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Reflections on the Election and the White Working Class...and Some Links Worth Reading

November 19, 2016 - 10:04am

Like many of you, I've spent the last 10 days reflecting on the Presidential election and devouring countless commentaries. The end of this blog includes some links I found helpful.

In any presidential election this close, changes in a large number of factors "coulda, woulda, shoulda" changed the outcome. That said, the margin by which Trump won the the white non-college vote—64% to 32% in Pennsylvania, not far off the 67 percent to 28 percent national gap—seems too big to ignore. 

It's not as if this is a new challenge. Back in 2000, we wrote in Pennsylvania's Forgotten Majority about the volatity of voters in the state without a four-year college degree. In these earlier years we didn't have exit polls split by race as well as education level, so we used the total non-college vote to gauge shifts among whites. As a point of comparison, Trump won the total Pennsylvania non-college vote by 52%-45%.

President Clinton carried Pennsylvania by winning non-college voters 48%-33% over George H.W. Bush in 1992 and 51%-38% over Bob Dole in 1996. A more than 20-percentage point swing among non-college Pennsylvania votes compared to 1992 carried Republican Rick Santorum to victory over Democrat Harris Wofford in the 1994 Senate race. Swings among non-college voters also contributed to a large increase in the Republican majority in the Pennsylvania Senate in 1994 and to swings towards Republicans State House races—swings which have never been fully reversed.

The volatilty and anger of white working class voters is not that mystifying to anyone who spends as much time looking and wage and income statistics as we do. This year's The State of Working Pennsylvania 2016 shows the large wage declines among white non-college men going back to 1979. (The wage decline among black non-college men has been even larger.)

KRC's analyses of intersecting economic and political trends focus too exclusively on economic trends. The sense of grievance felt by many voters can’t be reduced simply to wage declines and lower employment rates. Economic struggle has been accompanied by a loss of place in the community and a sense of being disrespected. Trump mixed accessible ideas about how to improve the economy (with new trade policies and investment in infrastructure) with a validation of the sense of grievance within his white working-class base. The criticism heaped on Trump for "behaving badly" almost played into his hands by reinforcing the identification with him of voters who feel disrespected. Going forward in Pennsylvania, policy prescriptions and political messaging need to respond to white working-class voters' need for respect and a redefined sense of place (which, contra Trump, doesn't require diminishing or attacking other groups).

Reflecting further on the election, we at KRC (and perhaps other progressives) need to get out more. We get out some—talking to local unions and central labor councils, and even to the occasional “Tea Party” chapter (which was great fun by the way—thanks Berks County Patriots). Giving talks to working people plus our immersion in grim economic trends make us less insulated than some in Harrisburg. But we need to spend more time listening to people talk about their economic struggles and frustrations—including people who disagree with us—and asking them which answers they find most compelling.

We have some initial ideas on how to get out more, and how to serve more effectively as Pennsylvania’s think tank for an economy—and a politics—that works for all. But let us know your ideas…and what you’re reading (email herzenberg@keystoneresearch.org or call 717-805-2318).

Now, finally, here are a couple of links:

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On The Inaction by State Senate to Fund Unemployment Compensation Call Centers

November 18, 2016 - 4:42pm

Pennsylvania Budget and Policy Center Director Marc Stier made the following statement after the state Senate failed to vote for additional funding for the Department of Labor and Industry’s unemployment compensation call centers during its only scheduled post-election session day:

"If you have received unemployment insurance or know anyone who has, you know how important it is for people to receive help in navigating a complicated system, particularly at a difficult time in their lives. Too often, the phone lines to the call centers where help can be found are busy. And that often means that recently-unemployed people cannot secure the help they need in claiming the benefits to which they are entitled, and which have been paid for in part by their own taxes.

"This has long been a serious problem in Pennsylvania. Recent additions to funding from the federal and state governments have helped reduce it. But yesterday, the Pennsylvania Senate left town without action on HB 2375, which would have continued that funding. 

"HB2375, which received bi-partisan support in the House, provided $57.5 million to improve UC services, replacing funding previously provided by Act 34, which has expired. Act 34 funding helped reduce call wait times by more than an hour in the last two years. 

