Third and State
It’s been nearly two weeks since we released a report with the Multi-State Shale Research Collaborative finding that drilling in the six states that span the Marcellus and Utica Shale formations has produced far fewer new jobs than the industry and its supporters claim.
We’ve also blogged about how shale drilling has been highly sensitive to price fluctuations and how drilling has shifted from Pennsylvania to Ohio and other areas with growth in shale oil production beginning in 2012.
Another important point to remember is that many of the core jobs in gas extraction existed well before the emergence of hydrofracking. Together, Pennsylvania, Ohio, and West Virginia had 38% of all producing wells in the country in 1990 and 32% in 2000. Some counties with a long history of mineral extraction have experienced a shift in employment from coal to shale extraction.
Which brings us to the key finding of this report: that employment estimates have been overstated, and the industry and its boosters have used inappropriate employment numbers, including equating new hires with new jobs and using ancillary job figures that largely have nothing to do with drilling, even after the flaws in those numbers have been brought to their attention.
In addition, industry-funded studies, including those by Dr. Timothy Considine and co-authors, have substantially overstated the total jobs impact of the shale industry. With the passage of several years since the earliest Considine studies, we now know that actual Pennsylvania job growth has been much less than his initial estimates for 2011 and 2012.
So if you haven’t had a chance to look at the recent report, take a minute and check out the key findings. The Collaborative was formed to respond more efficiently and effectively to the need for accurate information on the impacts of drilling so that we can promote state and local policies on shale drilling that really serve the public good.
Today is #GivingTuesday, a global day of giving that was started last year as an opportunity at the start of the Giving Season to support important causes that help create a better world.
Every day, the Keystone Research Center (KRC) is giving you a voice in key debates unfolding in Harrisburg. We have helped keep the issue of inequality on the front pages and advanced real solutions, including innovative career initiatives to expand opportunity for Pennsylvania's working families.
At the same time, PBPC is working hard to make Pennsylvania a better place for low- and middle-income families and children to live. Every day we are out there making the case for a Pennsylvania where every child can get a high quality education and no family has to live without health insurance, one illness away from financial catastrophe.
Help KRC continue to provide a voice for the middle class in critical debates over the regulation of shale drilling, increasing the minimum wage, and building a stronger Pennsylvania economy for all working families. And help PBPC continue to document the impact of budget decisions, take on special interest tax breaks, and shut down corporate tax loopholes.
Last week, The New York Times reported that Ron Unz, a conservative Silicon Valley millionaire and past Editor of The American Conservative, favors increasing California's minimum wage to $12 per hour.
The arguments he is making explain why a much higher minimum wage strengthens the economy and benefits taxpayers, and progressives should capitalize on his support to amplify these arguments in their own advocacy.
Mr. Unz rightly dismisses concerns about overall job loss from a higher minimum wage. Mr. Unz elaborated in The American Conservative last year that manufacturing “sweatshops” would be among the few industries hurt by a higher minimum wage. “There’s a legitimate argument to be made that those kinds of businesses have no place in our economy,” he wrote.
His sweatshop example brings to mind the progressive mantra that policy should "pave the high road and block the low road" — in other words, policy should make it easier for innovative, high-productivity businesses to thrive and harder for low-wage, low-productivity, no-innovation businesses to compete.
A much higher minimum wage is a powerful tool for "blocking the high road," leading to a mix of businesses and an economy that are more productive and innovative in the long run.
Mr. Unz also argues that a higher minimum wage would reduce spending on social welfare programs — a point well documented by studies showing, for example, how many fast food and Wal-Mart workers rely on public assistance programs to make ends meet.
Given a choice between alleviating poverty and inequality through redistribution (taxes and spending) or through a more equal before-tax distribution of wages and income, many Americans — and many conservatives — would favor fixing the latter. Higher wages, after all, "make work pay" and increase the incomes of those who "work hard and play by the rules." In other words, fixing the before-tax distribution of wages and income resonates strongly with American values — one reason a higher minimum wage is so popular.
Want an economy in which the economic pie grows faster and more families can make ends meet without assistance from government programs? Enact a much higher minimum wage.
In Case You Missed It: A Dose of Reality on Shale-Related Employment, PA Jobs Update, and School Funding
Third and State is taking a break for the holiday. We will return on December 2. Happy Thanksgiving.
In recent weeks, we blogged about a new report on the jobs impact of natural gas drilling in the Marcellus and Utica Shale formation. We also had the latest on Pennsylvania jobs, a report on a day of action in support of expanding Medicaid, and a letter to the editor setting the record straight about school funding in Pennsylvania.
