Third and State
This eighth week of the budget impasse turned theatrical as the Pennsylvania House spent hours Tuesday casting line-item veto override votes on 20 items in the Republican budget that Gov. Wolf vetoed in its entirety back on June 30. The Legislative Reference Bureau issued an opinion that under the state constitution the General Assembly must reconsider a vetoed bill in the same manner in which it was vetoed. Therefore, because the governor vetoed the whole budget, it must be reconsidered as a whole “and not on a line-by-line basis.” The Pennsylvania Budget and Policy Center urged legislators not to waste time on these likely unconstitutional line-item veto overrides.
It was all for naught. They voted anyway and failed to get the two-thirds majority required to override the governor’s veto. PBPC then called for legislators to begin seriously negotiating a sustainable budget. With talks still apparently on hold, a new poll released this week reveals that voters blame the legislature for the budget impasse.
Stopping the game-playing … The day after the line-item veto override votes, the Pennsylvania Budget and Policy Center joined budget coalition partners at a press conference in the Capitol Rotunda to challenge legislators to stop playing games and bring real compromises to the negotiating table. PCN will rerun the press conference at 11:35 tonight and at 3:30 p.m. on Sunday, or you can watch the PLS Reporter’s video of it.
PBPC's Jeff Garis & Rev. Sandra Strauss of PA Council of Churches
Fed Up with the Fed talking about raising rates … KRC Executive Director Stephen Herzenberg joined an Action United delegation from the Philadelphia Fed region at a gathering of the “Fed Up Campaign” at the Jackson Lake Lodge in Wyoming in the second half of this week. The campaign is urging the Federal Reserve -- which is holding an annual symposium at the lodge with policymakers, economists and bankers from across the country – to focus on wage and job growth for average Americans instead of raising interest rates.
As Steve said in a KRC press release on the event, “The heartbreaking struggles of people trying to support their families and the hard numbers – on the lack of inflationary pressure, the Depression-era unemployment rates among people of color and wage stagnation – drive home the same message: reducing unemployment and driving up wages need to be the top priority of the Fed for the foreseeable future.”
Fed Up Campaign
Calling for sensible budget compromises … Interim PBPC Research Director and KRC labor economist Mark Price related Pennsylvania’s latest job growth numbers to the need for a sustainable state budget in an op-ed that appeared this week in the Shamokin News-Item and the York Dispatch.
A Goldilockian severance tax … Check out PBPC consultant Jan Jarrett’s latest blog post on Third and State. She notes that the proposed severance tax on gas drilling meets the modified “Goldilocks Standard” in that it’s not too big and not too small but “just right” to produce a stable, recurring source of revenue to help adequately fund education in Pennsylvania.
Just getting by … KRC’s Mark Price issued a press release this week announcing updates to the Economic Policy Institute’s Family Budget Calculator, which shows what a family needs to achieve a modest standard of living in rural and urban Pennsylvania communities. Mark linked the new figures to the need for an increase in the minimum wage.
In a story on Lancasteronoline today, East Hempfield Township resident Duane Smith made the same observation that our analysis of the property tax relief plans of Gov. Wolf and House Republicans revealed a month ago: The two proposals aren’t all that different.
That observation led Smith to tell the reporter, “To me, Republicans are the ones that are holding up the (budget) process.” He is not alone in his thinking. Fifty-four percent of voters surveyed in a new Daily News/Franklin & Marshall poll released today said they blame the legislature for the budget impasse, compared to only 29 percent who hold the governor responsible.
Poll director Terry Madonna explained the results this way in a Daily News story: “Wolf gets elected by 10 points and says he wants to increase education spending. That was a big issue. How’s he want to pay for it? With a shale tax. What he has proposed to do, the voters want.”
Let me repeat that last part because it’s important for Republican legislators to remember eight weeks into the budget impasse and two days after their constitutionally creative line-item veto override votes failed: “What he has proposed to do, the voters want.”
So let’s do a quick review here. Gov. Wolf has proposed a property tax relief plan that is similar to House Republicans’ plan. He also has proposed a funding increase for education and a severance tax that voters like.
The poll also revealed a certain amount of voter impatience: two out of three respondents said lawmakers shouldn’t be paid until the budget situation is resolved.
You don’t need more research to conclude that it’s time for the legislature's leadership to bring some real compromise to the negotiating table.
Proposed PA Severance Tax Meets Modified Goldilocks Standard – Not Too Big or Too Small, But Just Right
To restore funding for education, boost economic development and strengthen oversight of the gas drilling industry, Governor Wolf proposed enacting a severance tax on gas drilling. Pennsylvania is the number two producer of natural gas in the country, but the only major producer without a severance tax.