"Those improvements—and further ones—may now be lost. And what’s worse, 600 employees of the Department of Labor and Industry will be laid off before the holidays. 

"Here’s hoping that they will be able to get their unemployment insurance in a timely fashion."

 

IFO Report: Deficits Now and In The Future

November 15, 2016 - 10:00pm

Pennsylvania Budget and Policy Center Director Marc Stier made the following statement following the Independent Fiscal Office release of their Five Year Economic and Budget Outlook:

"The herculean efforts of the Governor and General Assembly to overcome their divisions and reach a budget agreement last year may have enabled legislators to leave town in July. But it left the state with a deficit of at least $524 million for the current year, a projected deficit of at least $1.7 billion for the year beginning July 2017, and budget deficits that grow year after year beyond that. 

"If the state continues to generate revenue under current laws and maintains the current level of services, the projected deficit reaches $3 billion in 2021-22 and continues to grow by $175 million per year thereafter. 

"That conclusion, which is contained in the new Five year Economic and Budget Outlook released today by the Independent Fiscal Office (IFO), will not surprise anyone who has closely followed Pennsylvania Budget politics or who has paid attention to our warnings about the short fall in revenues this year or about the revenue package adopted in July. 

"The $524 shortfall in the current fiscal year is mainly a result of the General Assembly overestimating revenues in three ways: 

1. The General Assembly relied on optimistic projections that were higher than those put forth by IFO in June. 

2. The slow-down in the economy that reduced revenues in the first few months of the fiscal year is not expected to be offset by faster growth in the remaining of the year.

3. The General Assembly expected to raise $150 million by enacting an internet gaming bill and selling a second casino license in Philadelphia. It appears that neither will happen.

"The shortfall for this year could be exacerbated if the General Assembly enacts a supplement appropriation bill to fill a $366 million gap in human service funding that has arisen mostly as a result of higher case loads than projected for long term care and medical assistance. While some of that gap may be filled by cost savings or additional federal funding, a supplemental appropriation of between $150 and $300 million may be necessary. 

"As bad as the short term problem is, the long term problem is even worse. At the beginning of this year, Governor Wolf rightly warned that the long term situation was dire and called for new recurring revenues. And, as we’ve pointed out before, the long term deficit is the result not of higher spending but of ill-advised cuts to corporate taxes. These cuts in corporate taxes reduced state revenues below that necessary to pay for what the state government does now, let alone to restore the Corbett cuts to K-12 education, higher education and human services. 

"But the Republican-led General Assembly was unwilling to raise general taxes—the personal income tax, sales tax, or corporate tax. Instead, about half of the revenues it raised for this year came from recurring taxes, mostly on tobacco. (The amount raised from the tobacco taxes is projected to decline over time, however.) The other half came from one-time revenues that either do not help in future years or, because they involve transfers from other state funds that have to be paid back, actually increase the budget deficit in future years.

"The result of ignoring the warnings of the Governor, of us, and of many editorial boards, is that the long term Pennsylvania budget situation remains as threatening as it was last year at this time.

"The only solution is new revenues. The Pennsylvanian Budget and Policy Center will soon be releasing a paper that shows how the state can raise the revenues necessary to close the long term deficit and fund vital programs like those for our kids without raising taxes substantially on working people and the middle class." 

In Election's Wake: Time to Judge Elected Officials on Whether They Deliver an Economy Less Rigged to Benefit Political Insiders

November 9, 2016 - 12:08pm

What should Pennsylvanians and Americans take away from the Presidential election? While fully digesting Trump's razor-thin victory will take time, national exit polls show that the President-elect won several groups by large margins: white non-college and rural voters, those who view the economy as fair or poor, and those whose family financial situation has worsened.

Our annual State of Working Pennsylvania suggested that these and other middle-class groups have a right to feel aggrieved by an economic and political system rigged to benefit the rich and powerful.