IN CASE YOU MISSED IT AT THIRD AND STATE:
- On the Marcellus Shale, Chris Lilienthal blogged about a new report finding that shale drilling in the six states spanning the Marcellus and Utica Shale has produced far fewer new jobs than the industry and its supporters claim. The report was the first released by the Multi-State Shale Research Collaborative — a group of research organizations, including the Keystone Research Center and Pennsylvania Budget and Policy Center, tracking the impacts of shale drilling. Chris also highlighted other findings from the report: that shale drilling is highly sensitive to price fluctuations, and that since 2012 shale drilling has shifted from Pennsylvania to Ohio and other areas with growth in more lucrative shale oil production.
- On jobs and the economy, Mark Price wrote that there was little good job news for Pennsylvania in the September and October employment reports released last week.
- On education and the state budget, Sharon Ward shared her letter to the editor in The Patriot-News and PennLive.com setting the record straight about funding cuts to Pennsylvania schools in recent years.
- And on health care, Chris Lilienthal highlighted a recent statewide day of action calling on Pennsylvania lawmakers to expand Medicaid health coverage in 2014 under the health reform law.
SHALE EMPLOYMENT REPORT
- Drilling in the six states that span the Marcellus and Utica Shale formations has produced far fewer new jobs than the industry and its supporters claim. Read the new report or a press release on it from the Multi-State Shale Research Collaborative
WATCH PBPC'S LATEST WEBINAR
Watch the Pennsylvania Budget and Policy Center's latest webinar for a look at proven strategies to provide property tax relief to those who most need it — while protecting critical investments in public education.
To follow up on my blog post Monday, here is a look at how shale drilling has shifted from Pennsylvania to Ohio and other areas with growth in shale oil production beginning in 2012.
As gas prices increased nationally, the number of active natural gas rigs in the United States grew from 559 in September 1999 to a peak of 1,585 rigs in September 2008 when the wellhead price was $6.71 and had already begun to fall. As prices continued to drop, the number of operating gas rigs fell by two-thirds from the peak.
Beginning in 2005, shale oil production began to gain ground in Texas and North Dakota. In mid-2009, as gas prices dropped and oil prices began to rebound from the recession, drill rigs were increasingly deployed for oil rather than gas production. The number of operating oil rigs increased from fewer than 200 in 2009 to more than 1,400 in mid-2012.
Learn more in a new report on shale's employment impact from the Multi-State Shale Research Collaborative — a group of research organizations, including the Keystone Research Center and Pennsylvania Budget and Policy Center, tracking the impacts of shale drilling.
We'll be back with more findings from the report after the holiday. Happy Thanksgiving.
Some states have developed effective policies to address the challenges faced by some seniors and working families in paying their property taxes. What can Pennsylvania learn from them?
Watch the Pennsylvania Budget and Policy Center's latest webinar for a closer look at proven strategies to provide property tax relief to those who most need it — while protecting critical investments in public education. Get more resources from the webinar, including a PDF of the presentation.
Meg Wiehe, State Tax Policy Director for the Institute on Taxation and Economic Policy (ITEP), and Frank Mauro, Executive Director of the Fiscal Policy Institute in New York, joined PBPC Research Director Michael Wood to highlight property tax relief plans that work.
Natural gas drilling in the six states spanning the Marcellus Shale is highly sensitive to price fluctuations. High prices fueled shale development from 2000 to 2008. As prices have declined, gas drilling activity has slowed while development of higher-priced oil has accelerated.
This is another key finding in a report released last week by the Multi-State Shale Research Collaborative — a group of research organizations, including the Keystone Research Center and Pennsylvania Budget and Policy Center, tracking the impacts of shale drilling. On Friday, I blogged about another finding of the report — that industry supporters have exaggerated the jobs impact of shale drilling.
When it comes to price, an oversupply of natural gas and falling demand due to the Great Recession contributed to a swift decline in the wellhead price of gas, falling from a high of $10.79 per per thousand cubic feet (MCF) in July 2008 to below $3 MCF in September 2009. From 2010 to 2012, the wellhead price averaged $3.70 per MCF, and the U.S. Energy Information Administration (EIA) estimates that gas prices will remain below $5 per MCF through 2025.
In some counties, employment gains from natural gas drilling have been reversed as drilling activity shifted to more lucrative oil shale fields in Ohio and North Dakota. As the report shows, direct shale-related employment across the six-state Marcellus/Utica region fell over the last 12 months for which there are data — the first quarter 2012 to the first quarter 2013.