According to a study by the U.S. Energy Information Administration, other major gas-producing states generate significant percentages of their revenue from severance taxes. Here are some states where severance taxes make up substantial shares of revenue:
- Alaska -- 72 percent
- North Dakota -- 54 percent
- Wyoming -- 39 percent
- Texas -- 11 percent
As the EIA notes, Pennsylvania “currently derives less than 1 percent of its revenues” from its impact fee per gas well. The EIA adds that, if Pennsylvania imposed a severance tax on production similar to West Virginia’s, which the governor has proposed, the revenues generated “would still be less than 3 percent of the state's total tax collections”, and only a little above the national average of 2 percent. West Virginia’s severance tax, which applies to coal and other commodities in addition to gas drilling, generates about 12 percent of its total revenue.
As we’ve seen over the last several years, fossil fuel prices are volatile. So an over-reliance on severance taxes could expose states to sharp fluctuations in revenues that are painful when prices fall. At an anticipated 3 percent of Pennsylvania’s overall revenue, a West Virginia-like severance tax would generate stable, recurring revenue that could be used to adequately fund our schools and help repair the structural deficit while limiting the commonwealth’s reliance on it for total revenues.
The governor’s proposed severance tax is not too little, as is the current impact fee, and not too large of a portion of total state revenue. It’s just right.
Last week’s budget negotiations were marked by what WITF called “glimmers of progress,” and Gov. Wolf classified as “good discussion.” WITF said the governor “remains committed to a historic $400 million increase in education funding.”
Capitolwire quoted House Majority Leader Dave Reed as saying: “We’ve spent the last two days focused on pensions and education, and obviously those two items are needed to get a final budget agreement. We still have differences that exist. We’re working through those differences. We’re hoping to do so in a timely fashion because there a number of other issues that need to come to the table before we have a final budget agreement.”
Reed “quipped” that “I think we have a tentative agreement on the fact that pensions and education funding are going to have to be part of a final budget agreement,” according to The PLS Reporter.
Foretelling the future of unions … Keystone Research Center Executive Director Stephen Herzenberg drew on Kati Sipp’s interview of coworker.org founder Michelle Miller, about her brief “The Union of the Future,” as he contemplated what unions will look like in the future on Third and State last week.
Decanting competing property tax proposals … A recent Pennsylvania Budget and Policy Center op-ed asked Republican legislators to imagine that the Wolf and House Republican property tax relief plans are fine wines, invited them to take a blind taste test of the two, and predicted they would find that more middle- and low-income and rural Pennsylvanians would benefit under the Wolf plan. Last week The Delaware County Daily Times, The Allentown Morning Call and The York Daily Record published the op-ed.
Kati Sipp's latest blog post on "Hack the Union" has a link to a thought-provoking interview with Michelle Miller, founder of coworker.org. The interview was prompted by Sipp's discovery of Miller's article "The Union of the Future," published as part of the Roosevelt Institute's Next American Economy project.
Miller's article and interview focus on the issue of how labor unions must adapt to the new economy. This has been a central concern of Keystone Research Center since our creation in the mid-1990s (see, for example, here, here, and here).
Overlapping Miller's view, our position has been that unions need to become more multi-employer and that the association of unions with individual companies or work sites was a unique and temporary aspect of U.S. manufacturing-based industrial unionism. We have also argued that unions of the future will often be anchored within regional service industries that are (mostly) non-mobile because they will have to operate in proximity to their geographically localized customers. Here we are thinking of unions in service industries such as janitorial services, retail, fast food, other restaurants, health care, and higher education (within which contingent faculty are now organizing metro campaigns in Philadelphia and elsewhere).
In addition, Miller and Sipp highlight the growing importance of occupational networks that extend beyond geographic regions. And they highlight that there is positive, as well as negative, potential for workers to earn money in more flexible ways than traditional full-time jobs: i.e., through part-time jobs with varied hours, whether at Starbucks, in ride-sharing, or, to use the example of my singer-songwriter daugher, through a combination of employment at Trader Joe's and managing the rental of two rooms in her house via Airbnb. Realizing the positive potential for workers requires that flexibility about hours serves them as well as the company and customers (so no just-in-time scheduling please). It also requires sharing the benefits of productivity growth (as highlighted in analysis by Dean Baker summarized here). This sharing could happen through area-wide wage and benefit standards (as established, for example, by the fast food wage board in NY) or, yes, through area-wide collective bargaining (as with building trades unions).
What's most heartening about the Miller brief and her interview with Sipp is the optimistic sense that union forms can be -- and are being -- adapted to shifts in technology and business organization. These young organizers and social observers do not conflate the death of traditional industrial union forms with an end to unionism in general. That, I suspect, is partly a generational optimism.
Progressives and unionists now in their mid-50s or older experienced the old middle-class economy distintegrate. They understandably went through a long period of mourning. Sipp, Miller, and their peers were barely born in 1980. Their optimism speaks to a growing appetite among a new generation to paint a picture of -- and to build-- an economy of the future that once again has a robust middle class. This appetite comes not a moment too soon.
Also: if you want to buy that new album by my Nashville singer-songwriter daughter, you can do that here.
