Third and State
Within three years, MOST school districts in Pennsylvania will be cutting programs and laying off staff if we continue on the current path of school funding. While program eliminations and staff reductions are already the case in a number of lower-income districts, they could soon become the norm across the state, according to an updated report from Temple University's Center on Regional Politics (authored by Drs. William Hartman and Timothy Shrom).
State limits on property tax increases and the very modest increases in state funding we've seen in the past few years mean that revenues in a growing number of districts aren't able to keep up with known increases in costs. As school districts exhaust their reserves, cuts will follow if we don't change this dynamic. We've already seen the impact of program and staffing losses on our schools during and immediately after the recession, and it isn't a recipe for success.
This cuts to the heart of why we need a major infusion of additional state funding for school districts, and why it must be a key part of the 2015-16 state budget.
Doing the same thing is no longer a viable option if we want kids across the state to succeed.
From the report summary's key findings:
Most school districts in Pennsylvania will not have sufficient revenues over the next three years to support their mandated and necessary expenditures. Sixty percent of the districts in the state will face severe and prolonged program and staff reductions to balance their budgets, which will reduce the quality of education in those districts and substantially widen the academc and fiscal gaps with more well-off districts.
One of the things the study makes clear is that a dollar-for-dollar swapping of state dollars for local property tax revenues (as would be done by HB 504 which was recently passed by the House) makes zero difference for the school districts and their ability to provide critical services.
The report also recommends targeting new state Basic Education dollars to districts with the most need, rather than across-the-board increases in state funding.
The report offers some good news on school pension costs, where the increases will moderate beginning in 2017-18.
The 2015-16 budget offers a stark choice for Pennsylvania - doing more of the same and seeing many of our schools deteriorate, or finding new state funding for schools (in part, from a severance tax on natural gas) to make a major improvement. It is up to us to let lawmakers know which path to choose.
It was a busy week in Harrisburg with the legislature rushing through pension and property tax bills before adjourning until June 1. The Senate passed SB 1, a 400-page proposal to revamp Pennsylvania’s public pension systems by requiring 401(k)-type plans for new state and school employees, and reducing benefits for current workers. In response, Keystone Research Center Executive Director Stephen Herzenberg released a statement warning that the plan is likely unconstitutional and would cut retirees’ benefits deeply while costing Pennsylvania taxpayers dearly.
Over in the House, they passed a property tax relief bill that would raise the state sales tax from 6 percent to 7 percent and the personal income tax from 3.07 percent to 3.7 percent. However, unlike Gov. Wolf’s property tax relief plan, the bill wouldn’t funnel the most relief to low-income Pennsylvanians and school districts with the highest property taxes. PBPC released a property tax primer this week to help legislators, the media and the public understand which kinds of property tax relief benefit which kinds of property owners.
Just harvesting budget info … PBPC Outreach and Engagement Director Jeff Garis provided an overview of Gov. Wolf's proposed 2015-16 budget and discussed issues emerging in budget negotiations at Just Harvest’s annual meeting Tuesday night in Pittsburgh. Just Harvest fights poverty in the Pittsburgh region and belongs, along with PBPC, to the Better Choices for PA coalition.
Building stronger industry partnerships … The Harrisburg Patriot-News/Pennlive.com published an op-ed on Wednesday by KRC’s Steve Herzenberg and former state Rep. Kelly Lewis on why Pennsylvania’s industry training partnerships are a winning strategy for both Democrats and Republicans and why they deserve the $10 million in restored state funding that Gov. Wolf proposes in his budget.
Calling for more education funding … The Campaign for Fair Education Funding, which includes PBPC, organized a "Call to Action for Public Education Day” on Thursday, generating phone calls and tweets to state lawmakers, urging them to restore funding cuts to public education and enact a fair system for driving state funds to school districts. If you weren't able to participate yesterday, it's not too late to let your state senator and representative know that you support investing in public education. PBPC has background information, resources, and a tool to find your state legislators and their phone numbers.
Blogging bonanza … This week brought several new posts on a variety of issues to Third and State. Jan Jarrett blogged about monster wells, soaring revenues and the need for a severance tax. Steve Herzenberg blogged about why Pennsylvania needs to reinvest in education. And PBPC Education Analyst Waslala Miranda blogged about how much the achievement gap has cost Pennsylvania.
Coming soon … PBPC’s Waslala Miranda will participate tomorrow morning in a NAACP school funding forum on the Delaware County campus of Cheney University. It’s free and open to the public. The Delaware County Daily Times ran a story yesterday previewing the event.
… On Thursday evening, PBPC's Jeff Garis, will participate in a free public forum about school funding issues hosted by Global Solutions Pittsburgh. The panel discussion will begin at 6:30 p.m. at the Union Project, 801 N. Negley Ave, Pittsburgh. More information is available here.
On May 6, researchers showed how the achievement gap and underlying inequality in Pennsylvania schools held back academic and economic performance and how resolving those problems would allow us to leapfrog ahead of the rest of the nation.