With the report documenting the beginning of a pull back of the industry, questions naturally arise about the stability and permanence of even the small number of jobs that have been created. For this reason, the Multi-State Shale Research Collaborative has recommended the formation of a six-state “Multi-State Shale Commission” to establish a consensus method to track jobs. It is critical that the six states work together to enact policies that serve the public interest.
You can check out the full report and press release here. We'll be back here tomorrow with more findings from the report.
One of the many lingering side effects of the shutdown of the federal government in October was a delay in the release of Pennsylvania jobs data for September. Today the Bureau of Labor Statistics gives us our first look at the September jobs numbers along with preliminary numbers for October. (The Pennsylvania Department of Labor and Industry has yet to release its own summary.)
The job numbers were all around disappointing.
First, total nonfarm payrolls fell by 7,400 jobs between August and September, and there was no change in employment from September to October.
The news on resident employment (collected from a separate survey of households) was also negative, falling by 4,500 jobs in September and by another 20,200 in October. In fact, this survey, which can be volatile, has registered a loss of more than 50,000 jobs in Pennsylvania since July.
The bottom line: neither survey of employment had good news for Pennsylvania in September and October. As the figure above makes clear, job growth has slowed over time. Unless the job numbers improve in November, December, and January, Pennsylvania may be on track to add fewer jobs this year than in 2012, making 2013 the worst since the end of the recession.
Looking at employment growth by sector since August, employment gains in construction (+4,400), manufacturing (+2,000), professional & business services (+7,300), and trade, transportation and utilities (+2,600) were offset by losses in education and health services (-7,300), leisure and hospitality (-4,600), and government (-9,300).
Counter to what we might have expected with the federal government shutdown in October, the losses in the public sector were not concentrated in federal employment (-600) but in local government (-9,700).
The source of all of those local government job losses is schools, which usually ramp up employment in September and October for the new school year and did so again this year but just added back fewer employees than in the recent past.
Better news came from the survey of households, which registered a slight decline in the unemployment rate from 7.7% in August to 7.6% in September to 7.5% in October.
The jobless rate fell as the number of unemployed declined by 5,200 in September and by 11,000 in October. This is the same survey that found employment fell by 4,500 in September and by 20,200 in October, but recorded even bigger declines in the labor force (-9,700 in September and -31,200 in October). Given the employment and labor force changes, the very slight decline in the unemployment rate is a bittersweet development.
Those of you who follow the job numbers closely will remember that Pennsylvania registered healthy increases in the labor force in 2012, which the Corbett administration attributed to an improvement in the business climate. Labor force growth peaked in January of this year, and as of October is down by 81,200. Whatever the source of the growth in the labor force in 2012, it clearly cannot be sustained with job growth remaining so weak.
Drilling in the six states that span the Marcellus and Utica Shale formations has produced far fewer new jobs than the industry and its supporters claim. In fact, in Pennsylvania, shale-related employment accounted for less than half a percent of total nonfarm employment in 2012 (as the figure to the right shows).
These findings come from a new report released today by the Multi-State Shale Research Collaborative — a group of research organizations, including the Keystone Research Center and Pennsylvania Budget and Policy Center, tracking the impacts of shale drilling.
As Frank Mauro, Executive Director of the Fiscal Policy Institute in New York and one of the authors of the report put it: "Industry supporters have exaggerated the jobs impact in order to minimize or avoid altogether taxation, regulation, and even careful examination of shale drilling."
The Marcellus and Utica shale formations span six states: New York, Ohio, Pennsylvania, West Virginia, Maryland, and Virginia.
To be clear, shale drilling has created jobs, particularly in Pennsylvania and West Virginia, and cushioned some drilling-intensive areas in these states from the worst effects of the Great Recession and the weak recovery. The number of actual shale jobs created, however, is far below industry claims. Shale employment remains a small share of overall employment and has made little difference in job growth in any of the six states studied.
Natural gas development in these states from 2000 to 2008 was largely fueled by high commodity prices. As prices have declined more recently, gas drilling activity has slowed while development of higher-priced oil has accelerated.
Recent trends are consistent with the boom and bust pattern that has characterized extractive industries for decades. It also points to the need for state and local policymakers to collaborate to enact policies that serve the public interest.
You can check out the full report and press release here. We'll be back here next week with more findings from the report.
Some states have developed effective policies to address the challenges faced by some seniors and working families in paying their property taxes. What can Pennsylvania learn from them?