It’s week six without a state budget and still no end in sight to the impasse – although negotiations between Republican legislative leaders and Gov. Wolf continue. House Speaker Mike Turzai has cancelled a trip to Israel scheduled for next week so he can continue to participate in budget talks, the Pittsburgh Post-Gazette reported.
Senate President Pro Tem Joe Scarnati said proposed tax increases in the governor’s budget remain the sticking point for Republicans, according to the Associated Press. Revenue from proposed increases in the personal income and sales taxes, and a new severance tax on gas drillers, would restore funding cut from education over the last four years, pay for property tax relief for homeowners and renters, and close a structural deficit in the state budget, under Wolf’s plan. Pennlive.com/The Patriot-News quoted Gov. Wolf as saying, "I could just roll over, but I'm not going to do that. I don't think the people of Pennsylvania want us not to invest in education."
Gov. Tom Wolf, top. Sens. Scarnati (left) and Turzai (right), bottom.
(Christian Alexandersen, Pennlive)
Better late than awful … Check out Monday’s Philadelphia Daily News editorial which makes the argument that a late budget is better than a bad budget. The editorial also cites a Pennsylvania Budget and Policy Center report that noted that drilling companies extracted more than $11.8 billion worth of gas from Pennsylvania in 2013 and paid $223 million in impact fees that year, an effective tax rate of less than 1.9 percent. “It’s hard to understand why,” the editorial states, “until you look at the campaign contributions from the Marcellus gas companies.”
Feeling better about paid sick leave … On Monday, Pittsburgh City Council passed an ordinance, by a 7-1 vote, to require employers in the city to provide their employees with paid sick leave. That’s just what Keystone Research Center Executive Director Steve Herzenberg urged them to do in an editorial in Monday morning’s Pittsburgh Post-Gazette. Steve also appeared on the Essential Pittsburgh show on 90.5 WESA radio on Wednesday to discuss the issue.
Supporters of paid sick leave during public comment period before Pittsburgh City
Council voted on Monday. (James Knox | Trib Total Media)
Following “Follow the Property Tax Money” report … The Pennsylvania Budget and Policy Center’s report comparing the Wolf and House Republican property tax relief plans, released last week, is still drawing lots of attention. An editorial based on the report appeared in the Delaware County Daily Times on Saturday, the Pottstown Mercury News on Sunday and Montgomery Media’s Roxborough Review on Wednesday.
Report co-author Steve Herzenberg also wrote a blog post on Third and State this week about the report, likening the two property tax relief plans to wines and urging legislative Republicans to take a “blind taste test” of the two.
Mad Men worrying about the tax man … An Advertising Age story published yesterday about four states, including Pennsylvania, which are considering taxing advertising services, quotes KRC’s Steve Herzenberg.
Making it up as they go along … PBPC consultant Jan Jarrett provides the numbers from Gov. Wolf’s budget proposal to prove, in a blog post this week on Third and State, that the lion’s share of revenue from a proposed severance tax, would go to increase education spending, despite what the drilling industry, some Republican legislators and their think tank supporters have been falsely claiming.
Blind taste tests often produce surprising results. In our family, for example, the men often struggle to discern which wines are red and which white.
We think that if Pennsylvania’s Republican lawmakers are subjected to a blind test (without party labeling) of which of two property tax plans they like – Gov. Wolf’s or the Republican-sponsored plan that passed the House in mid-May – many would be surprised to find that they prefer the blue (Democratic) one to the red. The similarities between the two plans – and the benefits of Wolf’s plan for many Republican areas of the state – SHOULD make property taxes one area for potential compromise in the current state budget debate.
The Pennsylvania Budget and Policy Center laid out the facts on the blue and red property tax plans in a package of three briefs released last week. Gov. Wolf’s "blue" plan was unveiled as part of his 2015-16 budget proposal in March. The Republican property tax proposal passed the Pennsylvania House of Representatives in May.
PBPC’s analysis was the first to calculate and compare how much property tax relief typical homeowners in each of Pennsylvania’s 500 school districts would receive under each plan. We also used color-coded maps so all Pennsylvanians and their representatives can see at a glance which districts would get the biggest share of tax relief under each plan as well as the actual dollar amount of relief to be received.
Here’s what we found.
- Both proposals would raise the state income tax by the same amount (from 3.07% to 3.7%) and also would raise revenues by increasing the state sales tax: the House proposal would raise the sales tax from 6% to 7% while the Wolf proposal would increase the sales tax to 6.6% but also impose it on some additional items not currently subject to the tax.
- In most school districts, typical homeowners would receive similar dollar amounts of tax relief under both plans.
The two plans also have key differences:
- HB 504 would use all the additional revenues raised for dollar-for-dollar property tax relief. The Wolf proposal would distribute less total tax relief ($3.8 billion versus $4.8 billion) and would use some revenue raised to meet other state needs, including closing the state’s structural budget deficit and reversing recent cuts to education funding. Given this difference, anti-tax advocates – who hate any net increase in revenues – prefer the House plan. But wouldn’t a true conservative favor fiscal responsibility and plugging the state’s deficit? There’s also broad support on both sides of the aisle – and among voters – for increasing the adequacy and equity of education funding.
