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In case you missed it last week, we published our monthly analysis of revenue collections at the Pennsylvania Budget and Policy Center's web site. Good news on the revenue front continued in April, with collections surging past monthly estimates (as they did in March), putting the state on much better fiscal footing going into 2012-13.

This is important, as March and April receipts make up over a quarter of the fiscal year’s collections. March is a pivotal month for corporate tax collections, while April is the largest month for personal income tax payments.

Back in February, when the revenue shortfall was approaching $500 million, the Corbett administration estimated that General Fund collections would fall short of their official estimates by $719 million by the end of June 2012. Some spending was frozen in 2011-12, and the Governor proposed an austere budget plan for 2012-13.

Since then, we have seen three straight months of collections exceeding monthly estimates, shrinking the revenue gap to less than $300 million. If trends continue and revenues continue to improve, the fiscal year shortfall could be less than 1% of total collections. Read more here.

That will give lawmakers an opportunity to restore some of the deep cuts proposed by Governor Tom Corbett in February. The Pennsylvania Senate approved a budget last week that takes a step in that direction, but more funding needs to be restored to schools, health care, colleges and critical human services that strengthen families and local communities.

On Tuesday Marty Moss-Coane, the host of WHYY's Radio Times, moderated a question-and-answer session with Governor Tom Corbett at an event sponsored by the Greater Philadelphia Chamber of Commerce. The Governor ran wild with analogies.

• Bob Fernandez, The Philadelphia Inquirer — With protesters nearby, Corbett sticks to message for Phila. Chamber:

Corbett repeated a folksy analogy to the business suit-and-tie audience, saying that state revenue amounted to an eight-inch pizza pie before the 2008 financial crisis. Now, he said, it’s a six-inch pie “but with the same mouths to feed.”

• Chris Brennan, Philadelphia Daily News — Corbett: Open to spending more, but not protesters:

Moss-Coane noted near the end of the hour-long conversation that Corbett could hear demonstrators beating drums and chanting slogans outside. What would he say to them, she asked.

“I understand that you’re upset because we’ve had to put the state on a diet, for want of a better description,” Corbett said. “I haven’t met anybody who likes to go on diets. It is not easy. It is not what we want to do.”

Of course, if you really wanted to grow the pie, you could start by closing corporate tax loopholes and not creating new ones.

While the Corbett diet is high in corporate tax breaks, it is low in investments in human capital. Take, for example, the Harrisburg School District, which thanks in part to state budget cuts is considering eliminating kindergarten.

• Eric Veronikis, The Patriot-News — Budget deficit could cost Harrisburg School District its kindergarten program:

Duane O’Neal-Sloane longingly watches his older siblings pack their school lunches, wishing he was doing the same and heading off to school each morning.

After perfectly reciting his ABCs, O’Neal-Sloane said next year he even will be able to write, take gym class and eat in the lunch room at Camp Curtin School. 

But with the Harrisburg School District facing a $15.8 million budget deficit next year, Duane’s hopes of attending kindergarten at Camp Curtin next fall could be dashed.

To help close next year’s budget gap, school officials are looking to cut Harrisburg’s kindergarten program and other programs the district is not lawfully required to provide...

Harrisburg isn’t the only Pennsylvania school district looking to drop kindergarten due to looming deficits, said Wythe Keever, spokesman for the Pennsylvania State Education Association, which represents teacher unions across much of the state. 

York City School District and the Woodland Hills School District in Allegheny County are at least two others considering the same thing, Keever said.

Unless you have been away for two weeks, you will note I have been posting a lot about House Bill 2191, which if enacted would legalize predatory payday lending in Pennsylvania.

If you listen to only the policymakers pushing this legislation, you would conclude this bill is a common-sense reform aimed at boosting consumer protection. The reality is quite different since the bill opens the door to a kind of predatory lending that exploits working families and destroys jobs. 

But for the keen eye of Community Legal Services of Philadelphia and the Center for Responsible Lending, this bill might have moved through the state House with little attention. A marker of the deceptive tactics being used to push HB 2191 is the fact that so far 13 co-sponsors of the original legislation have withdrawn their support.

I bring this up this morning in part because The New York Times has a disturbing story on motor vehicle fatalities among oil and gas workers. It turns out that oil and gas workers are exempted from federal highway safety regulations that limit the hours of work for drivers.

Much like the payday lending industry today, the oil and gas industry in the 1960s argued it needed this exemption from regulation. The exemption they got is costing people their lives as natural gas extraction expands.

• Ian Urbina, The New York Times — Deadliest Danger Isn’t at the Rig but on the Road:

Over the past decade, more than 300 oil and gas workers like Mr. [Timothy] Roth were killed in highway crashes, the largest cause of fatalities in the industry. Many of these deaths were due in part to oil field exemptions from highway safety rules that allow truckers to work longer hours than drivers in most other industries, according to safety and health experts.

Many oil field truckers say that while these exemptions help them earn more money, they are routinely used to pressure workers into driving after shifts that are 20 hours or longer.

“Just because you are on an oil field site does not make you any less vulnerable to the effects of fatigue!” Garr Farrell, an oil service driver in Ore City, Tex.,  wrote last year to federal highway safety regulators. In his letter, Mr. Farrell complained that his managers had used the oil field exemptions to force him to wait, without anywhere to sleep, for 36 hours at one well site before he could unload his drilling supplies and get back on the highway...

Oil and gas workers also crash because their trucks are frequently in disrepair, the police say. For example, data from the Pennsylvania State Police indicates that 40 percent of 2,200 oil and gas industry trucks inspected from 2009 to this February were in such bad condition that they had to be taken off the roads.

Oil service companies also often circumvent highway safety rules.

Speaking of industries that have resisted efforts to make the world economy safer, the Pittsburgh Post-Gazette has an excellent editorial this morning on JPMorgan's surprise loss of $2 billion on credit default swaps. What you ask? Heidi Moore at Marketplace has a great explanation of what happend.

• Pittsburgh Post-Gazette — Banking debacle: JPMorgan's loss argues for tougher regulations:

The announcement last Thursday by JPMorgan Chase CEO Jamie Dimon that the bank had just lost $2 billion in complex, risky trading delivered several messages to Americans.