During a Temple University symposium on education funding, RAND economist Lynn Karoly showed how the state would benefit if it closed the achievement gaps among racial and socioeconomic groups, as indicated by state assessment scores. Currently, Pennsylvania suffers from achievement gaps so large that our 8th grade reading scores on the nation’s report card indicate:
- A white-black gap that is the 6th largest among states in the nation;
- A white-Latino gap that is the 3rd largest among states in the nation; and
- A wealthy-poor gap that is the 17th largest among states in the nation.
However, if Pennsylvania had closed those gaps in 2003, it would be the top scorer among states and be among the top three scorers globally. Even more importantly, Pennsylvania would have enjoyed major gains after just one year:
PA GDP Gain from Closing Gaps in 2003 (Billions $)
Gain After First Year (2004)
Gain After 10 Years (2013)
$0.9 - $2.0
(0.2% - 0.4%)
$12.4 - $27.4
(1.9% - 4.2%)
$1.6 - $3.1
(0.3% - 0.6%)
$21.8 - $43.5
(3.4% - 6.7%)
$1.5 - $2.6
(0.3% - 0.5%)
$20.3 - $35.4
(3.1% - 5.5%)
Closing the race-ethnic gap in 2003 would have resulted in $1.25 - $2.89 billion, or about 6-15%, more in earnings in 2014. If all the achievement gaps had been closed in 2003, our state economy last year would have grown by an additional 2% - 7%, or by $12-$44 billion.
Remember that figure when anyone says pushing for policies that help all children have a fair chance in life, especially in the classroom, is just “throwing money at the problem.” We are also paying the price of not adequately investing in a fair and equitable education system through lower test scores and the worst funding inequality in the nation between the wealthiest and poorest school districts. Certainly, the price tag of more equitable policies would not have been small, but it’s difficult to believe they would have cost the dozens of billions of dollars that failing to invest in such policies have already cost us.
 Lynn A. Karoly, “Economic Impact of Achievement Gaps in Pennsylvania’s Public Schools,” (presentation, Beyond a New School Funding Formula: Lifting Student Achievement to Grow Pennsylvania’s Economy, Harrisburg, PA, May 6, 2015).
The Center on Budget and Policy Priorities has just uploaded an interactive graphic that makes clear why Pennsylvania needs to reinvest in higher education.
The map shows that Pennsylvania's inflation-adjusted higher education spending per student is down 36% since 2008 -- while tuition is up 18%. Only four states have seen bigger cuts in higher education funding since 2008: South Carolina, Alabama, Louisiana, and Arizona. Is this really the company Pennsylvania wants to keep?
In addition, as Keystone Research Center explained in a report on higher education funding last October, Pennsylvania's starting point for funding in 2008 was near the bottom of states. Keep in mind also the evidence in that report about the critical importance of education investment to long-run economic growth, wages and opportunity.
Can you say "we're shooting ourselves in the foot?"
Pennsylvania's cuts-only approach to the state budget has been short-sighted and jeopardizes long-run prosperity in the state. This may not be news to some of us, but apparently we need to keep telling lawmakers.
Oh please, let's pass a state budget that reinvests in education.
There’s wonderful news coming out of Pennsylvania’s gas fields, if you’re an investor. Range Resources is boasting about its “monster wells” that are breaking all records for production. "We believe we've captured a large position with stacked pay potential in the best rock in the basin," gushed Range COO Ray Walker. (Stacked pay potential refers to the potential to extract gas from a single well at multiple depths, in this case from the Marcellus Shale and the much deeper Utica Shale).
Meanwhile, Cabot Oil and Gas beat its revenue estimates by $47.52 million as its high producing, low-cost Marcellus Shale wells pumped out almost 480 billion cubic feet of gas this year.
And to gild the lily, the drillers paid no severance tax on Pennsylvania gas like they did in every other state in which they operate.
But the news isn’t so good for Pennsylvania taxpayers who are still reeling from huge state funding cuts to public education that resulted in the loss of 27,000 jobs, and slashed classroom and extracurricular programs. Local school districts were forced to raise hated property taxes, so homeowners ended up paying higher taxes for less education.
Governor Wolf has proposed a severance tax on natural gas production similar to the one in place in neighboring West Virginia that would generate enough revenue to restore the cuts public schools have endured. Revenue from increases in sales and personal income taxes would be used to lower property tax bills, dramatically lower for some homeowners.
Not surprisingly, the gas drillers are saying a severance tax will drive them out of Pennsylvania. They would have us believe that they will leave their monster wells in the best rock in the basin to go drill in another state that already has a severance tax.
Pennsylvanians aren’t buying that threat, and neither should members of the General Assembly.
For a PBPC review of the research literature, which finds that severance taxes do not have a substantial impact on how much drilling happens in a state, see Responsible Growth: Protecting the Public Interest with a Natural Gas Severance Tax.
Three cheers for Tara Murtha, journalist and associate communications director at Women’s Law Project. Tara pointed out in a May 7th editorial that the media, in its zeal to quote “both sides” of an issue, can “unwittingly amplify well-funded propaganda machines.”
Tara had in mind the Employment Policies Institute, which claims that thousands of jobs will be lost if the minimum wage is increased. The group was identified in recent Pennsylvania news stories on the minimum wage as a “nonprofit think tank.” In fact, the group is run by a public relations firm that also represents the National Restaurant Association.