The new President and other elected officials should be judged going forward by a simple standard: will the policies they propose further rig the economy to benefit the rich and powerful? Or will they fight to give regular Pennsylvanians and Americans a fair shake again?

Will, for example, President-elect Trump deliver on a trade policy to benefit the middle class? Will Pennsylvania’s legislative leaders finally allow a vote on a substantial increase in the minimum wage—a simple, overwhelmingly popular way to make the economy fairer for regular people? (Voters in four states approved minimum wage increases to at least $12 per hour yesterday.) Will Pennsylvania lawmakers enact “An Agenda to Raise Pennsylvania’s Pay? That’s what it will take to improve the economic circumstances of white non-college and rural voters—and other middle-class groups—and make the economy “good” or “excellent” for those who currently view it as “poor” or “fair.”

In the aftermath of the election, it’s time to respond to populist anger and frustration with more full-throated populist solutions. And it’s time to call out politicians at the national and state level more bluntly when they rig the economy further to benefit the 1 percent.

Advice for the Voting Booth: Consider Who Will Support the Agenda to Raise Pennsylvania's Pay?

November 7, 2016 - 10:36am

The day before the election, Pennsylvanians who go to the polls tomorrow have one last chance to consider the choices they will make.

Since Keystone Research Center is an economic think thank focused on the middle class, our efforts to inform voters have highlighted two issues: how the middle class is doing; and the policies that would benefit the middle class going forward.

In The State of Working Pennsylvania 2016, we highlighted that, most of the middle class has not done well over the past 15 to 35 years (even though the last year and the last month have been good ones). Long term, however, when you cut the electorate by race/ethnicity, gender, or education (college or not), every large group has seen its wages stagnate or decline.

We (and many others) think that long-term economic difficulties underly some of the anger that surfaced in this election.

When it comes to policy, we've urged Pennsylvanians to channel their anger towards electing candidates who will enact policies that would "raise Pennsylvania's pay." Don't cut off your nose to spite your face by supporting candidates who will double down on a policy agenda for the 1 percent.

The end of The State of Working Pennsylvania 2016 details an "Agenda to Raise Pennsylvania's Pay" and contrasts it with "The Agenda to Lower Pennsylvania's Pay." The contrast is a pretty stark one. One group of Pennsylvania candidates and office holders wants to raise the minimum wage, give workers more bargaining power with employers, and boost investement in education and infrastructure that will create more middle-class jobs for every major demographic group. Another group of candidates and office holders are on record as championing the policies favored by Pennsylvania's self-described "free market think tank," the Commonwealth Foundation. Those candidates don't want to raise the minimum wage (or want to raise it as little as possible), do want to weaken the power of working families in bargaining with employers and in politics, and don't want to raise revenues to invest in schools or in infrastructure.

If you're a hard working Pennsylvanian who hasn't seen a significant raise in...forever, we think the choice is simple. You should vote for candidates who will support The Agenda to Raise Pennsylvania's Pay.

SWPA 2016: College No Longer Guarantees Rising Wages—Degree Holders Need Agenda to Raise PA’s Pay Too

October 28, 2016 - 8:13am

The post below is one of a series of posts about specific trends examined in the recently-released annual edition of The State of Working Pennsylvania.

We’ve already laid out how Pennsylvania men without a college degree have not shared in Pennsylvania's economic gains over the past few decades and how women without a college degree are still playing catch up. What about Pennsylvanians with a college degree, though?

For years, having a bachelor’s degree was the key to unlocking jobs with rising wages. Up until 2000, male college graduates in Pennsylvania fared better than those without a four-year college degree when it came to increasing wages. Hourly earnings climbed for white and black men with at least a bachelor’s degree by 23 percent and 14 percent respectively between 1979-81 and 2000-02.

Since 2000-02, though, the hourly earnings of white men with at least a bachelor’s degree have fallen $1.50 per hour or $3,200 for a full-time worker. Black workers with a bachelor’s or higher have seen their hourly earnings fall $2.18 or $4,500 for a full-time worker.

Beyond that, the data shows that a college degree does not protect minority men against racial gaps in earnings: in the most recent three-year period, black and Hispanic men with a college degree made 78 and 81 cents for every dollar a white man made with the same level of education.