The first — not new — is that even the nation's biggest bank can engage in enormous ill-advised transactions that can go sour, shattering the trust of their customers. These institutions' management, with people like Mr. Dimon in the lead, argue that they know how to manage money and make it grow. They argue further that they do what they do best, free of government oversight and regulation...

The most urgent message in all of this is that effective government regulation — four years after the banks and Wall Street houses plunged America into recession and were bailed out by the taxpayer — needs to be put into place. The Wall Street Reform and Consumer Protection Act, the so-called Dodd-Frank bill designed to upgrade federal regulation, was signed into law in July 2010.

Yet vaunted financial leaders such as Mr. Dimon have fought the measure, waging war with the government over the regulations implementing the law. No fewer than nine bills in Congress would weaken its provisions. It also doesn't help public perceptions when bank executives making up $14 million a year have to be fired or forced to retire for colossal trading mistakes.

When workers lose their jobs in a recession, they have time that could be spent in training programs targeted to the needs of employers. Of course, there is a hitch: during a recession, employers are not hiring, so at the very time there are lots of people available to train, employers don't need new workers. As the economy improves (like it is now), it opens the door to training tied to the needs of businesses that are hiring. 

As the Philadelphia Daily News reports, the Corbett Administration is working hard to miss this opportunity. Funding is being cut for programs aimed at helping low-income workers obtain skills that will allow them to get jobs that pay well enough for them to become self sufficient. The administration is instead seeking to place low-income adults into the very jobs that pushed them onto public assistance in the first place: high turnover minimum wage jobs.

What was it that Marie Antoinette said, "Let them go to the Pittsburgh Opera"?

• Holly Otterbein, Philadelphia Daily News — Corbett cuts seen as wounding job seekers

Philadelphia’s jobs programs, which provide services like literacy classes, job training and resume coaching, have lost about 50 percent of their funding due to state cuts and the loss of federal stimulus dollars. The state offers the programs to welfare recipients and other members of the public to improve their chances of finding employment.

Community Legal Services attorney Michael Froehlich said the cuts will force more people into dead-end work. He argues that people who lack training certifications or degrees are more likely to wind up in minimum-wage, unstable jobs.

If adult job seekers do go to the Pittsburgh Opera, they will likely have some local company. The Corbett administration is lowering state support for home care providers in the Southwest. 

• Gary Rotstein, Pittsburgh Post-Gazette — Home care providers decry proposed state cuts

In other training news, the Harrisburg Patriot-News profiles the new president of the Harrisburg Area Community College (HACC) and the federal, state and local budget cuts he has to grapple with.

• Ivey Dejesus, Patriot-News — President of Harrisburg Area Community College looks to the future in challenging economic times:

John Sygielski assumed leadership of Harrisburg Area Community College with a good intention: He would ride his bike to work.

The short commute through midtown barely taxed the avid sportsman.

Nine months into the job, the president of Pennsylvania’s oldest and second-largest community college has had to put the bike away...

This week, he prepares to submit to the Board of Trustees the proposed budget for next year — and contend with tough measures in store.

“There will be positions that won’t be filled,” Sygielski said. “There will be some layoffs and there will be some early retirements.”...

In addition to reduced funding and enrollment, HACC’s funding from its 22 sponsoring school districts has also declined. Those school districts have largely responded to their own budget cuts...

Gov. Tom Corbett cut $10 million in state aid to community colleges in his 2012-13 budget plan. The state Senate restored that aid in a budget bill it passed last week, but the outlook in the final budget isn’t certain. Corbett wants a lean budget, and the state House of Representatives still has to weigh in on the spending plan.

The Pennsylvania Commission for Community Colleges said the void would hurt capital projects such as updating labs, equipment and classrooms. Collectively, the state’s 14 community colleges have a list of “shovel-ready” projects that exceeds $100 million, according to PCCC.

Lisa Haver has an excellent op-ed in the Philadelphia Daily News this morning on the School Reform Commission's plan to end public education in Philadelphia.

• Lisa Haver, Philadelphia Daily News — The end of public education in Philadelphia:

Since the onset of the privatization movement, entire school districts, including Philadelphia’s, have been placed in the hands of those with no degree or experience in education. The School Reform Commission has appointed the former head of the Philadelphia Gas Works to decide the future of Philadelphia’s schools. [Chief Recovery Officer Thomas] Knudsen may know how to send out a utility bill or shut off someone’s gas, but only a city that is abdicating its responsibility to its children would allow him to decide what is best for the education of our children.

In a similar vein, The Washington Post has reprinted a commencement speech by Richard Rothstein of the Economic Policy Institute.

• Valerie Strauss, Washington Post — The fantasies driving school reform: A primer for education graduates

This week at Third and State, we blogged about the Pennsylvania Senate's passage of a budget, movement on a bill to legalize predatory payday lending in the state, a big rally at the state Capitol, analysis of the April jobs report, and much more.

IN CASE YOU MISSED IT

• On the state budget, Sharon Ward wrote about the Senate's passage of a state budget bill this week that improves upon the Governor's budget but still makes deep cuts to education and health services. Earlier in the week, she had a blog post on the Senate budget when details first emerged. Chris Lilienthal highlighted a Monday rally at the Capitol that brought 700 Pennsylvanians to Harrisburg to call on lawmakers and the Governor to save the General Assistance program and restore cuts proposed to county services for children, the homeless and people with disabilities. Plus, Mark Price blogged about concerns that the state will not spend all the tax revenue it collects, creating a further drag on the economy.
• On banking, Mark Price blogged about committee approval of a state House bill that would legalize predatory payday lending in Pennsylvania and what that would mean for the state's consumers and economy.
• On jobs and the economy, Mark Price shared analysis of April's U.S. jobs report.
• Finally, Mark Price had a roundup of news on the economic impact of state and federal budget cuts, the prospect of higher interest rates on student loans and the geography of manufacturing. 

More blog posts next week. Keep us bookmarked and join the conversation!

The headline on an editorial by The Daily Review of Towanda says all you need to know about payday lending.

• The Daily Review — Loansharking should not be legal in Pa.:

Yet some lawmakers favor a bill that would allow payday lenders to operate legally in Pennsylvania, under the rationale that some borrowers have obtained such loans over the Internet despite the state prohibition, or have obtained them in neighboring states.