The news stories were prompted by Keystone Research Center’s (KRC’s) new report on the benefits of raising the minimum wage. Murtha concludes that “research findings published by one corporate-funded business-interest advocacy group are not equivalent to research published by the Keystone Research Center.”
Telling communities’ shale tale … On May 7 in Bucks County, a KRC/Pennsylvania Budget and Policy Center (PBPC) team including Jeff Garis, Stephen Herzenberg, and Jan Jarrett presented findings from KRC/PBPC research showing increases in crime, STDs, rents and truck-related traffic fatalities in Pennsylvania counties experiencing the heaviest drilling. These costs give lawmakers one more reason to end the gas industry’s “free pass” by enacting a severance tax. To read about the Bucks forum and watch a short video of Steve click here. On the need for a severance tax, check out Steve’s letter to the editor.
Bucks County Courier Times
Unveiling the PA Skills2Compete coalition … At the Pennsylvania Workforce Development Association conference on May 7, Steve told attendees about a new coalition coming together to fight for the workforce investments in the governor’s proposed budget, including $10 million for Industry Partnerships to identify and meet common skill needs within sectors. To become part of the new coalition, email firstname.lastname@example.org.
Plugging the budget hole with a leaky stopper … The PA Independent quoted PBPC Research Director Michael Wood on the temporary nature of the state’s April revenue surge from a one-time windfall of unclaimed property.
Raise the wage now! … Mark Price, KRC labor economist, continued his media barnstorming in favor of raising the PA minimum wage. He published an op-ed in the Patriot News, testified before the Senate Labor and Industry Committee, and appeared on The Rick Smith Show.
Fighting for fair funding of schools … On May 2, PBPC Outreach and Engagement Director Jeff Garis participated in a fair education funding forum in Allentown hosted by the NAACP, one of seven forums across the state at which PBPC is presenting information on Pennsylvania’s gaping disparities in public school funding. PBPC and the NAACP are two of more than 50 organizations in the Campaign for Fair Education Funding.
The story of outsized compensation is a private sector one not a public sector one … Steve Herzenberg was quoted in the Patriot-News/Pennlive.com’s package of stories this week on public pensions that top $100,000 a year. Steve cautioned that "we need to be careful in the course of addressing the top-end pensions we don't at the same time end up cutting very modest pensions that people need for a secure retirement." Steve also told the Patriot-News that, while most public pension dollars go to people with modest pensions, retirement savings in private 401(k) savings plans are much more heavily tilted to the top end. (In fact, the median savings in private savings accounts is $14,000 while the Top 1% of accounts average $1.3 million – see p. 19 in this report from the “good EPI” (Economic Policy Institute).) Maybe these points will be used in the Patriot’s follow-up package of stories on retirement inequality in the private sector!
Giving the gift of tax credits this Mother’s Day … Looking for a way to give all working moms a gift for Mother’s Day? Read Mike Wood’s latest blog post on Third and State about how you can help preserve key provisions of the Earned Income Tax Credit and Child Tax Credit.
Coming soon … Don’t forget to buy your ticket, if you haven’t already, to KRC’s Annual Awards Reception on June 1 at the Hilton Harrisburg. We’ll be honoring Mike Crossey, president of the Pennsylvania State Education Association, and recognizing Sharon Ward, first director of PBPC.
This Mother’s Day, let’s show working moms how much we value them by supporting the Earned Income Tax Credit (EITC) and Child Tax Credit (CTC), which enable them to do the best they can for their kids. About 576,000 working moms in Pennsylvania rely on the EITC to help make ends meet. Include the CTC, and that number increases to 641,000, according to the Center on Budget and Policy Priorities.
The EITC and CTC boost income, support work, and reduce poverty. The credits raise the income of low-wage mothers, helping them pay for the very things that allow them to work and improve their family's situation - such as transportation and child care.
Across the nation, the EITC and CTC lifted 9.4 million people out of poverty in 2013 -- more people than any other federal program besides Social Security -- including more than 2 million mothers and 5 million children. In total, the credits helped 22 million Americans make ends meet.
In the wake of the recession, both programs were expanded to help more families, but only temporarily.
If Congress doesn’t act to make key provisions of these tax credits permanent, 16 million people, including 8 million children, will be pushed into poverty in the coming years.
Click here for a look at some of the research showing how EITC and CTC help foster child development, promote work, and reduce poverty.
If you want to help working moms this Mother’s Day, consider calling Senators Toomey and Casey, and your congressman, and asking them to support moms and kids by making these key provisions of the EITC and CTC permanent - after calling your mom, of course.
One-Time Revenue Causes April General Fund Collections to Surge; Revenue Surplus Continues For 2014-15
April is typically one of the more important months for tax collections in the General Fund. This year, April collections were better than expected – coming in $201 million, or 5.3%, higher than expected – due largely to one-time revenue. This pushes the fiscal-year-to-date revenue surplus to $569 million, or 2.3%, higher than expected. If this trend continues over the final two months of the commonwealth’s fiscal year, the additional revenue could help make it a little easier to negotiate a plan to balance the 2015-16 budget.