Join the Pennsylvania Budget and Policy Center this Friday at Noon for a webinar that will take a closer look at proven strategies to provide property tax relief to those who most need it — while protecting critical investments in public education.
Meg Wiehe, State Tax Policy Director for the Institute on Taxation and Economic Policy (ITEP), and Frank Mauro, Executive Director of the Fiscal Policy Institute in New York, will join PBPC to highlight property tax relief plans that work.
The expansion of Medicaid health coverage is being called an “early success story” of the Affordable Care Act — but you won’t find any success stories here in Pennsylvania.
Pennsylvania is one of 25 states NOT accepting federal funding next year to expand Medicaid coverage to hundreds of thousands of low-income Americans. Governor Tom Corbett has proposed a much more complicated expansion of health care that likely won’t happen until 2015, if at all.
All hardworking families deserve the security of knowing they can see a doctor when they get sick without facing enormous medical bills. If Pennsylvania fails to act on this federal opportunity, hundreds of thousands will be left out in the cold with no options for affordable coverage in 2014.
This Wednesday, join a statewide day of action urging Governor Corbett and your state lawmakers to expand health coverage next year. Tell them Pennsylvania cannot afford to turn down federal funding that states like New Jersey and Ohio will use to insure their citizens and give their health care economies a needed boost in 2014.
As many as 400,000 Pennsylvanians will have no other affordable health care options if we do not act soon. These Pennsylvanians are our neighbors and friends. They take our orders at restaurants, fix our cars, and take care of our kids when we’re at work — but don’t earn enough to buy private health coverage.
Expansion will open the door to affordable quality coverage for them AND give Pennsylvania’s health care sector a boost, especially the “eds and meds” that make up a large share of the state’s economy. By one estimate, the federal health care dollars would support more than 41,000 new jobs across Pennsylvania’s economy in 2016.
So join us to urge Governor Corbett and state legislators to take part in this “success story” by providing hardworking families with the security of quality health care.
I wrote a letter to the editor in the Patriot-News and PennLive.com setting the record straight about funding cuts to Pennsylvania schools in recent years. Take a look:
Research is clear that student performance improves with smaller class sizes, rigorous programs, and qualified teachers. Yet since 2011 Pennsylvania has done the opposite, enacting cuts that have increased class sizes, eliminated enrichment programs, and taken tens of thousands of teachers, guidance counselors, and aides out of the classroom.
Gene Barr of the Pennsylvania Chamber of Business and Industry offers a misleading picture of school funding in his Oct. 24 letter ("Teachers union is wrong; Corbett didn't cut $1 billion from education"). Fully half the school cuts enacted in 2011 came from programs that did not have a single dollar of federal stimulus funds. For the other half, it was not unreasonable for school districts or parents to expect that temporary federal funds would be replaced with state funds as they were for prisons and health care programs.
Meanwhile, school costs for special education, energy, construction, and pensions are rising, and the education cuts have still not been restored.
A spring poll found a large number of Pennsylvanians are worried that their schools are in crisis, and they favor investing more in education over new corporate tax breaks.
Businesses and families have a common goal. It’s time to get beyond assigning blame and get back to the task of ensuring excellence in Pennsylvania’s public school system.
In Case You Missed It: Tax Cuts Slow Revenue Growth, 'Bad Deal' Deregulation Bill, SNAP Cut, Transportation & More
In recent weeks, we blogged about how business tax cuts have dragged down revenue growth this year and will continue to do so in future budgets. We also wrote about the dangers of a Pennsylvania telephone deregulation bill, the impact of a cut to federal food assistance, how the 50 states stack up when it comes to employer-sponsored health insurance, transportation funding, Marcellus Shale-related employment, and more.
IN CASE YOU MISSED IT AT THIRD AND STATE:
- On state budget and taxes, Michael Wood wrote in the latest revenue tracker that General Fund collections are not keeping pace with the slowly growing economy, and much of this can be traced to corporate tax cuts. He also wrote about the Independent Fiscal Office's budget outlook predicting slow revenue growth in the next five years, another product of business tax cuts.
- On utilities and regulation, Steve Herzenberg blogged about a new Keystone Research Center report finding that a telephone deregulation bill in the state House will hurt rural broadband access and increase phone rates for consumers.
- On the federal nutrition assistance, Chris Lilienthal shared an interactive map of Pennsylvania showing that a $183 million cut to the Supplemental Nutrition Assistance Program (SNAP) will impact families and children in every county.