Rolling over is not the way to protect Pennsylvania consumers, however.

The bill purports to protect consumers from bad practices by limiting interest rates to "just" 28 percent, but it doesn't limit fees. Nor does it preclude borrowing even against Social Security or veterans' benefits.

Several original cosponsors have taken a closer look at the bill and withdrawn their support. Good for them.

The web site Stop Predatory Payday Loans In Pennsylvania has a full explanation of the House Consumer Affairs Committee votes to amend legislation that would legalize predatory payday loans in the state.

• Stop Predatory Payday Loans In Pennsylvania — House committee approves 300% interest rate debt

Also Wednesday, the state Senate passed a budget.

• Laura Olson, Pittsburgh Post-Gazette — Pa. Senate votes to boost spending by $500M:

A state budget for next year that would spend $500 million more than the governor's proposal passed the Senate on Wednesday, setting up weeks of give-and-take between the Corbett administration and Republican legislative leaders.

When unemployment is high, the worst possible thing the public sector can do is collect tax revenue and not spend it. When a state government collects revenues and fails to spend what it collects, the economy grows more slowly. Yet this is precisely the position now being staked out by the Corbett administration in response to the Senate budget.

As The Philadelphia Inquirer reports this morning, the Governor reacted to the Senate budget by noting he considered the extra $500 million in spending a ceiling for budget talks. To be clear, the Governor's position does not relate to the classic debate about the proper level of taxation —  the additional revenue is now coming in with the current level of taxation. The Governor is advocating for a partial repeat of the last budget cycle where more than half a billion in tax revenue was left unspent. The result: less investment in our future, more essential services left unmet, more suffering for struggling families, and fewer jobs. An unbalanced approach.

• Angela Couloumbis, The Philadelphia Inquirer — Corbett too dislikes cuts, but doesn't see clear way out

But Corbett today called the additional $500 million “a ceiling.”

“These are negotiations, and negotiations have two ends and we will work toward something in between,” the governor said.

He added: “Would I consider putting some of that money in? Yes, I would consider it … But $500 million is a lot.”

The Senate plan would restore $245 million of the $253 million that Corbett is proposing to slice from funding for the 18 schools in the State System of Higher Education. It would also restore tens of millions in basic education funding, including $50 million for distressed schools and another $50 million for Accountability Block Grants that help pay for early childhood education.

Room 148 of the State Capitol might as well double as a Capitol broom closet. That's where the House Consumer Affairs Committee this morning rushed out amendments to House Bill 2191, which legalizes predatory payday lending in Pennsylvania.

The amendments to HB 2191 were misleadingly pitched as adding more consumer protections to the bill. Even the Navy Marine Corps Relief Society took a look at these amendments and said they do "nothing to mitigate the already harmful aspects of HB 2191," and that one amendment "actually worsens the problem it claims to solve."

What is Payday Lending? Payday lending encompasses small loans, usually for two weeks or less, that require a post-dated check or electronic access to a borrower’s bank account as a condition of the loan. Fees and interest in states that allow payday lending typically total $15 to $17 for every $100 borrowed — amounting to an effective annual percentage rate of more than 300 percent for a loan due in full in 14-days.

One focus of the amendments this morning was language banning renewals or rollovers of a payday loan, as if that was a solution to stopping the long-term cycle of debt. It is not.

Payday lenders support amendments that ban renewals and rollovers because they know how to circumvent them. To avoid appearing to "rollover" or "renew" the debt, lenders ask the borrower to pay off the old loan and take out a new loan by paying a new fee and writing another check. Also, in a practice called "touch and go," lenders take a cash "payoff" for the old loan that they immediately re-loan with new loan funds the next day.

Here’s how it works: To repay the first loan, the borrower lets the lender cash the original post-dated check or pays the lender $300 in cash to tear up the check. In either case, they borrow again immediately or as soon as allowed by law. 

Under HB 2191 as amended, people would be able to borrow again the next day. In this way, a borrower in Pennsylvania could be indebted every payday of the year!

Because these types of transactions technically do involve paying off the loan — if only for one day before a new loan is originated — they are not considered renewals or rollovers, thus allowing serial use of payday lending to continue unabated. In states with a rollover ban, borrowers are stuck in an average of nine loans per year, and payday lenders earn 60% of their revenue from borrowers with 12 or more loans a year.

As the Keystone Research Center explains in a new policy brief, Bankrupt by Design: Payday Lenders Target Pennsylvania Working Families:

Research and experience in other states shows that payday loans with triple-digit APRs and quick due dates lead to the accumulation of long-term debt for working families, rather than serving as timely financial aid, as the industry often claims.

Customers typically do not use a payday lender just once; the average payday borrower takes out nine payday loans per year. Many borrowers cannot afford to pay back the principal, let alone the principal plus high interest and fees, two weeks or less after borrowing. 

When borrowers do pay back the loan, they often need an additional loan to meet their already established bills and obligations. The structure of the payday product itself exploits the already stretched budgets of low- and moderate-income families by luring them into a debt trap.  

In today’s committee meeting, Rep. Jesse White noted that in his legal practice helping low-income rural families struggling with bankruptcy, his clients often identified their use of payday lending (when it was legal in Pennsylvania) as the point at which their financial troubles got out of control.

It is no surprise then that the typical payday borrower takes out multiple (non-concurrent) loans over the year, each time falling further behind on their bills. It is also why payday borrowers are twice as likely to file for bankruptcy as applicants denied a payday loan. Payday lenders succeed not by targeting the completely destitute but by targeting desperate but resourceful people they can squeeze for money.

Predatory payday lending doesn't just put the squeeze on borrowers; excessive fees leave borrowers with less money to spend on goods and services, such as rent and food. This ends up erasing an estimated 1,843 good jobs from the economy. In this way, HB 2191, even with amendments, would transfer money from Main Street Pennsylvania to out-of-state and foreign payday lending corporations. 

Under current Pennsylvania law, payday lending at annual interest rates of 300% or more is illegal. It's also immoral. HB 2191 would do more harm to Pennsylvania than good.

The Pennsylvania Senate approved a $27.6 billion budget plan today by a vote of 39-8. The plan improves upon the budget proposed by Governor Tom Corbett, but deep cuts to education and health services remain.