For women with at least a bachelor’s degree, the story is one of long-term improvement, but a significant pay gap remains.

Real hourly earnings for white and black women with a college degree or better climbed 41 percent and 39 percent respectively between 1979-81 and 2000-02.

Since 2000-02, however, the wages of white women with at least a bachelor’s degree have fallen by 1 percent.  And, most alarming, the data shows that female black college graduates have fared substantially worse, absorbing a 22 percent decline in hourly earnings since 2000-02.

In the most recent three-year period, the wage gap is significant; white female college graduates made 78 cents for every dollar a similarly-educated white male earned. Female black and Hispanic college graduates made only 65 cents and 49 cents, respectively, of similarly-educated white men. 

There is no question that earning a bachelor’s degree significantly increases lifetime earnings and opens up job market opportunities, but to understand the shifting economy, it’s critical to know that earnings for those with a college degree or higher have fallen off in the last 15 plus years. This underscores the fact that the economic gains of the last few decades have only been realized by those at the very top, and blue collar and white collar workers alike are not sharing in the prosperity.

On HB 1885 — The Sanctuary Bill

October 24, 2016 - 3:04pm

Legislation rushed to the finish line in an election year is notorious for being both badly crafted and motivated by less than pristine motives. And that certainly goes for HB 1885, the anti-sanctuary city bill passed by the House recently and currently under consideration in the Senate this week. 

There is a lot wrong with the bill, starting with the intention of its sponsors to appeal to the anti-immigrant voters whose ire has been inflamed by Donald Trump and continuing on to its likely consequence of leading to racial profiling that undermines police-community relationships, and thus effective policing, in (documented and undocumented) immigrant communities.

But here I want to focus on the potential economic costs of the bill to the counties and cities of Pennsylvania—costs that have been barely considered in the fast-track legislative debate on it. The House Fiscal Note on the bill does not even try to identify, let alone estimate, these potential costs.

In doing this analysis, I will concentrate on one feature of this multi-faceted bill, its requirement that police officers in any jurisdiction comply with any request by the Immigration and Customs Enforcement (ICE) agents to detain people suspected by ICE of being undocumented for forty-eight hours beyond their release date so that ICE can decide whether to take the individual into federal custody. The bill would deny municipalities that do not comply with ICE requests all state support. A loss of state funding would be disastrous for the budgets of every municipality in the Commonwealth. 

Forcing municipalities to comply with all ICE detainer requests will, however, place three serious economic burdens them: the costs of holding people in prison far longer than they might otherwise be held in response to ICE detainer requests; the costs of paying damages to United States citizens who are unconstitutionally held in response to such requests; and the costs to businesses; and the costs that fall on business whose employees cannot get to work and families who lose their source of support when people are imprisoned because of an ICE detainer request.

 

The Costs of Incarceration

The first costs likely to result from HB 1885 are those of incarcerating people in county and municipal jails who would be incarcerated or incarcerated for substantially longer periods of time than they otherwise would be due to the enactment of HB 1885. 

In analyzing those costs, we can take advantage of Colorado’s experience with SB 90, a law with provisions similar to HB 1885. SB 90 was enacted in 2006 and repealed in 2013, in no small part because the unexpectedly high costs of implementing the legislation. 

One might think that additional costs of imprisonment due to HB 1885 would be solely the result of obeying a detainer request from ICE to hold someone forty-eight hours beyond when they would have been released. The experience of Colorado shows us, however, that the true extent of additional incarceration resulting from HB 1885 is likely to be far greater.

To understand this, one must recognize that the majority of people arrested by the police officers are not held in prison at all or for very long. Many arrests for low-level crimes are non-custodial. In those cases, a police officer detains someone only long enough to issue a citation or summons to appear in court at a later date. Custodial arrests occur when the police arrest offenders and transport them to a detention center of some kind where they are booked and held until they are released (sometimes after posting bond) or their case is adjudicated. 