The vast majority of April’s revenue surplus (just under $190 million) was due to higher than projected revenues from a change in the state’s unclaimed property law. This change, which shortened the waiting period before unclaimed property is turned over to the Pennsylvania Treasury, yielded a lot more revenue than was expected. While the unclaimed property money adds to the overall revenue surplus this year, this one-time revenue shouldn’t be expected in future years.
April tax collections also exceeded estimates, but only by $11 million, or 0.3%. Income, sales, and inheritance tax collections were higher than revenue targets for the month, while corporate taxes fell modestly short.
Compared to the prior fiscal year, both April collections and those for the fiscal year are showing strong growth. Collections in April 2015 grew by $588 million, or 17.2%, from the prior year. Tax collections grew by $277 million, or 8.5%. Much of this growth was in personal income tax payments, which increased by $228 million. The increase in payments of unclaimed property also caused non-tax revenues to increase substantially over the prior April.
For the fiscal year-to-date, General Fund collections are nearly $1.9 billion, or 7.8%, higher this year. Tax collections are up $1.2 billion, or 5.2%, during this same period – with increased revenues in every major category of tax. This is a sign of an expanding state and national economy (finally).
On Monday, May 4, the Independent Fiscal Office will issue its official forecast for 2015-16. This will be the first updated revenue forecast since the Governor’s budget proposal came out in early March. This forecast typically sets the bar for revenue expectations (not including revenue changes sought by either the administration or General Assembly) in the coming fiscal year for budget negotiations. Despite the one-time revenue in the 2014-15 budget, the better-than-expected tax collections seen so far will likely push the bar higher for 2015-16.
By Kathy Fisher, policy manager for the Greater Philadelphia Coalition Against Hunger
You may have seen in the news this week that Gov. Tom Wolf eliminated the so-called asset test, which prevented many Pennsylvanians from obtaining SNAP benefits (food stamps). Gov. Wolf promised in his campaign that he would do this, and his action brought an end to a seven-year debate regarding the merits of the asset test.
The recession that took hold in 2008 forced many struggling families to turn to SNAP for the first time. At that time Pennsylvania wisely followed the lead of 35 other states and the District of Columbia by eliminating its existing asset test. This prevented people with meaningful assets from receiving food stamps even though a growing number of people with some assets were affected by the economy. Pennsylvania resurrected the asset test in May, 2012, even though the state still had high rates of unemployment, limited job opportunities, and far too many Pennsylvanians struggling to feed themselves and their families.
The revived asset test required households to have less than $5,500 in assets ($9,000 for households with seniors or people with disabilities) to qualify for SNAP. The value of one vehicle per household was exempt, but any additional vehicle worth more than $4,650 counted as an asset. At the time, Department of Public Welfare (now Human Services) estimates revealed that 4,023 households with little to no income would lose SNAP benefits, and that a majority of these were seniors and people with disabilities. By disqualifying those households from SNAP, Pennsylvania stood to lose at least $12.5 million in federally funded benefits in 2012.Normal 0 false false false EN-US X-NONE X-NONE MicrosoftInternetExplorer4 Normal 0 false false false EN-US X-NONE X-NONE MicrosoftInternetExplorer4
Many impacted individuals had recently lost jobs and were counting on assistance to help pay for their mortgage and other basics to maintain some stability in their lives while they looked for work.
In addition, administration of the test created a costly and time-consuming ripple effect. County Assistance Office staff, already overwhelmed and struggling to provide the most basic services to their clients, had to process paperwork for hundreds of thousands of households receiving SNAP that were now required to verify their assets. This added red tape made it more difficult for eligible families to receive SNAP and increased the risk of federal penalties that could result from high error rates.
Advocates vigorously argued that the social and economic costs of an asset test, both to individuals and to Pennsylvania’s economy, are too high. Families with modest assets need SNAP to get back on their feet and to help avoid long-term devastating consequences. Seniors living on limited incomes should not be forced to forego a small SNAP grant that helps them make ends meet simply because they were wise enough to save for unexpected medical costs and home repairs. Pennsylvania grocery stores and small businesses should not lose out on federal SNAP dollars that help support local economies.
Finally, our voices have been heard, and our efforts have paid off – in the form of SNAP dollars that will help thousands of families and individuals put food on the table.
The Senate Appropriations Committee met on March 30 to discuss the proposed 2015-16 education budget with Acting Education Secretary Pedro Rivera. There were three topics discussed at the committee hearing that will be key to understanding the upcoming budget process:
- How well public schools are doing and whether all children are given a fair chance to succeed;
- The role of unfunded pension costs in budget concerns; and
- Property tax reform.
Today, we’ll be looking at the last topic: property taxes.
Gov. Wolf and state lawmakers have both proposed changes in property taxes used to fund public schools, but some senators routinely challenged Wolf’s proposal during the hearing. Sen. David Argall (R-Berks and Schuylkill) said partisan politics drove Gov. Wolf’s property tax reform plan, to which Rivera countered that the proposed education budget, overall, revolves around funding equity.