- On health care, Chris Lilienthal shared an interactive map of the United States showing how the 50 states stack up when it comes to employer-sponsored health insurance. With the nation’s employer-based health insurance system fraying rapidly in the past decade, the findings highlight just how important the Affordable Care Act is to many Americans.
- On transportation funding, Sharon Ward highlighted her testimony before a House committee on how Pennsylvania could significantly increase its long-term investment in roads, bridges, and public transit with a mix of cash and debt financing.
- On the Marcellus Shale, Mark Price shared an article setting the record straight about drilling-related employment claims made by Governor Tom Corbett's re-election campaign.
- Finally, we shared the Pennsylvania Budget and Policy Center's latest webinar on the Governor's Healthy PA plan, Medicaid expansion, and the Health Insurance Marketplace.
LATEST FROM KEYSTONE RESEARCH CENTER (KRC):
- Upcoming Event: Join KRC Reception in Pittsburgh on November 20
- Report: A Bad Deal for Pennsylvania: Raising Phone Rates and Putting Telephone Service at Risk
- Press Release: Deregulation Bill Will Hurt Rural Broadband Access, Hike Phone Rates
- Patriot-News: Cash Balance Plans Threaten Retirement Security
- Scranton Times-Tribune: Pension Solution Elusive
KRC IN THE NEWS:
- Johnstown Tribune-Democrat: Phone Changes Decried: Higher Landline Bills, Reduction in Service
- WESA-FM: Phone Deregulation Bill Would Hurt Rural Broadband Access
- Delaware County Daily Times: Fix Pension Problem to Save Workers, Economy
LATEST FROM PENNSYLVANIA BUDGET AND POLICY CENTER (PBPC):
- Upcoming Webinar: Proven Property Tax Relief Strategies for Pennsylvania
- Takeaways from IFO Outlook: Business Tax Cuts Slow PA Revenue Growth Creating Future Budget Gaps
- Press Release: Use Mix of Cash and Debt Financing to Fund PA Transportation Projects
- Interactive Map: Cut to Federal Nutrition Assistance Impacts Families and Children in Every PA County
- Revenue Tracker: Collections Exceed Estimate But Corporate Tax Cuts Slowing Year-Over-Year Growth
PBPC IN THE NEWS:
- Central Penn Business Journal: Capital Stock and Franchise Tax Could Be Key to Transportation Funding
- Reading Eagle Letter to Editor: Property Tax Elimination Bill Would Hurt Education
- Bucks County Courier Times: Food Stamp Cuts Hit 1.8M Pennsylvanians
The Pennsylvania Independent Fiscal Office (IFO) released its five-year economic and budget outlook on Thursday, and the picture is not pretty.
Pennsylvania General Fund revenues are expected to grow over time but more slowly than expenditures. The IFO projects a shortfall of $839 million between revenues and expenditures in the 2014-15 budget year, growing to $2.1 billion in 2018-19. This structural deficit, based on current tax law and expenditure trends, is not set in stone but gives us a glimpse at the difficult road ahead.
Although significant, the $839 million estimated shortfall in 2014-15 is less than the $1.3 billion projected gap figure that has been circulating in the Capitol.
Revenue Growth Undone by Shrinking Corporate Tax Receipts
Reflecting Pennsylvania’s gradually improving economy, the IFO projects personal income tax (PIT) growth of about 4.5% per year for the next five years, and sales tax growth of 3% to 4% annually. Not the strongest growth we have seen coming out of some prior recessions but healthy nonetheless.
IFO projections for the third major leg of the General Fund's revenue system — the corporate net income tax (CNIT) — are something to worry about. From 2014-15 through 2016-17, the IFO projects CNIT revenue to grow by less than a percent each year, and then predicts an absolute DECLINE in corporate tax receipts in 2017-18 and 2018-19. This is an effect of the phase out of the capital stock and franchise tax, which is slated to be fully eliminated in December 2015.
All other General Fund revenues are projected to fall in the next couple of fiscal years followed by growth of about 1% per year in the later years.
Altogether, revenue growth looks pretty anemic in the coming five years if circumstances do not change. While the IFO did not say so specifically, the data make clear that 15 years of business tax cuts have contributed significantly to Pennsylvania’s structural deficit.
Expenditures Grow More Quickly
Total General Fund expenditures, based on current trends, are projected to increase from $28.4 billion in 2013-14 to $34.7 billion in 2018-19, an increase of $6.3 billion over the five-year period. This amounts to growth of about 4% per year, again not unusual coming out of a recession.