On Tuesday, the Senate Appropriations Committee, in a rare display of bipartisanship, adopted two Democratic amendments and unanimously approved the spending plan.

The Senate budget, Senate Bill 1466, finds savings from reduced spending on general obligation debt and school employee retirement costs. Most departments remain unchanged. Funding for education, public welfare and health account for the bulk of the changes. 

In early public statements, the Governor is not on board, calling the Senate budget plan "unsustainable." It is not clear if that is saber rattling or if the Governor will agree to a plan that spends $27.6 billion, $517 million more than he proposed in February. 

The Senate plan also leaves money on the table. The Governor’s proposal to cap the sales tax vendor discount, which would have saved $41 million, is gone. The capital stock and franchise tax cut, worth $90 million this year and $150 million more the following year, remains. So the budget continues to cut services and shift costs to local taxpayers while continuing tax breaks we cannot afford. 

Get a full overview on the Senate budget from the Pennsylvania Budget and Policy Center.

The U.S. economy is growing, albeit too slowly to make a substantial and badly needed dent in the unemployment rate. Growth in the U.S. economy will almost certainly mean continued growth in the Pennsylvania economy.

The most important risk to Pennsylvania's job growth in 2012 remains job losses among teachers, nurses and other public servants caused by federal and state budget cuts. 

In 2011, Pennsylvania shed more than 22,000 public-sector jobs. It is too early to know whether 2012 will bring similar losses, but as public agencies continue to grapple with revenue shortfalls, the predicted job losses and service cuts mount.

This morning’s news is full of stories about layoffs, tax increases and service cuts scheduled to take effect over the next few months all across the commonwealth.

Service cuts and layoffs by the Port Authority in Pittsburgh are helping people think twice about traveling into the city to spend money, illustrating once again that economic austerity erases jobs and undermines the quality of life in a community.

• Jon Schmitz, Pittsburgh Post-Gazette — Port Authority's failures frustrate fans, runners:

For many transit riders, Saturday's fireworks show at PNC Park was followed by a dud.

Port Authority says it can no longer afford to provide extra Light Rail Transit service after crowded stadium events. But last weekend, a staffing shortage prevented it from meeting even its stripped-down regular schedule.

Hopefully, Pittsburgh Opera fans don't rely on public transportation; otherwise Governor Corbett might get as cool a reception in the opera house as he is expected to get outside of it thanks to his mixed brand of economic austerity, tax cuts and cash for businesses and fewer art teachers for the kids.

• Eleanor Chute, Pittsburgh Post-Gazette — Voices rise against Pittsburgh Opera's award for Gov. Corbett:

When blogger Jessie Ramey of Point Breeze thinks of opera, the governor and arts education together, she said "The Beggar's Opera" comes to mind because "public schools have become beggars, hoping to salvage their arts curriculum with donations."

When the Pittsburgh Opera thinks of opera, the governor and arts education together, it gets ready to award a Lifetime Achievement Award to Gov. Tom Corbett and his wife, Susan, for their support...

"This is not something that is anti-opera. This is about what's happening to funding in our public schools," she said.

The Corbett award, she said, "really hit a nerve. People are really reacting, and they're passionate about arts education.

"The award has attracted about 300 comments on the opera's Facebook page questioning the decision, calling it "unreal," "deplorable" and "unbelievable."

In other economic austerity news:

• Bill Peschel, Harrisburg Patriot-News — Central Dauphin school employees wait for furlough notices this week

Incoming Superintendent Carol Johnson said she can’t yet share details of the process involving 74 teaching positions and 10 support staff being cut.
 

• David Singleton, Scranton Times-Tribune — USPS: Closing of Scranton processing center will take time:

The closing of the U.S. Postal Service processing and distribution center on Stafford Avenue is probably months away even if there is no action in Washington that would further delay the planned shutdown.

A moratorium on the consolidation of the Scranton regional center and hundreds of others across the country is set to lapse Tuesday, but nothing will happen immediately, Postal Service regional spokesman Ray Daiutolo said...

With Congress at work on alternatives that could stall or reverse the planned closures, the 300 employees at the Stafford Avenue facility whose jobs would be affected are still hopeful of a reprieve, said Kevin Gallagher, president of American Postal Workers Union Local 101.
 

• John Clayton, York Daily Record — York City schools' proposed cuts leave athletes, coaches bracing for the worst

• Megan Lello, WITF — Handful of blind midstate workers laid off in temporary cuts

• Joe Cress, Carlisle Sentinel — Big Spring board approves budget with 2.2 percent tax increase:

Big Spring School Board Monday approved a preliminary $41.2 million budget for 2012-2013 that hikes the real estate tax by 2.2 percent while cutting the equivalent of 10.5 teachers from the payroll.
 

• Angela Couloumbis and Troy Graham, The Philadelphia Inquirer — Some Philadelphia lawmakers want to redirect gaming revenue to city schools:

As Philadelphia school officials were pleading with City Council for more money Tuesday, a group of Philadelphia state legislators was pushing a bill to redirect gaming revenue to the schools.

Roughly $86 million a year generated from gambling now goes toward reducing the city wage tax for people who live or work in Philadelphia.

One of the more unseemly and destructive features of the last two years has been the repeated hostage taking by members of the U.S. House and Senate. Remember the debt ceiling fight last year when the economy was the hostage, or again when jobless Americans were taken hostage as unemployment benefits were set to run out at the end of last year?  

Well, now it's the young with student loans. As Heidi Shierholz, Natalie Sabadish and Hilary Wething point out, the labor market for people under 25 remains grim. Those fortunate enough to have graduated and are now repaying their student loans can look on in horror as electoral politics is stopping action to prevent the interest rates they pay on their student loans from doubling.

• Erie Times — GOP blocks Senate debate on Dem student loan bill:

Senate Republicans derailed a Democratic bill on Tuesday keeping interest rates on federal college loans from doubling July 1 in an election-year battle aimed at the hearts — and votes — of millions of students and their parents.

Republicans said they favor preventing the interest rate increase but blocked the Senate from debating the $6 billion measure because they oppose how Democrats would pay for it: Boosting Social Security and Medicare payroll taxes on high-earning stockholders of some privately owned corporations.

