $80 million to the programs in exchange for the tax credits offered. Who could possibly think that standing in the way of expanding educational opportunities is a good idea? The answer is, sadly, Governor Tom Wolf.

Wolf Condemns Children To Failed Schools
Does he really hate children that much? Yes, yes he does.

Almost immediately after passage, Governor Wolf announced his intention to veto HB 800. The legislation would have increased the EITC and OSTC limits by a combined $100 million. The bill would have also expanded scholarship eligibility to include more middle-class families. Despite his lofty rhetoric that a zip code shouldn’t determine the quality of a student’s education, his veto guaranteed that children will be trapped in failing schools. Pennsylvania currently spends more than $16,000 per student, on average, per year. Despite that amount being well over the national average, too many schools fail to provide the education that students deserve.
 
The EITC and OSTC provide assistance to families who live in school districts that underperform and allow students an opportunity to reach their full potential. Our friends at the Commonwealth Foundation estimated that the increased tax credits and eligibility requirements in HB 800 would have benefited 90,000 students over the next five years.
 
Expanding educational opportunities and empowering parents should be a bipartisan issue, but it isn’t. Thanks to the opposition from teachers’ unions and their allies in the Governor’s Mansion and General Assembly, Pennsylvania’s students pay the price.

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

Wolf Condemns Children To Failed Schools

Budget Season Bad Ideas

Budget Season Bad Ideas

By Leo Knepper

It’s June in Harrisburg, and that means that the Capitol is teeming with lobbyists trying to convince lawmakers to spend someone else’s money on their client’s causes. Sometimes that takes the form of subsidies like the nuclear power bailout, or the $250 million Race Horse Development Fund. However, bad ideas are not limited to spending tax dollars. One popular, and harmful policy, that continues to pop-up while lawmakers look for horses to trade is an increase in the minimum wage.

A recent article from the Associated Press notes that Republicans in the General Assembly have until now rebuffed efforts to increase the minimum wage. According to the article, there is now some movement among Republicans in the Senate to raise the minimum wage:

“In that chamber, Labor and Industry Committee Chairwoman Camera Bartolotta, R-Washington, is preparing legislation to boost the minimum wage by a ‘cost-of-living increase,’ which she said would protect business owners from crushing new costs.

“She declined to give details.

“Senate Majority Policy Committee Chairman David Argall, R-Schuylkill, said he also supports some sort of minimum-wage increase and that Senate Republicans have discussed the idea of tying an increase to policies to get more people into the workforce and off public assistance programs.”

Lawmakers who advocate increasing the minimum wage are no doubt well-intentioned, but there are always unconsidered, or unintended consequences to their interference in the labor market. One item that is rarely discussed in debates on minimum wage is the simple fact that government-mandated wages, by their nature, interfere with an individual’s freedom of contract. Freedom of contract is a person’s right to bargain and create an agreement without interference. When the government sets a minimum wage, that freedom is diminished.

A second problem with increasing the minimum wage is more practical; it harms the people that the policy change purports to help. The Independent Fiscal Office estimated that raising the minimum wage to $12.00/hour would destroy 33,000 jobs in Pennsylvania. Their report may underestimate the impact substantially. Ontario, Canada increased their minimum wage by 20 percent from 2017 to 2018, and there was a nearly immediate elimination of over 59,000 part-time jobs. Most of the wage proposals being floated would surpass Ontario’s wage increase on a percentage basis.

The real minimum wage is zero. When politicians forget that and try to set wages, they may feel good about themselves, but workers pay the price in lost jobs and decreased hours.

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

Budget Season Bad Ideas
Budget Season Bad Ideas


Alternative Power And Nuclear Plants

Alternative Power And Nuclear Plants

By Leo Knepper

In 2017 the nuclear power industry began lobbying Pennsylvania lawmakers to institute a bailout scheme. Due to federal regulations and an abundant supply of natural gas, the electricity produced by nuclear power plants costs more than electricity generated by other sources. Lobbyists for the nuclear power industry found little appetite in the General Assembly for the kinds of bailouts enacted by other states. The nuclear power industry has been undeterred and is now attempting to convince lawmakers to support a stealth bailout of the industry via Pennsylvania’s Alternative Energy Portfolio Standards (AEPS).

You may not have ever heard of the AEPS, but you are paying for it every month in your electric bill. Simply put, AEPS requires an electric company to purchase a certain percentage of their electricity from solar, wind, and other “alternative energy” sources regardless of cost. Because it costs more to generate electricity from alternative energy sources, consumers pay more for their power than they would under free-market conditions.

Being included in the AEPS list has certainly given alternative energy sources an unfair advantage over traditional energy sources. The best thing for consumers would be to eliminate the AEPS list. However, the nuclear power industry has decided that they want in on the game. They and their allies argue that being included on the AEPS shouldn’t be called a bailout; they have a point, but it is something far worse.

With a bailout, taxpayers would know up front just how much we will be responsible for adding to the nuclear industry’s bottom line. By lobbying for inclusion in the AEPS, the financial commitment from consumers is open-ended and undefined. According to the Commonwealth Foundation, the cost to Pennsylvania for the current AEPS regime is estimated to be a $700 million increase in energy costs and the loss of 11,400 jobs by 2025.

Members of the General Assembly should be appalled by the suggestion to expand the AEPS. If they wanted to help the nuclear power industry compete, they should take the government’s finger off the scale entirely and eliminate the preferential treatment given to some producers over others. Let the free-market work; not only would this help the nuclear power industry, but it would also reduce the costs for consumers.