Much of the projected expenditure growth is driven by required public pension funding increases as the state makes up for a decade of pension system underfunding and historic investment losses. Pension payments from the state are expected to increase from $1.4 billion in 2013-14 to $3.4 billion in 2018-19. That averages to 24% growth per year.
There is no magic bullet to change this outcome. Pension cuts to current employees would run afoul of the state constitution and other suggested changes, like a move to a 401(K)-style defined contribution system, would actually increase short- and long-term costs.
All other education spending (other than pensions) is projected to grow by only 1% per year, $63 million in 2014-15 and rising to $150 million in 2015-16 and beyond, not even enough to keep pace with inflation let alone to restore budget cuts.
Prison costs rise about 4% per year on average, despite a projected decline in the prison population by about 4,000 inmates.
Department of Public Welfare spending increases between 4% and 5% per year, based largely on Medical Assistance enrollment growth of 2% per year, no dramatic changes in federal matching rates, and that the state will not expand Medicaid under the Affordable Care Act.
Demographic Changes Pose More Challenges and Opportunities
Pennsylvania is an aging state. From 2010 to 2020, the number of seniors is expected to increase by more than 500,000 to 2.5 million, the number of working adults is expected to remain at about 7.6 million, and the number of children is projected to decline by 60,000. These changes will have impacts on the state budget — on both the revenue and expenditure side of the ledger. Seniors don’t pay state income taxes on retirement income, and the demand for services, particularly long-term care, is expected to grow.
The largest single driver of overall population growth in the state will be from net international migration — even more than the net difference between births and deaths. This, too, will have a long-term impact on how and what state government does and how we pay for it.
The IFO's report clearly highlights that Pennsylvania has to make careful choices going forward. Tax cuts have not spurred the economy or trickled back in the form of higher revenue collections, as proponents have argued. Going forward, will Pennsylvania embrace a tactic that has not worked, or direct strategic investments in our public education system, higher education, and transportation to help our economy grow?
There has been a wave of deregulation bills introduced in statehouses across the country in recent years, and the latest in Pennsylvania is targeting landline telephone service. The plan could end up limiting access to broadband service in rural parts of the commonwealth and sharply increasing telephone rates.
Like similar bills in other states, HB 1608 is structured to increase the profits of telecommunications companies while raising phone rates and putting quality telephone service at risk in Pennsylvania. It also leaves rural parts of the commonwealth on the wrong side of the digital divide by threatening their access to broadband. Pennsylvania needs next-generation broadband in all communities, not deregulation that locks in substandard rural service.
Phone deregulation in other states has led to significant increases in rates for consumers. In neighboring Ohio, rates have increased $1.25 per month (the maximum rate allowed) since passage of the state’s 2010 deregulation law. In Illinois, another state similar to Pennsylvania, AT&T increased line charge rates by up to 63 percent following passage of a deregulation law. In California, some rates increased by several hundred percent.
The bill allows telephone companies in Pennsylvania to raise rates with only one day’s advance notice by largely eliminating the Public Utility Commission’s oversight of basic telephone service in Pennsylvania. After years of price stability for Pennsylvania telephone consumers, it will likely lead to significant price increases across the state.
The bill also:
- Abandons rural communities by permitting telephone carriers to eliminate service to consumer they do not want to serve, beginning in 2018.
- Eliminates critical consumer protections, reporting requirements that allow consumers to compare phone rates, auditing requirements that ensure phone company accountability, and quality of service requirements.
- Removes public oversight of telecommunications companies’ mergers and acquisitions.
Like many forms of rushed deregulation, HB 1608 is a bad deal for Pennsylvanians, and lawmakers should reject it. It will raise phone rates for consumers, undermine effective consumer protections, and take away the ability of state regulators to ensure Pennsylvanians have competitive options over the long term.
The Pennsylvania Budget and Policy Center put out the following press release Tuesday on testimony I delivered to the Pennsylvania House Finance Committee on transportation funding:
Pennsylvania could significantly increase its long-term investment in roads, bridges, and public transit with a mix of cash and debt financing, testified Sharon Ward, Director of the Pennsylvania Budget and Policy Center, before a state House committee today.
Ward said the commonwealth could float $2.5 billion in new debt to fund transportation projects, with the annual debt costs paid for by keeping the capital stock and franchise tax at its current low rate, rather than phasing it out. Alternatively, lawmakers could put a minimum corporate tax in place with revenue dedicated to paying down the debt, she said.