- While the Wolf proposal would give out less total property tax relief, a higher proportion of that relief would go to homeowners. The House proposal would lavish more property tax relief on non-residential properties such as golf courses, malls and other businesses, even though Pennsylvania’s property taxes on business are already below average.
- The Wolf proposal would distribute more of its tax relief to lower-income and lower-wealth districts, including many Republican-represented rural and “property tax revolt” areas. In fact, typical homeowners in a majority of school districts in rural counties (128 of 238) would receive more dollars of property tax relief under the Wolf plan. The 10 school districts in the state in which residential property taxes are highest relative to income would receive very similar amounts of property tax relief under the House and Wolf plans.
- A larger share of the tax relief under the House proposal would go to homeowners in more affluent school districts who have high property taxes partly because they want to generously fund local schools. For example, typical homeowners in affluent Radnor Township outside Philadelphia would receive $2,960 in property tax relief, while those in the city of Philadelphia would receive $474 in relief.
So this is our plea to Republican lawmakers and to their constituents. Put on a blindfold. Have a sip. Roll it around in your mouth. “Hmm, similar and sometimes more property tax relief. A state budget no longer put together with smoke and mirrors. More funding for local schools.” How does that taste? Now have a little water, and try the other glass. “More tax cuts for shopping malls. More property tax relief for people who aren’t clamoring for it and arguably don’t need it. A perpetuation of the state's underfunding of schools and of the largest gap in funding between affluent and poor districts.”
Longstanding champions of property tax relief on both sides of the aisle in the capitol should find a lot to support in the Wolf plan if they give it a fair and objective look. If they do, Pennsylvania has a once-in-a-generation opportunity this year for real property tax reform. Here’s hoping a spirit of bipartisan problem-solving for the good of all Pennsylvanians wins out over a ritualistic thumbs-down on a proposal simply because of its blue package.
Drilling industry representatives, some Republican legislators and their think tank supporters are ignoring Daniel Patrick Moynihan’s famous caution, “you are not entitled to your own facts,” as they repeat a talking point that is just plain wrong. No matter how many times they parrot the false assertion that revenue from Gov. Wolf’s proposed severance tax will not be used to increase education funding, it won’t make it true.
The graph below clearly illustrates that Gov. Wolf’s budget proposes for the lion’s share of severance tax revenue to be used to fund education. The revenue from the tax would be deposited into the General Fund, and then allocated to the basic education funding line item. By 2019, it would add up to a $1 billion increase in the basic education funding line item.
The governor’s proposal to use the severance tax to fund education is plainly laid out and easy to find and verify. Assertions to the contrary are disingenuous, dishonest and just plain wrong.
On July 30, 1965, President Johnson signed into law the Medicare and Medicaid programs that gave millions of older and low-income people access to affordable health care. Today, more than 100 million Americans, almost one out of every three, are covered by Medicare, Medicaid, or both. It’s the closest the United States gets to providing universal health care.
Prior to 1965, almost half of all seniors in the United States were uninsured, leaving them essentially without access to quality health care and exposing them to the possibility of catastrophic medical bills. Many health care facilities were segregated by race, and some would not accept African-American patients. Although some inequalities still exist, Medicare and Medicaid removed discriminatory barriers to health care access for African-Americans because if health care facilities wanted to be paid by those programs, they had to accept all patients regardless of race.
Both programs deliver health insurance at a lower cost, including significantly lower administrative costs, than private insurance. In Pennsylvania, more than 2.5 million people – including more than 1.1 million children -- receive health care through Medicaid. It’s hard to overstate how important these two programs are to the health, well-being and financial security of older and low-income Americans.
I will turn 65 early next year. I’m looking forward to the peace of mind and savings I’ll get from enrolling in Medicare like I once looked forward to getting my driver’s license when I turned 16. So this evening I’ll raise my glass of medicinal red wine in a heartfelt “happy birthday” toast to Medicare and Medicaid.
Yesterday, Representative Turzai, Speaker of the House, said that Republicans may attempt to override Governor Wolf’s veto of the budget they passed in June. That budget raises no new revenue, does not increase school funding, does not provide any reduction in property taxes, and generates budget deficits in future years.
What would happen if the Republicans override Governor Wolf’s veto of their budget? Here are seven likely outcomes.
- 41 percent of school districts will lay off more teachers, guidance counselors, school nurses and coaches adding thousands to the 27,000 education jobs that were lost over the last four years.
- 71 percent of school districts will, once again, be forced to raise property taxes, so instead of property tax relief, taxpayers would feel more property tax pain.
- One-quarter of school districts will eliminate more language, art, music and sports programs and assess fees on students’ families who wish to participate in extra-curricular activities.