To understand how the plan would work, let’s look at the projected property tax reductions shown in the figure below. Each dot represents the most typical household in a school district, and the figure shows two factors:
- The student poverty rate of the school district running from left to right across the bottom; and
- The proposed percent tax reduction running along the left-hand side, from the bottom to the top of the graph.
Neighborhood poverty is reflected by school district poverty. Student poverty — as indicated by the share of students who qualify for free- or reduced-price lunch — is now the norm in our public schools, reaching 44% overall, with half of districts having rates of 40% or higher. You can see a large cluster of districts rise from left to right, showing that as school district poverty – neighborhood poverty —increases so does the proposed percent tax reduction for the most typical household. This means the plan would focus the largest shares of homeowner tax relief in lower-income areas.
Source: PBPC analysis
Skeptical senators said homeowners would not be protected against rising property taxes, but that’s not true for two reasons:
- The Act I index already caps how high property taxes can be raised without voter approval (the base index for 2015-16 is 1.9%); and
- The Wolf Administration’s proposal to increase the state share of education funding from 38% to 50% will greatly lower the primary driver of high property taxes, which is the need for school districts to raise local revenue to make up for any funding gaps.
No, not Keystone Research Center labor economist Mark Price. Dan Price. CEO and owner of Gravity Payments, a credit card processing company in Seattle. Although the two men do kind of look alike.
As reported a few days ago, CEO Price plans to raise the minimum salary at his company to $70,000 per year. He'll slash his own salary until the company gets back to the profit level it had before raising its minimum salary.
Price's rationale for increasing his company's minimum wage: lifting the pay of lower-wage workers will make them happier (increasing income above $70,000 makes less difference to happiness), and the company will benefit in the long run. Price also felt his action might "highlight the corrosive effects of income inequality in American society."
When you look at who is criticizing Price's action -- e.g., Rush Limbaugh -- you know Price is on the right track.
Price's pay-leveling approach would make particular sense in Pennsylvania's nursing home industry. As we documented in a report released last week, the CEO at the nursing home chain HCR ManorCare earned $18.4 million per year over a recent seven-year period -- $129 million total. Meanwhile, typical nursing assistants in nursing homes earn about $27,040 per year. This is a CEO-to-nursing-assistant pay ratio of 684 to 1 in an industry in which 81% of for-profit nursing home revenue comes from taxpayers (via Medicaid and Medicare). As this column in the Carlisle Sentinel points out, there's something very wrong with this picture.
The same happiness research cited by Price suggests that lifting the earnings of low-wage nusing home workers making $27,040 per year (or less) would have a profound impact on their quality of life. Leveling top-to-bottom pay ratios could also improve quality of care in nursing homes, driving down staff turnover that severs the caregiver-resident relationship and reinforcing the calling that led many nursing assistants to caregiving.
CEO and minimum pay at Gravity Payments, which largely serves other private businesses, is up to the company's top management. The pay at publicly funded nursing homes is up to all of us: It is a policy choice.
Distribution of the public funds on which this industry depends could be conditioned on decent pay at the bottom and justifiable pay at the top -- justified morally and based on a real (not invented) connection to improving care quality.
If we make the moral choice Price has made for more equal pay, we can transform the lives of workers and nursing home residents. What's the wait?
The Senate Appropriations Committee met on March 30 to discuss the proposed 2015-16 education budget with Acting Education Secretary Pedro Rivera. Three topics were discussed at the committee hearing that will be key to understanding the upcoming budget process:
- How well public schools are doing and whether all children are given a fair chance to succeed;
- The role of unfunded pension costs in budget concerns; and
- Property tax reform.
Today, we look at the second topic: pensions.
During the hearing, senators kept emphasizing the impact of unfunded pension costs on school districts, with Republican lawmakers making clear that pensions will be their top priority in budget talks. Three important things to know in the pension debate are: how we got to this point, why pensions matter, and how to move forward:
- We’re here because of past state decisions. Various factors caused the unfunded pension liability, as shown below, but employer funding deferrals remain the largest factor. The decision to defer payments was ultimately made by legislators.
Source: PSERS analysis
- Pensions are a critical part of our investment in public education, helping to attract and retain good teachers. Of all the factors within the control of a school district, teachers are the most influential on student performance by two- or three-fold. Pensions are especially important to improving teacher quality because salaries for teachers are 25% or more below private-sector salaries for the college-educated.
- We need to be responsible to move forward. We must beware of potential “reforms” that would offer new public workers 401(k)-type retirement accounts. Among other problems, these accounts would have a “transition” cost of $42 billion and would not offer any pension debt relief. Gov. Wolf’s proposal to buy down debt, on the other hand, would help us dig out of this mess.
 “Partners for Your Future: Pennsylvania Public Schools Employees’ Retirement System (PSERS) Budget Report Fiscal Year 2014-2015.” PSERS, February 7, 2014. Print. Page 20. Accessed April 7, 2015. http://www.psers.state.pa.us/content/publications/budget/1415budget.pdf
Today, low-wage worker protests across Pennsylvania, the nation, and the globe will reach their greatest scale yet.
Mobilizing behind a demand for "$15 and a union," this swelling movement holds the key to the future of opportunity and the middle class in America.