I should note Natalie Sabadish, now of the Economic Policy Institute, is an alumni of the Keystone Research Center. Speaking of KRC alumni, Howard Wial, now of the Brookings Institution, and his coauthors have a fascinating paper out on the geography of manufacturing production in the United States. Check it out.

• Susan Helper, Timothy Krueger & Howard Wial, The Brookings Institution — Locating American Manufacturing: Trends in the Geography of Production Manufacturing, U.S. Economy, Exports, Cities, Job Creation

Action on the state budget began in earnest Monday with state Senator Jake Corman, chairman of the Appropriations Committee, releasing important details on the Senate budget plan that will be advanced this week.

The proposal would increase Governor Tom Corbett's budget proposal by $500 million, with total spending rising from $27.15 billion to $27.65 billion for 2012-13. The Senate plan rejects $191 million in fund transfers and new revenue and proposes new spending cuts of $165 million. Those spending reductions were not yet detailed.

According to a Capitolwire.com report (subscription required), the Senate budget plan:

• Restores $245 million to higher education;
• Does not include block grants for county human services or basic education;
• Reduces the county human services funding cut from 20% to 10%;
• Restores $50 million to Accountability Block Grants (which fund quality pre-kindergarten and full-day kindergarten); 
• Restores $14 million in cuts to early childhood education;
• Reduces the transfer from the Keystone Recreation, Park and Conservation Fund (Key ‘93 Fund) from $38 million to $19 million; 
• Cuts PHEAA by $8 million rather than the $19 million proposed by the Governor; and
• Maintains $59 million for the CURE health research program in the Tobacco Settlement Fund.

Senator Corman, who announced the details, said the Senate wanted to take a step back on the proposed education block grant because "a lot of people are opposed to it" and will wait to get more feedback from school districts. On the human services block grant, Corman said, "we did not get into whether it is block granted or not." 

It’s not clear that a 10% cut in county human services will seem like much of a victory to the folks fighting that battle. And since House leaders had been talking $100 million for Accountability Block Grants, there may be some trading to come. It’s not clear whether we can get a spend number higher than $27.615 billion so there is a lot more work to be done.

Will welfare programs get cut again?

The Senate plan includes $40 million in revenue from "recalculating Social Security and welfare costs." The Social Security side is what school advocates have identified as double counting on charter school Social Security payment. The $165 million in unspecified spending cuts, plus the welfare savings, could be a cause for concern.

The preliminary revenue estimate released by the Independent Fiscal Office (IFO) last week provided crucial cover to state lawmakers who have been hammered for months in Harrisburg and in the press about the consequences of the Governor’s proposed cuts. The IFO, which was established precisely for the purpose of providing a revenue estimate "independent" from the Governor, projects that Pennsylvania will end the current fiscal year with about a $400 million balance, and raise $400 million more than originally projected in the new fiscal year.

To make the Senate plan more palatable to lawmakers, especially those in the House loathe to spend a dime more even if bridges are falling down around them, Senator Corman argued that the spending plan would meet TABOR targets. That, of course, should send shivers down all of our spines.  

TABOR — the Taxpayer Bill of Rights — is the failed experiment in Colorado, which limited state spending to a formula of inflation plus population growth. If tax collections run higher than that, officials are supposed to send the money back to taxpayers as a rebate. In 2005, voters in Colorado passed a referendum suspending this crazy system for five years. 

Why would voters turn down a tax rebate check? I guess they tired of the gimmick. The last time I looked, local governments had passed 1,400 tax increases to make up for state funding cuts.

Prevention is the path to fiscal responsibility.

Those were the words of Tony Ross of the United Way of Pennsylvania at a rally in the state Capitol that brought 700 people from across Pennsylvania to Harrisburg today.

Many speakers called on Governor Corbett and the General Assembly to restore funding for the state’s General Assistance Program.

General Assistance is a benefit of last resort that offers people who are sick or living with a disability a tiny grant allowing them to participate in treatment, rent a room in a boarding house or find a shelter bed. Women fleeing abuse use it as a lifeline when they escape their abusers. Roughly 68,000 people in every county use the program together with Medical Assistance to avoid homelessness and build a better life for themselves. Governor Corbett has proposed eliminating General Assistance.

Michael Froelich, an attorney with Community Legal Services and a strong advocate for restoring General Assistance, told the crowd that so many Pennsylvanians took time out of their busy lives to come to Harrisburg today because they wanted to send a message to our elected leaders: You should care for all Pennsylvanians, not just the privileged and wealthy.

The PA Cares for All coalition is one of the loudest voices in the commonwealth calling for the restoration of General Assistance.

The Governor's budget would also lump several proven county health and human service programs into a proposed block grant, without any goals or plan, and make an across-the-board 20% cut to funding. It will impact critical services for children, seniors, the homeless and people with disabilities.

This is a big concern for Rep. Gene DiGirolamo, a Republican and chairman of the House Health and Human Services Committee. He vowed to fight hard to restore that funding.

We hope he does, and that his colleagues listen. Otherwise, hundreds of thousands of Pennsylvanians will be left in the dark and demand for homeless shelters, emergency room services, fire and police will increase – all at significantly greater cost.

Check out more photos from the rally here. You can also send a message to the Governor and to lawmakers here.

In case you missed it, job numbers for the U.S. economy came out Friday. The numbers were somewhat disappointing as nonfarm payroll growth came in barely above the level necessary to keep the unemployment rate steady at 8.1%. On the other hand, one month of data does not a trend make, and looking at nonfarm payroll growth over the last three months, growth has been somewhat stronger.

Now for the grim news, although the economy continues to grow, it is growing at a pace well below what is needed to drive the unemployment rate down quickly.

• Heidi Shierholz, Economic Policy Institute — April job growth of 115,000 likely understates growth trend:

Given that, the average job growth of the last three months—176,000 jobs—is probably the best measure of the current underlying trend.  This trend is above the roughly 100,000 jobs per month we need to keep up with population growth and keep the unemployment rate stable. The labor market thus continues to very slowly improve, but current growth is a far cry from the 350,000 jobs per month we would need to get back to full employment in three years.

In other news, The Associated Press does a good job explaining there are no easy fixes to the Pennsylvania pension problem.