- After promising to forego a tuition hike this year, state universities will be forced to raise tuition since the increased state funding they were expecting will not materialize.
- People with disabilities and their families will continue to languish on waiting lists for critical services.
- The Department of Environmental Protection will be unable to hire the 50 inspectors it needs to ensure that gas drillers obey our laws and regulations.
- Wall Street will once again downgrade Pennsylvania’s credit adding to the $170 million in increased borrowing costs that taxpayers are already paying because of the five previous downgrades over the last two years.
Pennsylvanians want increased funds for their schools, property tax relief, a tax on gas drilling and a responsible budget – not more political grandstanding.
A new study by the University of Pennsylvania and Columbia University finds that people living near active gas drilling go to the hospital more frequently than people who do not live near active gas drilling. These sobering findings coming from an article in a peer-reviewed scientific journal should prompt a hard review of existing gas drilling regulations.
The study found that some but not all medical conditions became more common as the number and density (wells per square kilometer) of wells in a zip code increased. Specifically, people living near concentrations of wells had higher hospitalization rates for cardiologic, neurologic, urology, and skin conditions. If a zip code went from having 0 wells per square kilometer to being in one of 19 (out of 67) zip codes with the densest concentration of wells, cardiologic conditions increased an estimated 27%. The study was only possible because of a treasure trove of data maintained by Pennsylvania’s internationally recognized Health Care Cost Containment Council – a record of 93,000 hospitalizations over five years in two drilling counties (Bradford and Susquehanna) and one non-drilling county (Wayne).
While the study does not conclusively prove that gas drilling activity causes diseases, the authors theorize that exposure to toxics, diesel fumes from heavy truck traffic, noise and social stresses increase the number of people sick enough to be hospitalized.
This addition to the literature on the health impacts of drilling reinforces the conclusion of the Multi-State Shale Research Collaborative (MSSRC) that the costs of drilling have to be weighed alongside a realistic assessment of economic benefits when considering public policy on drilling. In case studies and a statistical study published last year, the MSSC found that high levels of drilling activity were associated with substantial community and socio-economic impacts. These included increases in crime, fatalities from accidents involving trucks, sexually transmitted diseases and rents. These disruptions can be particularly hard on the poor, seniors and other community members who do not benefit from the modest increase in jobs and wealth that intensive gas drilling creates.
Pennsylvania does not currently have a system to track when health effects have a direct connection to gas drilling. The Marcellus Shale Advisory Commission recommended the creation of a health registry to track health complaints related to drilling, and such a provision was included but then deleted from Act 13, the gas drilling regulation overhaul passed by the General Assembly in 2012. Governor Wolf proposed allocating $100,000 in his state budget to begin setting up a registry, but the current budget impasse has delayed, and may eliminate, that funding.
The Department of Environmental Protection is currently updating the regulations that address gas drilling. The findings of the highly credible health study done by Penn and Columbia underscore the value of good data. These findings also underscore the need for better regulation of drilling. This should include the collection of hard data that can help researchers and policymakers refine our understanding of when health problems have a causal connection to drilling.
One sticking point in Pennsylvania's budget battle is whether the next state budget needs to improve the state's fiscal condition. Recent budgets reliant on one-time revenues contributed to the repeated downgrading of Pennsylvania's debt. The Wolf administration estimates that the Republican budget proposal vetoed by the Governor would increase the state structural deficit to over $3 billion by 2016-17.
Earlier this month, the Mercatus Center, a conservative think tank at George Mason University funded by the Koch Brothers, put forward a ranking of state fiscal health that buttresses Gov. Wolf’s position on the need to address the Commonwealth’s fragile fiscal position.
The report, released July 7, ranks Pennsylvania 41st for its fiscal health based on its fiscal solvency in five categories.
Pennsylvania does worst, ranking 45th, for cash solvency, which measures whether a state has enough cash to cover short-term bills. The category in which Pennsylvania does second worst, ranking 39th, is budget solvency -- whether the state has enough money to cover its fiscal-year spending from current revenue. These two low rankings show that cutting spending without raising new revenue over the past several budgets has left Pennsylvania in poor fiscal health. We have not cut our way to prosperity (as we showed here).
Of the five Mercatus categories, Pennsylvania does best, ranking 17th, because its taxes, revenue and spending are lower than two thirds of other states (and the national average) compared to state personal income. (This measure is called "service-level solvency." Don't ask why.) This means, according to Mercatus, that Pennsylvania is in a relatively "good position to increase taxes without hurting the economy."
The Commonwealth ranks squarely in the middle, 26th, for trust fund solvency, the only one of the five measures that mentions the state's unfunded pension liabilities.
Based on the Mercatus report, another "more of the same" budget, held together with scotch tape and bobby pins, and without an increase in recurring revenues, is a recipe for sinking below even 41st for fiscal health.
By contrast, the recurring revenues in Gov. Wolf's budget, in addition to providing resources to invest in education, jobs, and communities, would begin to improve the state's fiscal health.