The basic idea here is simple. Most U.S. jobs -- and an even higher share of jobs that pay below a family- supporting wage -- are in service industries that can't relocate. You can't empty the bed pans at UPMC from Tijuana. You can't guard the Tower at PNC plaza from Beijing. You can't customize a Subway sandwich for someone in Pittsburgh from Indonesia.
By forming regional (or statewide) labor unions in service industries -- often similar in geographic scope to building trades unions -- service workers will gain the ability to lift wage and benefit standards (and work-time, training and other labor standards). Imagine unions of janitors, security guards, contingent university faculty, retail workers, supermarket workers, fast food workers, other restaurant workers, hotel workers, health care workers, etc.
Presto -- they have wages of $15 per hour and above, instead of $7.25 to $13 per hour. The "union" part of "$15 and a union" is essential to -- among other things -- keep wages moving up with productivity growth following the initial catch-up wage jump to compensate (literally) for 35 years of wage stagnation.
In many industries, the bump-up of wages won't have a big impact on total costs but could lead to substantial improvements in productivity and/or quality. One example where there could be a large quality boost is in the nursing home industry, about which we released this report two days ago.
Driving up wages will also boost consumption and economic growth AND, in the long-term, INCREASE productivity growth and innovation economy-wide. Businesses blocked from earning profit at the expense of their workers find a more productive focus for managerial energy.
With this just one little bit of social innovation -- $15 AND a union -- in all these regional service industries, you could solve the problem of inequality in America, and increase living standards for everyone more rapidly.
What's not to like about this eminently practical solution embraced recently by economist Paul Krugman?
Occupy Wall Street some five or six years ago was critizied for not having a solution to the one-percent economy. The workers protesting today have a solution. They just need to keep pushing until society -- and economic and political leaders -- realize that they have a solution, and that the solution works great for everybody.
Hats off to all the nursing home and other Pennsylvania workers joining the Fight for $15 today. Their fight for their families' economic justice is also a fight for all of us to create the kind of Pennsylvania we want.
Today in 200 U.S. cities workers will rally for higher pay and a union. These actions, which started in November of 2012, have been instrumental in building momentum for state and local minimum wage increases.
These events have already driven large corporations like the Gap, Walmart and McDonald’s to announce, usually with great fanfare, that they are raising wages. On Tuesday a Pennsylvania-based retailer, Giant Food Stores (the firm is a subsidiary of the Dutch multinational Ahold), joined in and announced that it would raise starting salaries to $9 per hour.
While $9 falls short of the $10.10 per hour minimum wage being advocated by the Raise The Wage Pa Coalition it does represent another victory in the fight to raise wages a victory that comes in no small part from thousands of workers who risk their jobs to speak out for higher wages.
It’s thanks to events like those happening all over Pennsylvania today that the Pennsylvania legislature will likely pass a bill to raise the minimum wage this year. By all accounts, we will win the fight for a higher minimum wage. The tough part of the fight will be lifting the statewide minimum wage in Pennsylvania to at least $10.10, including for tipped workers, and retaining for local governments the power to set their own minimum wage at a higher level.
The Senate Appropriations Committee met on March 30 to discuss the proposed 2015-16 education budget with Acting Education Secretary Pedro Rivera. Three topics were discussed at the committee hearing that will be key to understanding the upcoming budget process. The topics will be covered, starting today, in three separate blog posts:
- How well public schools are doing and whether all children are given a fair chance to succeed;
- The role of unfunded pension costs in budget concerns; and
- Property tax reform.
Today, we look at the first topic: public school performance and equality of opportunity.
Sen. Lloyd Smucker (R-Lancaster and York) started the hearing by pointing to how well the state performed on national academic measures to underscore how good our public schools already are. But that assumes that those averages are a good picture of the entire state, instead of just parts of it. When looking at state averages we see that:
- The state is among the top 10 nationally for 8th grade reading and math scores; and
- Pennsylvania’s high school graduation rate ranks 15th nationally.
However good these state averages are, they hide the achievement gaps among socioeconomic groups. Scores on Pennsylvania System of School Assessment (PSSA) exams vary along ethnic and class lines, as shown by the results of PSSA math scores in 2011 and 2014, which are similar to the reading scores in those years. Generally, ethnic minorities perform worse on these exams than white students. Furthermore, Pennsylvania’s achievement gaps between students attending the poorest and wealthiest schools are worse than the national average.
Source: Pittsburgh Post-Gazette analysis
Underlying these achievement gaps are funding gaps:
- Research shows that reducing funding inequality reduces the achievement gap. You can see the importance of funding to performance by looking at how PSSA math scores above dropped across the board as classroom funding levels fell after 2010-11. The following year the state cut more than $840 million from classrooms.  Reading scores showed similar drops.
- Pennsylvania ranks as worst in the nation in funding inequality between the poorest and wealthiest school districts, almost twice as bad as the second-worst state, Vermont. Pennsylvania spends about 34% more on students in the wealthiest districts despite the poorest districts needing more money to meet their higher needs.