• Marc Levy, The Associated Press — Corbett wants to confront pension costs 'tapeworm'

This week at Third and State, we blogged about a new revenue report from the Independent Fiscal Office offering a more upbeat view of the economy moving forward, and the likely impact of a state House-approved bill to reduce corporate taxes by nearly $1 billion by the end of the decade. We also posted Morning Must Reads on payday lending legislation and the economic cost of an asset test for Pennsylvanians in need of food assistance.

IN CASE YOU MISSED IT

• On the state budget, Sharon Ward blogged about the Independent Fiscal Office's new report predicting a smaller revenue shortfall for the current year and more robust revenue collections for 2012-13. Mark Price also had analysis on the new revenue report, noting that state budget cuts have hurt job growth.
• On tax policy, Chris Lilienthal wrote about the House's approval of a plan to reduce corporate taxes by nearly $1 billion by the end of the decade without any commitment from businesses to put Pennsylvanians back to work. Sharon Ward shared her Philadelphia Inquirer op-ed on this bill and a memo she sent to editors and reporters outlining her concerns with the bill.
• Finally, Mark Price had Morning Must Reads on legislation in the state House to legalize payday loans charging upwards of 300% in annual percentage rates, and the lost economic activity from implementing an asset test for people receiving food stamps.

More blog posts next week. Keep us bookmarked and join the conversation!

Pennsylvania’s Independent Fiscal Office (IFO) released its revenue estimate this week, offering a more upbeat view of the economy moving forward. The official revenue estimate predicts a smaller revenue shortfall for the current year and more robust revenue collections for 2012-13.

The IFO estimate leaves the General Assembly with as much as $800 million available to restore cuts proposed by the Governor. This is clearly good news, but both the Corbett administration and legislative leaders are already dampening expectations about the scale of funding restorations.

A Look at the Numbers 

In the current 2011-12 fiscal year, the Corbett budget pegged revenue at $27.1 billion, with a revenue shortfall of $719 million. The IFO estimates revenue collections will be $419 million higher, at $27.5 billion and a shortfall of $300 million for the fiscal year. With $700 million in current-year reserves, this leaves an actual year-end surplus of around $400 million.

In the 2012-13 fiscal year, the IFO predicts revenue at $28.7 billion. This is approximately $404 million higher than the Corbett budget (the IFO excludes $142 million in new revenue sources proposed by the Governor in his budget plan, since those measures have not yet been enacted). See a table with more details.

State lawmakers have been careful so far not to set a hard “spend number” for 2012-13, leaving some wiggle room to increase total spending. This is a welcome departure from the past few years when the Senate or the Governor set a target spending number and stubbornly held to it throughout budget negotiations. With revenues improving in the second half of the fiscal year, lawmakers want to see if they can make the 2012-13 budget less damaging.

Just what will $800 million in additional revenue get us in the budget?

• $168 million for the Human Services Development Fund
• $238 million for Higher Education
• $159 million for General Assistance Grants
• $100 million for Accountability Block Grants (which funds full-day kindergarten and other early childhood programs)
• $135 million for the Basic Education Subsidy or Long-Term Care (to help restore research funding out of the Tobacco Settlement fund)

Too Good to Be True?

There are a few obstacles to be overcome. The Legislature is required by law to send 25% of any year-end surplus to the state’s Rainy Day fund. Although lawmakers ignored this rule last year, we are likely to see some amount go into the bank this year — and that’s a good thing for Pennsylvania over the long term.

Revenue Secretary Dan Meuser, in responding to the revenue news, urged caution in light of economic uncertainty and fiscal pressures. Senate President Joe Scarnati pointed out the need to think in terms of longer-term fiscal pressures, and House Appropriations Chairman Bill Adolph said through a spokesman that the House would not support spending that is “unsustainable.”

There is much competition for the additional revenue. Hospitals and nursing homes have sustained cuts, and there is pressure to restore some of the Tobacco Settlement research funding that has been shifted into the Long-term Care program.

The IFO estimate did not consider the Governor’s proposals to cap the sales tax vendor discount or transfer money from the Keystone Recreation, Park and Conservation Fund to the General Fund. This is good news and bad news: adopting the vendor discount cap will raise $41 million more to restore service cuts, but the Keystone Fund transfer is a big concern for environmentalists.

The Bottom Line

Improving revenues means there is a real opportunity to see a restoration of some of the Governor’s most controversial and draconian cuts. It will take a lot of work to push the Governor and Legislature to set a spending number that allows for significant restoration. We have our work cut out for us.

The Pennsylvania House of Representatives approved legislation Wednesday that would enact nearly $1 billion in corporate tax cuts by the end of the decade. If signed into law, this bill will weaken Pennsylvania's economy and result in a long-term erosion to the quality of our schools, colleges, health care and human services for the commonwealth's children and families.

House Bill 2150 will not close the Delaware loophole that large multi-state companies use to avoid paying state taxes, but it will mean major cuts down the road and a tax shift onto individual taxpayers. And it comes with no commitment from businesses to put Pennsylvanians back to work.

Twenty-three Democrats joined most Republicans in support of House Bill 2150, while two Republicans joined 56 Democrats to vote against the bill. The overall vote as 129-58.

The bill is so costly that even Governor Corbett's administration has voiced concerns about it. Revenue Secretary Dan Meuser told Capitolwire this week: "And frankly, in a period when revenues are sensitive and budget challenges are great, the timing is not right to enter into a new program in tax reform that can create uncertainty, the governor is very interested in a perhaps larger more comprehensive tax reform bill, possibly next year if the timing is right. Hopefully it is and we will have a stronger economy and revenues are more stable.”

Most Pennsylvanians support closing corporate tax loopholes to level the playing field for all businesses and boost the state's economy. But lawmakers need to act cautiously and responsibly. House Bill 2150 takes the wrong approach. It would ensure budget shortfalls, major service cuts and higher local taxes for years to come.

The Pennsylvania Budget and Policy Center has done extensive analysis of and commentary on House Bill 2150. Find more on the bill here.

In the fall, Pennsylvania's economy looked a bit shaky. Unemployment was rising and leading indexes which predict future growth were signaling weak growth.

Today, the outlook is stronger: unemployment is falling, albeit slowly, and leading indexes (PDF) point to stronger growth over the next six months. Thus, it is no surprise that the Independent Fiscal Office has boosted its forecast for state tax revenue collections.