Keystone Research Center was among more than 75 organizations in 14 states and the District of Columbia that signed a letter sent earlier this month to Consumer Financial Protection Bureau Director Richard Cordray. The letter calls on that federal agency to issue strong rules on payday lending that (1) expand states’ existing protections; (2) enforce tougher state regulations to protect consumers from financial abuse; and (3) “put an end to the payday lending scourge once and for all.”
Payday loans are short-term loans with an average interest rate of 400 percent that borrowers usually can’t pay off without taking out additional loans and paying new fees. CFPB is in the process of crafting the first-ever federal payday lending rules which would govern payday lending nationally.
All the signatory organizations – which include faith, civil rights, credit counseling, military, veterans, housing, labor, legal, community and other groups -- are in states, including Pennsylvania, where payday lending is not allowed.
The letter was prompted by concern that CFPB’s draft rule, unveiled in March, would allow lenders to continue making payday loans that are harmful and abusive to consumers. The letter stated that “a weak CFPB rule will directly jeopardize our states’ … consumer protection laws.”
The payday lending industry already is using this draft rule to lobby against strong state protections. The industry has supported several bills over the years to introduce payday lending into Pennsylvania. Each time, KRC and other consumer advocates have successfully fought to maintain the ban.
CFPB’s draft rule would require payday lenders to determine in advance whether borrowers’ income and expenses would reasonably allow them to pay off the loan when it comes due. That’s good. But the draft rule contains a huge loophole that would exempt the consumer’s first six loans from that “affordability standard.” Six loans at 400 percent interest to a financially vulnerable consumer quickly adds up to a lot of rapidly multiplying and unmanageable debt.
The letter KRC signed states that “from our perspective, this approach runs counter to sound public policy-making, as well as the CFPB’s mandate of stopping unfair and abusive lending practices.” So KRC and the other signing organizations are urging the CFPB “to issue final rules that build on, rather than undermine, strong state protections and that enhance our ability to enforce them.” That’s something we believe CFPB owes the consumer.paydaylendltr.pdf
We’re already deep into the summer, and budget impasse, of 2015. In a quick recap of events so far, Gov. Wolf vetoed the hastily constructed and passed Republican budget presented to him on June 30, which lacked a severance tax, property tax relief and any significant increase in education funding. The Pennsylvania Budget and Policy Center had urged him to veto that budget after releasing an analysis of it.
The Governor also vetoed a bill to privatize the state’s wine and spirits stores and Senate Bill 1 -- a pension “reform” plan from legislative Republicans that was likely unconstitutional and would have decimated benefits for future teachers and state workers while offering taxpayers no real savings. Read Keystone Research Center’s analysis of Pennsylvania’s current public pension benefits in comparison to other states’ and The 10 Top Facts about SB 1.
The Senate is back in session this week. The House reportedly will return next week. Meanwhile, Gov. Wolf was scheduled to be in Bellefonte and Pittsburgh on Monday on his “Schools That Teach Tour” to build support for a budget that invests in education. The Governor held a brief but cordial meeting with legislative leaders last week. It’s anyone’s guess how long this impasse could last before a compromise is reached. But this might be a good time to let your legislators know how you feel about enacting a severance tax on gas drillers and restoring the $1 billion in funding that was cut from Pennsylvania’s public schools over the last four years.
Demonstrators on Capitol steps during the budget debate --- www.post-gazette.com
Seeking a budget compromise … To hear KRC Executive Director Steve Herzenberg’s analysis of the Wolf versus Republican budgets listen to his appearance on WESA 90.5’s Essential Pittsburgh radio program last Thursday.
More just the fact sheets, ma’am … Just when the political rhetoric during the budget debate reached a fever pitch at the end of June, PBPC came to the rescue again with more legislative district fact sheets, this time comparing the local impacts of the Wolf and Republican budgets on public school funding, property tax relief, human services funding, minimum wage workers and higher education funding by legislative district. See what the impacts would be in your district here.
Investing in more teachers and textbooks … Check out two new and complementary blog posts on Third and State by Interim PBPC Research Director Mark Price and Steve Herzenberg on why the sky won’t fall in if Pennsylvania raises revenue in the 2015-16 budget and why drinking the “shrink-revenues-at-all-costs-Kool-Aid” is dangerous to your children’s – and the state’s – educational health.
Staying a course that not’s working … Read Mark Price’s op-ed on the Republican budget, which appeared last week in the York Dispatch, the Centre Daily Times, the Bucks County Courier Times and The Patriot-News/Pennlive.com.
WARNING: Drinking the “Shrink-Revenues-at-All-Costs-Kool-Aid” Is Dangerous to Your Children’s – and Your State’s – Health
The implicit, and sometimes explicit, claim of some of those raising the alarm about increasing revenues to invest in education (see Mark Price’s recent blog post) and make Pennsylvania fiscally sound by closing its budget deficit is, of course, that lower revenues (i.e. lower taxes) as a share of a state’s economy are a goal in themselves.