“Repairing our transportation infrastructure, including roads, bridges, transit, rail, and airports, is a core function of government and a high priority in 2013,” Ward testified before the House Finance Committee. “Funding this infrastructure will create jobs, strengthen Pennsylvania’s economy, and prevent dangerous and costly bridge failures, potentially saving lives.”
Most states use a balance of borrowing and cash to fund transportation projects, but Pennsylvania is among a handful of states that largely funds transportation projects on a pay-as-you-go basis. Roads typically last 30 years, while rail infrastructure can remain functional for up to a century – making these types of projects good candidates for long-term financing, much like purchasing a home.
“Financing long-term road improvements with long-term bonds means that drivers, long distance truckers, and all businesses that profit from a good transportation system will contribute to the roads they are using now and 15 years from now,” Ward said.
Pennsylvania is in good fiscal shape to take on new borrowing. By several measures, the commonwealth’s debt levels are low and declining in the years ahead. Interest rates are also low, reducing the long-term costs of borrowing and allowing Pennsylvania to step up its investment in transportation with less of an increase in the gas tax or other user fees.
Keeping the capital stock and franchise tax at its current low rate could fund most of the debt costs of borrowing $2.5 billion for transportation projects – just under $200 million annually. The capital stock and franchise tax rate has already been cut by nearly 93 percent since 1998 and, under current law, will be eliminated in 2016.
Ward presented the transportation funding idea as an alternative to legislation that would redirect about $1.2 billion in sales taxes paid on motor vehicle purchases out of the state’s General Fund and into the Motor License Fund to fund transportation projects.
Ward testified before the House Finance Committee that two bills on this subject, HB 1630 and HB 962, would create a permanent fiscal crisis for the commonwealth, forcing funding cuts to hospitals, schools, early childhood programs, nursing homes, and other services as important as transportation.
“While some may think this is a ‘pain free’ way to dedicate more funding to roads and bridges, in reality this is a classic case of robbing Peter to pay Paul,” Ward said.
The good news first: October General Fund collections exceeded the monthly estimate by $29 million, or 1.4%. For the fiscal year-to-date, the General Fund has a modest revenue surplus of $42 million, or 0.5%.
Much of October's surplus, $20 million of the $29 million, came from corporate tax collections, which fell slightly short of revenue targets in the previous month. Personal income and sales tax receipts also met October targets.
For the fiscal year-to-date, collections of the state's three major groups of taxes — personal, sales, and corporate — are all above estimate. Modest shortfalls of less than 1% were recorded for collections of the inheritance tax and taxes on tobacco, beer, liquor, and table games.
All in all, General Fund revenue collections are on track with official estimates four months into the 2013-14 fiscal year.
Now the bad news: General Fund collections are not keeping pace with the slowly growing economy, and much of this can be traced to corporate tax cuts.
Compared to collections through October 2012, fiscal year-to-date revenues have grown by an anemic $88 million, or 1.1%. Personal income and sales tax collections have grown by more than 3% in this same period, bringing in slightly over $200 million more than in 2012. While not surging revenue growth, these figures show the economy is expanding.
However, much of this revenue growth has been wiped out by a decline in corporate tax collections of $121 million, or 13.9%, during the first four months of 2013-14 compared to 2012-13. A large share of this decline is due to the 2013 rate cut to the capital stock and franchise tax. This tax rate is expected to be cut again in 2014 and 2015, making it potentially difficult for overall revenue growth to keep up with inflation in coming budgets.
So as prices and incomes rise, individuals will continue to pay their taxes, while many corporations pay less. This means fewer public resources to support our schools, hospitals, and other critical services.
So when lawmakers say this next budget season that there just isn't any money, remember that this is a choice.
The official launch last week of Governor Tom Corbett's re-election campaign has generated another round of stories on employment generated by fracking in the Marcellus Shale.
A low point in that coverage came when a Pennsylvania Department of Labor and Industry staffer claimed that a quarter-million jobs was a conservative estimate of the jobs impact:
Q: I know you have to be careful with your language about what this all means. But I hear the Corbett administration say there are approximately a quarter-million people benefiting from this industry with jobs. Is that correct?
A: I think in some respects it can be a conservative estimate.
Marc Levy at The Associated Press does a nice job setting the record straight:
It might sound good as a campaign claim, especially if you're trying to take credit for it: The Marcellus Shale natural gas industry supports more than 200,000 jobs, goes an online ad for Gov. Tom Corbett...
The problem is, it's an iffy claim for an energy sector that economists say is relatively small...
The Labor and Industry Department statistic counts six "core" industries that involve oil and gas extraction and pipelines. Over four years, those jobs grew by 17,414 to 28,155.