Although the economy appears to be back on track, the damage done because the economy didn't produce enough jobs in 2011 is evident from looking at the jobs deficit in Pennsylvania as of this March.  

Pennsylvania's jobs deficit, or the difference between the number of jobs Pennsylvania has and the number it needs to regain its pre-recession employment rate, is 267,900. That number includes the 84,200 jobs Pennsylvania lost plus the 183,700 jobs it needs to keep up with the 3.2% growth in population that Pennsylvania has experienced in the 51 months since the recession began.

The jobs deficit has remained above 200,000 for most of the last 12 months. What does it mean? It means that people who lose a job, on average, take longer to find a new one because there are already so many other people out looking for work. It also means that very few workers get wage increases that help them keep up with rising prices.

The jobs deficit in Pennsylvania would be smaller today if federal and state policymakers had not reduced their spending while unemployment is high. The Corbett administration in particular made the situation worse by leaving unspent half a billion in tax revenue and cutting corporate taxes. Now with revenue collections coming in better than expected, there is a real danger that new revenue will be redirected not to vital public services but for further corporate tax cuts.

• Karen Langley, Pittsburgh Post-Gazette — More tax income may soften Pa. budget cuts:

A higher-than-expected haul of state taxes in April and a new set of revenue projections for coming months offered hope on Tuesday to legislators seeking to soften spending cuts in the upcoming budget.

Pennsylvania collected 3 percent more general fund revenue than anticipated in April, an increase driven by strong collections of corporation and sales taxes. The additional $98.9 million in general fund revenue brings the deficit for the current year to $288 million, leaving it at less than half the $719 million projected when Gov. Tom Corbett delivered his budget proposal in February.

Separately on Tuesday, the new Independent Fiscal Office released a revenue forecast that shows the state bringing in $419 million more this year than projected by the administration and $396 million more next year. Director Matthew Knittel, who joined the office last fall from the U.S. Treasury, said economic conditions have improved since the Department of Revenue produced its revenue projections last winter.

School District officials in Philadelphia are arguing they might not open their doors next fall.

• Kristen A. Graham, The Philadelphia Inquirer — Philadelphia school official says that without more cash, classrooms might not open in the fall:

The Philadelphia School District's financial situation is so dire that without a $94 million cash infusion from a proposed city property-reassessment plan, schools might not be able to open in the fall, leaders said Tuesday night.

The Philadelphia Inquirer profiles one of the people Governor Tom Corbett and a majority of the Pennsylvania legislature aimed to prevent from voting in November when they passed the voter ID law.

• Amy Worden and Jan Hefler, The Philadelphia Inquirer — City woman is lead plaintiff against Pa. voter ID:

Wartime welder, civil-rights marcher, world traveler, voter — Viviette Applewhite of Philadelphia's Germantown section can boast of having been all those things.

On Tuesday, she added another title: plaintiff.

Applewhite, who is 93 and uses a wheelchair, became the lead plaintiff in a lawsuit filed here in state court by the ACLU and the NAACP challenging Pennsylvania's new law requiring voters to produce a driver's license or other photo identification before they are allowed to vote.

As I noted yesterday, the Pennsylvania House is scheduled to debate legislation today that would take a modest step toward closing tax loopholes while making business tax reductions that would cost nearly $1 billion by the end of the decade.

Today I outlined our concerns with House Bill 2150 in an op-ed in The Philadelphia Inquirer.

 Here's an excerpt:

For too long, big companies have benefited from Pennsylvania lawmakers’ refusal to close tax loopholes. They have been free to use aggressive avoidance schemes to shield their income from state taxes and shift the cost of public services to families and other businesses.

After close to a billion dollars in cuts to public schools and social services, state lawmakers from both parties are taking another look at this issue. This bipartisan recognition of the problem is welcome.

Unfortunately, one proposed cure may be worse than the disease. State Rep. Dave Reed (R., Indiana) has introduced legislation, expected to be considered today, that would take a modest step toward closing loopholes but also give businesses tax cuts that would cost nearly $1 billion by the end of the decade. Closing loopholes only to open up big budget deficits is not the way to go.

But lawmakers do need to address this issue responsibly. In the three years after the recession hit, 265 profitable Fortune 500 companies managed to avoid paying state taxes on at least half their profits, according to a report by the Institute on Taxation and Economic Policy. Sixty-eight companies on that list — including such Pennsylvania-based companies as Heinz and Comcast — paid no state income tax on profits in at least one of those years.

None of these companies is breaking the law — and that’s exactly the problem.

Read the full op-ed here.

Happy International Workers Day! What's that, you ask? Historian Jacob Remes breaks it down for you.

• Jacob Remes, Alternet — May Day's Radical History: What Occupy Is Fighting for This May 1st

Rachel Black at the New American Foundation puts the lost economic activity at $45 million a year for the Corbett administration's implementation of an asset test for food stamps, known formally as the Supplemental Nutrition Assistance Program (SNAP). Based on estimates by Josh Bivens at the Economic Policy Institute, each $127,000 of spending in the economy generates 1 payroll job. By this estimate, the asset test will lead to the loss of just over 350 jobs in Pennsylvania over the next 12 months.

• Rachel Black, The New America Foundation — How NOT to go Retro: Pennsylvania Brings Back Asset Limits for SNAP

First, reinstating asset limits will hurt the state’s bottom line by reducing revenue and increasing cost. Since SNAP is almost entirely federally funded, the $2.7 billion a year that it brings in to the state is really the proverbial free federal money. Curbing the number of families who participate in the program will bring this down. If one percent of participants (8,000 families) are kicked off the program, as the Department of Public Welfare estimates, the state would lose $26 million based on current USDA data. The state would also lose the multiplier effect advantage of having that money spent immediately and circulate locally, which Economist Mark Zandi values at $1.73 for every $1 in SNAP benefit. So, Pennsylvania would actually be out $45 million in lost economic activity.

Not only will the state have less money coming in, it will have more money going out. The only portion of SNAP that is financed by the state is half of its administrative costs. Any savings to the state from reducing its administrative costs on one percent of its caseload will be eclipsed by the cost of newly verifying the assets of the remaining ninety-nine percent of families. In contrast, states that have gone the way of eliminating asset tests actually save money. Virginia, for example, has saved about $250,000 a year by getting grid of its asset test for the Temporary Assistance to Needy Families program and Oklahoma has saved about $1 million by doing the same for Medicaid.