A recent study by the Population Reference Bureau found, to the contrary, that “States with Higher Tax Rates Are Better for Children.” All five of the states with the lowest upward mobility in America (North Carolina, South Carolina, Georgia, Alabama, and Mississippi – see this map) are in the bottom half of states for share of state and local taxes as a percentage of personal income (using Tax Policy Center data). And three of the five are in the bottom dozen states.
So if you don’t care about the next generation or upward mobility, it may be fine to fixate on reducing state taxes without even asking what the revenue would be used for; but if you do care about giving our children an opportunity for upward mobility, you may want to support Gov. Wolf’s proposed investment in education from cradle to college and career.
Total revenues in Pennsylvania were up in the fiscal year that just ended by $94 million, compared to 2007-08 on the eve of the Great Recession, according to data released by the National Association of Budget Officers (NASBO). That’s an increase of 0.3%. Pennsylvania’s revenue growth over that period ranked 25th among states.
NASBO’s data for 2015-16 projects that a combination of healthier economic growth and higher taxes will boost revenue in the commonwealth by $672 million, an increase over 2007-08 of 2.2%. That would push Pennsylvania’s revenue growth to 22nd fastest in the nation.
As the budget battles in Harrisburg have heated up, critics of investing in more teachers and textbooks have claimed that the proposed tax increases necessary to accomplish those goals would be the largest ever or the largest in the country. These comparisons appeal to an impassioned, but largely innumerate, minority in Pennsylvania. We know they are a distinct minority as we just had a gubernatorial election in which the victor/challenger promised, if elected, to raise taxes to restore funding to education, and the loser/incumbent identified his signature achievement as not raising taxes.
The voters chose to make investing in education a priority because they saw firsthand the consequences of the policies of the last four years -- thousands of teacher layoffs, climbing class sizes, falling test scores, and rising property taxes. As economist and Keystone Research Center Executive Director Steve Herzenberg explains in another blog post, when it comes to children’s well-being and the American Dream in Pennsylvania, voters made the right choice.
Gov. Wolf should veto the Republican budget because it would:
- Bankrupt K-12 schools. Public schools would receive a miserly $8 million increase – spread over the 3,287 schools in Pennsylvania’s 500 school districts.
- Deny hard-pressed Pennsylvania seniors, families and communities property tax relief.
- Force state universities to hike tuition and college students to incur more debt. The budget’s higher education funding increase is less than projected inflation; at this rate the state may never restore the real level of higher education funding before Gov. Corbett’s first cuts.
- Maintain Pennsylvania as the only extraction state foolish enough not to enact a commonsense severance tax.
- Add to Pennsylvania’s debt and further lower the state’s bond rating. One-time gimmicks mean the Republican budget would come up $1 billion short this year and $3+ billion short next year, which would lead to more downgrades of Pennsylvania’s debt.
- Fail to invest in job creation and “upskilling” of Pennsylvania workers.
- Continue to starve county-run human services programs.
- Only take care of Republican lawmakers’ priorities and interests – pension changes that slash retirement benefits, privatization of profitable state-run liquor stores, give $51 million more in funding to the legislature (but only $36 million for higher education) and more money for the Commonwealth Financing Authority, over which legislators have veto power – but turn a blind eye to the people’s priorities – education funding and a tax on natural gas drillers. .
- Ignore the Governor’s detailed budget proposal on the table for four months now, and replace it with an extreme, one-sided and uncompromising plan conceived in secret and hurriedly passed without input from the Governor or the public.
- Prolong a course that is not working by mercilessly clinging to a cuts-only, “no new taxes” approach that is stalling Pennsylvania’s economic recovery.
*(For more detail and sources, see PBPC’s detailed analysis of the Republican budget).
In March, Gov. Wolf presented his budget to the Republicans in the General Assembly. Knowing they would present objections and alternate approaches, the governor made numerous overtures to the Republican leaders in an effort to engage them in fruitful negotiations.
At one point, Gov. Wolf offered a substantive compromise on his severance tax proposal, but Republicans refused to negotiate. "Our counterproposal was nothing," Senate President Pro Tem Joe Scarnati said. "Yeah, nothing," he repeated. That’s a big ZERO.
Instead, House and Senate Republican leaders negotiated with themselves behind closed doors in backrooms and produced a budget that involved ZERO engagement with the governor.
The budget Republicans cooked up has ZERO property tax relief and an almost ZERO increase in education funding – even though property tax relief and increased education funding are the highest priorities of the voters who sent them to Harrisburg. The budget also maintains Pennsylvania’s status as the only major gas-producing state that has a ZERO severance tax on drillers.
Gov. Wolf has said he will veto this budget that was created without his input if it ignores his stated priorities of increased education funding, property tax relief and a severance tax on drillers.