Source: Washington Post analysis
- The inequality is due to the state’s low share of public education funding, 38%, ranking as one of the bottom 10 states nationally. Lower-income school districts are unable to raise the needed local revenue to make up the funding gap while the wealthier school districts can.
 PBPC analysis.
March’s revenue numbers fell short of targets, but only by a little bit (-0.2%). March’s numbers matter because it’s the largest month for tax receipts. General Fund collections so far this fiscal year (starting July 2014) have exceeded expectations by $368 million, or 1.7 percent.
Compared to last March, this March’s tax revenues ($4.2 billion) are up $125 million, or 3.1%. Fiscal year-to-date tax revenues also exceed a year ago by $946 million, or 4.7 percent. Read PBPC Research Director Mike Wood’s in-depth analysis of March’s revenue data, including why Pennsylvania needs corporate tax reform, in his latest blog post.
April will be another important month and, as the fiscal year ends, any revenue surplus or shortfall could have a major impact on budget negotiations. We’ll keep you posted.
Growing gaps in school funding … A new national study, Funding Gaps 2015, by the Education Trust measures the nation’s growing funding inequalities between affluent and poor school districts. Pa. placed second worst among states, with the highest poverty districts receiving $2,491, or 17 percent, less per student than districts with the lowest poverty. The Campaign for Fair Education Funding, of which PBPC is a member, issued a press release on the report this week, and PBPC education analyst Waslala Miranda wrote a blog post on it.
Thumbs down on “jobs that don’t pay” in construction … Also this week a group of lawmakers led by Rep. Jesse Topper, and joined by the School Boards Association and the Pennsylvania Association of School Business Officials, kicked off a by now-biennial effort to exempt school construction projects from Pennsylvania’s prevailing wage law. In a statement to legislators and media, KRC summarized research that shows the law helps keep skilled and experienced workers in the construction industry, and does not raise construction costs. Is it too much to ask that school associations and lawmakers do their homework before advocating for policies that drive down wages?
Thumbs up on a minimum wage increase … On Thursday KRC labor economist Mark Price testified before the House Democratic Policy Committee in Harrisburg on the benefits that raising Pennsylvania’s minimum wage from $7.25 to $10.10 an hour would bring. Mark noted that more than 30,000 people in Dauphin County alone would see a hike in their pay, boosting demand at local businesses. Workers making the minimum wage now can’t afford even the basics, he said.
Supersizing everything but the minimum wage … McDonald’s announced on Wednesday that it will increase by $1 the locally mandated minimum wage it pays in the 1,500 U.S. stores it operates, effective July 1. KRC labor economist Mark Price calls McDonald’s decision “a classic example of union avoidance” as groups like Fight for $15 organize fast food workers to demand higher wages. For more on Mark’s take on McDonald’s decision, read this article from Inc.com.
Coming soon … PBPC Outreach and Engagement Director Jeff Garis will discuss Pa.’s regressive tax system and how to make it fairer at a public forum sponsored by the Susquehanna Valley Progressives from 6:30 p.m. to 8 p.m., Thursday, April 9, at the Unitarian Church in Northumberland, 265 Point Township Drive (Route 11).
… PBPC Research Director Mike Wood will give an updated version of his budget presentation from last week’s Budget Summit in a webinar at 1 p.m. Wed., April 15th. Space is limited, so you'll want to register for the webinar as soon as possible.
The Education Trust, an independent national education policy organization, recently released a report on the nation’s growing funding inequalities between wealthy and low-income school districts. The study reveals that Pennsylvania has the second-worst funding gap among states. When adjusted for the higher needs of low-income students, Pennsylvania’s highest poverty school districts receive 17% less per student than the districts with the lowest poverty.
Figure 1: The Education Trust analysis
To understand this statistic, we need to look at how state and local funding of schools works in Pennsylvania. Currently, the commonwealth has no funding formula that distributes money based on the needs of a school district or its students. The state share of funding -- 38% -- puts us in the bottom 10 of states nationally. This is part of a long-term trend of the state paying a smaller and smaller share, leaving local communities to fund the balance. As local wealth greatly varies across the state, so does the chance that a child will receive an adequate education, which is a basic right.
Below we can see the result: Instead of having a system that matches funding with need, we have one in which the poorer a school district is, the less funding it receives. Adjusting for the higher needs of low-income students, the poorest school districts receive almost $2,500 less per student than the wealthiest districts.
Figure 2: The Education Trust analysis
This is a problem that affects the whole state when you realize how common student poverty is. In 2013-14, nearly half of all public school children in Pennsylvania, 44%, qualified for free- or reduced-price lunch, an indicator of student poverty. Half of all school districts had student poverty rates of 40% or higher. These funding inequalities affect the core mission of public education: to promote academic achievement and an engaged citizenry. Pennsylvania needs to return to a funding formula that gives every child a realistic chance to succeed in school and life.
March is always the most important month for the collection of corporate taxes because nearly half of all corporate tax dollars for the fiscal year come in at this time. While overall tax collections were on target in March 2015, a closer look shows why we need to re-think our corporate tax policies in Pennsylvania.