In sad news, there was a death from a fall on a construction site in Philadelphia on Monday.

• Michael Hinkelman, The Philadelphia Inquirer — Worker Dies at Job Site:

Authorities said the 30-year-old unidentified Hispanic male came in contact with a live wire and fell to the ground while working on the third floor of a building under construction at 20th and Parrish streets.

The Center for Construction Research and Training has partnered with the National Institute Of Occupational and Health (NIOSH) and the Occupational Safety and Health Administration (OSHA) to mount a campaign to prevent deaths from falls in the construction industry. As the center notes, Latino construction workers suffer a greater proportion of fatal falls than their non-Latino counterparts. Below are snapshots of an interactive map on construction fatalities which you can explore here.

• The Center for Construction Research and Training — NIOSH, OSHA and CPWR-The Center for Construction Research and Training Announce National Campaign to Prevent Falls:

The National Institute for Occupational Safety and Health (NIOSH), the Occupational Safety and Health Administration (OSHA), and CPWR – The Center for Construction Research and Training announced today the launch of a construction fall prevention campaign. It is a nationwide initiative to prevent falls at small residential construction sites. Falls continue to be the leading cause of work-related injury and deaths in construction.

According to the U.S. Bureau of Labor Statistics, in 2010 there were more than 10,000 construction workers in the private construction industry who were injured as a result of falling while working from heights on the job and another 255 workers were killed. Latino construction workers also bear a disproportionate amount of the burden, suffering a greater proportion of fatal falls compared to their non-Latino counterparts.

I wanted to share a memo I sent to editors and reporters today outlining some concerns about legislation that is expected to come before the Pennsylvania House this week. Here is an excerpt from the memo:

The Pennsylvania House will take up House Bill 2150 this week which couples a half-hearted attempt to close corporate tax loopholes with nearly a billion dollars in business tax cuts by the end of the decade. These tax cuts will do little to boost the economy but will drain needed resources for education, hospitals and infrastructure in Pennsylvania.

Corporate tax loopholes are a costly problem for Pennsylvania, and House Bill 2150, sponsored by Rep. Dave Reed, is an important acknowledgement of that problem. The state Department of Revenue has estimated that loopholes cost the state more than $500 million a year.

Responsible tax reform should be a priority for lawmakers, but this bill restructures the state’s tax system in a way that Pennsylvania cannot afford. It would enact nearly $1 billion in tax cuts by the end of the decade – offset, at best, by $250 million or so in new revenue from closing loopholes. The full House is expected to debate and vote on amendments to the bill Tuesday, May 1.

Both House and Senate leaders have signaled displeasure with the Governor’s proposed 2012-13 budget, which includes cuts to higher education, county human services, Accountability Block Grants and the General Assistance program, and provides no relief for school district funding cuts enacted last year. The slow economic recovery, aging population, higher pension costs, and rising health care costs will continue to exert pressure on the state budget for several years. 

Given this set of long-term fiscal pressures, lawmakers need to act prudently on both the revenue and expenditure side of the budget. House Bill 2150 leans more toward reckless than prudent, promising long-term tax reductions during a period when the commonwealth is likely to face great difficulty paying its bills. 

There's more and you can read it all at the Pennsylvania Budget and Policy Center's web site.

The state legislature is back today, and this Thursday at 9 a.m. the House Consumer Affairs Committee will hold a hearing to discuss state Representative Chris Ross's bill to legalize payday loans charging upwards of 300% in annual percentage rates (APR).

Currently in Pennsylvania, APRs on small loans cannot exceed 24%, effectively banning firms like Advance America, now owned by Mexican billionaire Ricardo Salinas Pliego, from preying on vulnerable Pennsylvania consumers. Payday lenders profit by trapping working families with cash flow problems in debt. The Philadelphia Inquirer explains the predatory economics of these loans using an example from a period in Pennsylvania when some forms of payday lending were legal.

• Jeff Gelles, The Philadelphia Inquirer — Consumer 12.0: Online payday loan firms open flout Pa. laws:

Pete Alfeche doesn’t recall exactly how he first encountered CashNetUSA, the online affiliate of the payday lender Cash America. He believes he got an e-mail pitching a quick loan.

But Alfeche, a Havertown insurance adjuster, is convinced of one thing: As much as he believed he needed the $250 he borrowed that day five years ago, taking the high-cost, short-term loan was a mistake he’d like to help protect others from making. Within a year, he had paid nearly $2,000 in finance charges, much of it to repeatedly roll over the initial loan.

The way that payday lending drives borrowers deeper into debt is demonstrated by the fact that payday borrowers are twice as likely to file for bankruptcy as applicants whose request for a payday loan was denied. Payday lenders catch a family in financial distress and profit by making multiple loans to them because, given the punitive interest and fees, the borrowers can't pay off their loans.

The lender, as the example above illustrates, makes thousands before a family is finally pushed into bankruptcy — in Alfeche's case the lender netted nearly eight times the size of the original loan! Excessive fees and rates don't just hurt struggling families, they also crowd out their spending on other goods and services in the local community, making it harder for them to pay their rent or buy groceries.

It is hard to take any of the industry lobbying on this issue seriously, but the arguments get more interesting as the hearing gets closer and closer. In addition to arguing that this is a jobs bill, some proponents of the bill now argue that allowing payday lenders to charge upwards of 300% interest rates is a way to better regulate payday lenders who now break the law by marketing and selling payday loans to Pennsylvanians. Does this mean we can soon look forward to a bill to legalize bank robbery? After all, we have laws against robbing banks and people still rob them. So let's legalize bank robbery so as to better regulate it!

In other news this week, the Corbett administration is moving forward with its asset test for food stamp benefits.

• Jan Murphy, The Patriot News - Pennsylvania food stamp program will trap people in poverty, critics say:

The Central Pennsylvania Food Bank anticipates demand for emergency food assistance will grow once the asset test takes effect. The food bank is drumming up donations to make sure they can handle it, Associate Director Joe Arthur said.

“It’s not the time to be putting more restrictions on the program. We feel now is the time to provide all the help we can,” Arthur said, adding that many are still recovering from the economic downturn.