House and Senate leaders are betting that their cynical antics will be well-received by a public that will blame the governor for the budget impasse. Early indications are that their gamble is backfiring. The Philadelphia Daily News observes that it’s “tough to bargain with GOP lawmakers living in fantasyland,” and a reporter for the Pottstown Mercury muses in his blog that “this is why everybody hates Harrisburg.”
The Republicans apparently will get their wish of passing an on-time budget that raises ZERO taxes – not even on gas drillers. But they should remember the old caution, “be careful what you wish for.” After all, voters are wishing for more money for their schools, property tax relief and a tax on the gas drillers, and the Republican budget scores ZERO on all of these.
Ten years after the first gas driller bored into the Marcellus Shale formation, the commonwealth remains the only major gas-producing state without a severance tax. Legislation to enact a severance tax has been introduced into the General Assembly every year since 2009. And every year, the General Assembly has failed to get a severance tax bill to the governor’s desk. The Republican budget for 2015-16 does not include a severance tax.
Polls over these years have shown that a severance tax enjoys broad, bipartisan support from voters. Bipartisan support also exists in the General Assembly, where both Republican and Democratic lawmakers have introduced versions of a severance tax.
So why hasn’t a severance tax passed? Well, there are a million reasons – no, wait, -- there are 55 million reasons why Pennsylvania continues to give the drillers a huge tax break. According to the latest Marcellus Money report, a project of Common Cause of Pennsylvania and the Conservation Voters of Pennsylvania, since 2007 gas drillers have spent $46.8 million lobbying Pennsylvania officials and $8.2 million in campaign contributions to candidates for office and PACs.
Governor Wolf made passage of a severance tax the centerpiece of his budget. The Wolf budget is structured so that revenue from a drilling tax would go to restore education funding drastically cut during the Corbett administration, fund economic development and clean energy, and hire more Department of Environmental Protection inspectors to monitor gas drilling in Pennsylvania.
In failing to include a severance tax in their budget, the Republican leadership chose oil and gas industry lobbyists and PACs over the needs of our children and communities. This budget richly deserves the veto the governor is sure to deliver.
Ah June, the month of blushing brides and bruising budget battles. The latest on the latter is that House and Senate Republicans announced their own $30.1 billion budget Friday. The new proposal looks like Gov. Corbett's fifth budget, a pure expression of a cut-spending, no-new-revenues approach. Gov. Wolf vowed to veto it if it remains in its current form. “Pennsylvanians want a budget that provides property tax relief, a real investment in education and a reasonable severance tax to pay for it,” he said. The Republican budget contains no property tax relief plan or severance tax and would invest a fraction of what the governor’s proposal would in education.
The House will reconvene at 11 a.m. Saturday to take up the Republican plan. The Senate is in recess until 6 p.m. Sunday. The state’s fiscal year ends on Tuesday. If the legislature passes the Republican budget, and the governor vetoes it, a protracted budget impasse could ensue, leaving the state’s bill-paying and funding capacities in a precarious position. We’ll keep you posted.
Rep. Bill Adolph (R-Delaware) & Senate Majority Leader Jake Corman (R-Centre) take
questions after Republican budget plan released on Friday (Sam Janesch, The Morning Call)
The Final Verdict … happens to be the name of the briefing paper the Keystone Research Center released Tuesday. And it’s not a pretty verdict for the one-sided, cuts-only style of budget that, ironically, the Republicans are voting on this weekend. The paper concludes that “the failure to take a balanced approach – looking for costs savings but also new revenues – since 2011 operated as a drag on the state’s economy and makes PA’s budget choices this June more difficult. What PA needs now is a turnaround budget that combines sound fiscal management with investments in education, job creation, and communities.”
And a SUPREMELY good week … for decisions coming out of the U.S. Supreme Court. Check out KRC Executive Director Steve Herzenberg’s blog post on the Court’s decision upholding tax subsidies under the Affordable Care Act to help low- and middle-income people buy health insurance in states with a federal health-care exchange.
Rallying for fair funding … PBPC staff and interns joined hundreds of parents, students, teachers, clergy and community leaders who rallied in the capitol Tuesday, as part of the Campaign for Fair Education Funding, to urge lawmakers to create a basic education funding system that gives all PA students access to a quality education, regardless of where they live. PA ranks as the worst state for inequality in state and local funding between poor and wealthy school districts.
Fair Education Funding Rally in the Capitol on Tuesday
Phoning in for fair funding … PBPC Outreach and Engagement Director Jeff Garis was the featured presenter for a tele-town hall Thursday hosted by the Urban League of Philadelphia. More than 1,000 people from Philadelphia and Delaware counties phoned into a discussion about the need for a state budget that increases PA’s investment in public schools and distributes funding in a fair and equitable way.
Drilling down to the facts … The Pennsylvania Budget and Policy Center came out this week with a one-page list of the Top Five Facts About Drilling and Taxes in PA. We’ve been blogging and tweeting a fact a day to counter some of the creative “information” coming out of the gas industry about what the dire consequences will be if PA becomes the last major gas-producing state to enact a severance tax.