March bank tax collections were $59 million, or 19%, below their revenue target. Compared to March 2013 collections, bank taxes are down $67 million, or 20%. This is not how it was supposed to be. In 2013, the bank shares tax was reformed to fix unintentional loopholes in the law that arose from changes in the banking industry. The reform expanded the base and lowered the tax rate from 1.25% to 0.89%, in what was sold as being “revenue neutral” – meaning the change was supposed to neither gain nor lose revenue for the state. As we’ve seen from the results – it hasn’t worked that way. Banks pay a lot less under the revised law than they did prior to reform.
Gov. Wolf, in his 2015-16 budget plan, calls for reforming the reform – pushing back the tax rate to the pre-reform level and collecting the tax the commonwealth lost over the last few years.
The second area where the ramifications of policy decisions are evident is in capital stock and franchise tax (CSFT) collections. In March 2015, the commonwealth received $33 million from the CSFT, in what is typically the largest month of collections for that tax. In March 2009, during the height of the recession, Pennsylvania had CSFT collections of $121 million. In March 2007, the state collected $175 million in CSFT revenue. Pennsylvania is experiencing a massive loss of revenue – all due to a steady stream of CSFT rate cuts. Revenue from this tax used to total more than $1 billion a year before the Great Recession, and the CSFT is being eliminated (even under Gov. Wolf) on Jan. 1, 2016.
Overall, revenue collections in March (the single largest month for tax receipts in a fiscal year) fell short of budget targets, but only modestly (-0.2%). For the fiscal-year-to-date, General Fund collections have been higher than expected, exceeding estimates by $368 million, or 1.7%.
General Fund tax revenues in March totaled $4.2 billion, an increase of $125 million, or 3.1%, from a year ago. Compared to the prior fiscal year at this time, tax revenues are $946 million higher, or 4.7%. Every major category of taxes has grown since last year – a sign of the growing state and national economies.
Revenues for 2014-15 are on track to meet their targets. But April is another critical month for tax collections and could dramatically add to or subtract from the current surplus. As we grow closer to the end of the fiscal year, revenue surpluses or shortfalls can have a big impact on budget negotiations for the next fiscal year. We’ll keep watching and keep you posted.
Left to my own devices, I would make more frequent references to Monty Python and cricket (the sport not the insect) in my op-eds, blogs, and other writings.
Fortunately, the younger members of the KRC staff keep me mostly under control.
In a recent op-ed on the Wolf budget, however, I did get away with a reference to Austin Powers, which isn't quite as old as Monty Python, and which involves Americans (OK, a Canadian) making fun of the British.
Here's the op-ed, which so far has appeared in the Philadelphia Business Journal and the Northeast Business Journal.
Below is a YouTube video of the scene from the movie I referenced, which is only 34 seconds and worth playing to the end.
Read the op-ed as well because the business community really SHOULD be a champion of the Wolf budget. Let's see how much it will be.
PBPC’s Budget Summit last week in Harrisburg drew about 200 participants and a distinguished bipartisan lineup of speakers, including Katie McGinty, Gov. Wolf’s chief of staff; Sen. David Argall; Budget Secretary Randy Albright; Representative Kerry Benninghoff; Secretary of Policy and Planning John Hanger; Representative Madeleine Dean and Representative Glen Grell.
PCN broadcast the summit’s plenary sessions -- including McGinty’s keynote speech -- and two of the workshops on Saturday. You can also find workshop presentation materials from the summit on PBPC’s website.
Amnesia Anyone … KRC Executive Director Stephen Herzenberg participated in a town hall on pension reform Thursday night, sponsored by the Pennsylvania NewsMedia Association Foundation and the Pennsylvania Chamber. Steve pointed out that pension experts (or “actuaries”) estimated just 21 months ago that moving new public employees out of the existing Pennsylvania pensions into separate 401(k)-style savings accounts would cost taxpayers a cool $42 billion. This hefty price tag killed the proposal in 2013, and yet it appears destined to rise again, zombie-like, this year. PCN broadcast the town hall at 9 pm Saturday.
It’s Elementary. PBPC education analyst Wasilla Miranda blogged last week about a new brief on how, surprise, money matters to school outcomes. The University of Pennsylvania Consortium for Policy Research in Education published the brief. Check out her post on Third and State.
Lifting Wages to Boost the Recovery. KRC labor economist Mark Price gave a talk Friday morning to the Bucks County Women’s Advocacy Coalition on why Pennsylvania’s minimum wage needs to be raised and how raising it will help the commonwealth’s economy.
Boom Chicka…Bust…The Multi-State Shale Research Collaborative will hold a public forum on “Shale Boomtowns: The Economic and Social Impacts of Gas Drilling” at 7 p.m. April 29 in the Community Room of the Sewickley Public Library, 500 Thorn St., Sewickley. For more information or to register, click here.
Who’s afraid of the Wolf budget … KRC’s Steve Ehrenberg explains why business should embrace Gov. Wolf’s budget proposal in an op-ed published last week in the Philadelphia Business Journal.
Coming soon … The Basic Education Funding Commission will meet from 10 a.m. to 2 p.m. on April 27 in the William Pitt Union Assembly Room at the University of Pittsburgh.
katiefoto v2.pdf Legislative Panel.pdf