Then it counts 30 "ancillary" industries, including highway construction, metal making, laboratories, trucking, power plants and engineers. Over four years, those jobs grew by 13,352 to 203,814.
Tim Kelsey, a Penn State professor of agricultural economics and a co-director of the university's Center for Economic and Community Development, said an academic economist's very rough calculation of the job impact would be closer to multiplying by two the increase in core jobs - 17,414 - to get a figure of about 34,000 or 35,000. And that includes ripple effects, Kelsey said.
Our friends at the Economic Policy Institute (EPI) are out today with an interactive map showing how the 50 states stack up when it comes to employer-sponsored health insurance. With the nation’s employer-based health insurance system fraying rapidly in the past decade, the findings highlight just how important the Affordable Care Act is to many Americans.
The non-elderly population across the country relies on employer-sponsored health insurance (ESI) as their primary form of health coverage. In eleven of the last twelve years, however, ESI coverage has declined. Across the country, on average, ESI coverage for the under-65 population fell 10.8 percentage points from 2000 to 2012. Translated into raw numbers, if the ESI coverage rate had not declined over this period, 29 million more Americans would be covered today by their employers. Twenty-two states experienced losses in excess of 10 percentage points over the period. The largest declines in coverage occurred in Nevada, Michigan, Georgia, Ohio, Wisconsin, and Indiana, each with losses of at least 13 percentage points.
As a result of these losses, the average coverage rate in 2012 was down to 58.4 percent. The map below compares ESI coverage for the entire under-65 population across states in 2011/2012. Massachusetts has the highest rate of ESI coverage at 70.8 percent. It is followed by New Hampshire (70.0 percent), Connecticut (69.7 percent), Minnesota (69.0 percent), North Dakota (67.6 percent), and Maryland (67.3 percent). In contrast, less than half of New Mexico’s non-elderly population has ESI, at 47.2 percent.
See how Pennsylvania compares to other states on EPI’s interactive map (click here if you are having any trouble viewing it):
 Because of sample size requirements, I combined two years of data 2011 and 2012.
A major funding cut to the Supplemental Nutrition Assistance Program (SNAP) took effect November 1, impacting 1.8 million Pennsylvanians.
SNAP, formerly known as food stamps, is our nation’s first line of defense against hunger and a powerful tool to help keep families out of poverty. Benefits are modest, offering many Pennsylvania families a crucial bridge in this slow economic recovery.
The November 1 cut is the result of an expiring provision in the American Recovery and Reinvestment Act (ARRA) that temporarily boosted SNAP to strengthen the economy and ease hardship in the wake of the recession. The cut totals $5 billion nationwide for the remaining months of the federal fiscal year (November 2013-September 2014), including $183 million in Pennsylvania.
Nearly 66 cents of every dollar cut in Pennsylvania ($120 million) will reduce the benefits of households with children. Another 37 cents out of every dollar cut ($68 million) will reduce benefits for Pennsylvanians who are elderly or living with disabilities. Click here or on the map below to view how many people, households, and children are impacted by the cut to SNAP in each of Pennsylvania's 67 counties.
In addition to helping to feed hungry families, SNAP is one of the fastest, most effective ways to spur the economy. Every $1 increase in SNAP benefits generates about $1.70 in economic activity. Benefits boost demand for farm produce, helping to keep our nation’s farms strong.
The cuts may force some Pennsylvanians to choose between food and other priorities. Ruth Vesa, a 78-year-old widow in Pittsburgh, said in August when the cuts were announced: "I’m very thankful for the food stamp program because it enables me to have good food to eat and not be worried about my medical prescriptions. Otherwise I would have to make a choice. Any cuts to the program would be hurtful to me personally."
For a family of three, the cut will likely mean a reduction of $29 a month — $319 for the remaining 11 months of the fiscal year. This is a serious loss for families whose benefits, after this cut, will average less than $1.40 per person per meal. It is the equivalent of taking away 21 meals per month for a family of four or 16 meals for a family of three.
That's the bad news. The even worse news is that additional cuts to SNAP could be on the way. In September, the U.S. House narrowly approved legislation that would cut $39 billion in SNAP funding over the next decade. The Senate has not taken up the bill.
If enacted, a cut that large would deny SNAP to approximately 3.8 million low-income people in 2014 and to an average of nearly 3 million people each year over the coming decade, according to Congressional Budget Office (CBO) estimates. Those who would be thrown off the program include many low-income children, seniors, and families that work for low wages.