Mr. Knepper is executive director of Citizens Alliance of Pennsylvania.
Alternative Power And Nuclear Plants
Alternative Power And Nuclear Plants

Pennsylvania Ranks Low For Business

Pennsylvania Ranks Low For Business

By Leo Knepper

Pennsylvania Ranks Low For Business

Every year tax dollars are used to bribe businesses to come to or stay in Pennsylvania. The General Assembly, the Governor, and local governments may call it “economic development” but it’s another version of engaging in central planning for economic growth. Based on lackluster job growth, and an ever-dwindling population you would think that our elected officials would have learned their lesson after fifty years of failure; they haven’t.

For evidence of their failure, look no further than the Commonwealth’s rank in terms of overall business tax climate. According to the Tax Foundation’s latest analysis, Pennsylvania ranks thirty-fourth out of the fifty states for business taxes. An article from Watchdog.org gives a good breakdown of the methodology used in the comparison:

“The analysis examined more than 100 variables involving the states’ primary methods of taxation: corporate taxes, individual income taxes, sales taxes, unemployment insurance taxes and property taxes. Many of the top-rated states lack one of those five major taxes, but a few apply all the taxes with low rates and broad bases.

“Pennsylvania ranked No. 43 for its corporate tax; No. 18 for its individual income tax; No. 21 for its sales tax; No. 34 for its property tax; and No. 46 for its unemployment insurance tax.”

Our poor tax climate, an overly-burdensome regulatory environment, and a reputation as a place ripe for lawsuit abuse all combine to put Pennsylvania at the bottom of the list as far as a place to start a new business. If the legislature were really interested in fostering economic growth in the Commonwealth, lawmakers would make a concerted effort to move Pennsylvania into the top ten states to do business.

For evidence of their failure, look no further than the Commonwealth’s rank in terms of overall business tax climate. According to the Tax Foundation’s latest analysis, Pennsylvania ranks thirty-fourth out of the fifty states for business taxes. An article from Watchdog.org gives a good breakdown of the methodology used in the comparison:

“The analysis examined more than 100 variables involving the states’ primary methods of taxation: corporate taxes, individual income taxes, sales taxes, unemployment insurance taxes and property taxes. Many of the top-rated states lack one of those five major taxes, but a few apply all the taxes with low rates and broad bases.

“Pennsylvania ranked No. 43 for its corporate tax; No. 18 for its individual income tax; No. 21 for its sales tax; No. 34 for its property tax; and No. 46 for its unemployment insurance tax.”

Our poor tax climate, an overly-burdensome regulatory environment, and a reputation as a place ripe for lawsuit abuse all combine to put Pennsylvania at the bottom of the list as far as a place to start a new business. If the legislature were really interested in fostering economic growth in the Commonwealth, lawmakers would make a concerted effort to move Pennsylvania into the top ten states to do business.

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

 

Pennsylvania Ranks Low For Business

Spending Curse Is Bipartisan In Pa.

Spending Curse Is Bipartisan In Pa.

By Leo Knepper

A common sentiment among our followers on social media is that Pennsylvania would be much better off if everyone just voted “red” or elected more Republicans. We can certainly appreciate the sentiment, but it ignores two critical facts from recent history. First, when the General Assembly increased their own pensions by 50 percent, and other government employees by 25 percent in 2001, it was a bipartisan effort. The Governor who signed the bill into law was a Republican, Tom Ridge. Second, when the proposal to increase Pennsylvania’s gasoline tax to the highest in the nation was floated in 2013, it was Republicans who were behind the wheel. Governor Corbett, along with Republican leadership in the House and Senate twisted the arms of other Republicans to make this regressive tax increase a reality.

Not every example of profligate spending has such widespread effects. Consider the $1 million price tag for renovations recently completed at the Capitol in Harrisburg. From an article in The Caucus (subscription required):

“The chief clerk of the Pennsylvania Senate has new office digs — at a cost of more than $1 million in taxpayer money, including $30,000 for draperies and a set of fancy $800 chairs. The spending on the office’s relocation from near the Capitol cafeteria to formerly vacant space on the first floor of the North Office Building included furnishings, renovations and consultants, records show…

“The spending included:

  • More than $30,000 on draperies from Decorating Den Interiors, a Harrisburg-based interior-design company. The cost of outfitting one room with draperies was more than $3,700.
  • $2,300 for a desk of “heritage oak on cherry.”
  • $6,000 for eight “exec swivel” chairs, or $750 per chair.
  • $10,000 for 34 other chairs, or about $294 apiece.”

Every budget season, taxpayers are told that spending has been “cut to the bone” and every year taxpayers are forced to pay an exorbitant cost for pet projects and non-essential programs. In 2017, the General Assembly was sitting on a $95 million slush fund. The money comes from over-allocating funds to themselves, and not returning the surplus to the general fund; making matters worse, the General Assembly’s accounts are not subject to independent audit. Instead, they select the auditing firm and pay them directly. While this is no guarantee of mismanagement, it does set up the possibility of a conflict of interest for the auditing firm.

Further compounding the problem, the General Assembly has no legal obligation to make the changes recommended by their auditor. Therefore, we see many of the same reforms suggested and then ignored year after year. The legislature’s unwillingness to reform its financial process is one of the reasons that CAP supports a limited state constitutional convention. If the legislature is incapable of correcting its own deficiencies, then it is up to taxpayers to impose those reforms ourselves.

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

Spending Curse Is Bipartisan In Pa.

Spending Curse Is Bipartisan In Pa.

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.