SB 90 in Colorado had the unintended consequence of incarcerating many more people and for much longer in two different ways. On the one hand, police officers carrying out what would be an otherwise non-custodial arrest of someone suspected of being an undocumented immigrant, would, under SB 90, place such a person in custody and then report them to ICE. On the other hand, people suspected of being an undocumented immigrant who were booked and held after a custodial arrest were generally deemed to be ineligible for pre-trial release even if they were capable of and willing to post bond. 

A study of the effect of SB 90 on incarceration practices in Denver, carried out by our sister organization, the Colorado Fiscal Institute (CFI), showed that these two consequences of SB 90 cost municipalities in the state an additional $13 million per year. Because Pennsylvania is likely to differ from Colorado in a number of ways, it is not easy to estimate the added cost of the additional incarceration that would result from HB 1885 in Pennsylvania. 

But if we simply extrapolate from the best estimate of the proportion of population in Pennsylvania who were undocumented immigrants in 2010 (1.3%) as compared to Colorado at the same time (3.6%) and adjust for inflation, our estimate of the costs of HB 1885 to the county and municipality governments in the state is $5.2 million. If, on the other hand, costs in Pennsylvania were roughly proportional to the absolute number of undocumented immigrants—which is about the same in the two states—our estimate would rise to almost $13 million.

 

The Costs of Settling Lawsuits for Civil Rights Violations

A second potential cost of HB 1885 is that of settling lawsuits for the unjust detention of U.S. citizens. A statewide policy of responding affirmatively to every ICE detainer request runs the risk of detaining citizens of the United States who then are likely to successfully sue the municipality and / or county for violating their civil rights. 

This is not an idle or fanciful threat. It has happened in Pennsylvania. In November 2008, Ernesto Galarza, a New Jersey-born U.S. citizen of Puerto Rican Descent was illegally held for three days in the Lehigh County Prison despite posting bond after ICE requested his detention on the suspicion that he was an undocumented immigrant. Galarza sued for damages on the grounds that his imprisonment violated his civil rights. He ultimately won, and United States and the City of Allentown together paid Galarza $50,000, and Lehigh County paid $95,000 in damages and attorney’s fees.  

The determination on the part of county and municipal governments to avoid similar lawsuits, is one reason that many Pennsylvania jurisdictions have written or unwritten policies to not honor detainer requests from ICE.

 

The Costs to the Community

In addition to the costs of incarceration and the threat of lawsuits for the violation of the civil rights of citizens, there are broader costs that would result from instituting a state wide policy to comply with every ICE detainer.  There are the costs businesses must bear when immigrants are detained and cannot show up for work. And there are both private and public costs associated with the hardships imposed on the families of people who are incarcerated—many of which include U.S.-born children—including loss of income and a strain on social services and local schools. These broader burdens are difficult to quantify, but are undoubtedly real.

 

Conclusion

I have not attempted to give firm estimates of all the costs of HB 1885. My goal has been to come up with the best estimate we could within current time constraints. This analysis shows that those costs are possibly quite large and that they have not yet been considered in the General Assembly’s evaluation of this bill. Regardless of whether one supports the general approach of HB 1885, it is impossible to deny that the General Assembly should seek more information and carefully think through the potential cost of HB 1885 before rushing to enact it. We should not follow Colorado down the path of responding to anti-immigrant fervor by putting a new law in place without understanding its consequences and costs. 

For more details on the legislation see our policy brief

Against HB 530 — Once More With Feeling

October 24, 2016 - 8:09am

HB 530, a revision of the laws that govern charter schools, has reared its ugly head again. We continue to oppose it.

School districts in Pennsylvania contain a mix of traditional public schools and charter schools. Some local school districts want to add charters schools. Many do not. All of them should be empowered to evaluate the best way to educate students in their respective districts. 

Unfortunately, provisions in HB530 will remove much of the supervisory and decision-making authority from local school districts in every corner of the state. Since charter schools receive funding from local school districts, the creation of new seats in charter schools without school board supervision and control diminishes the ability of school districts to establish and manage their budgets. That could result in the underfunding of traditional schools or significant local tax increases. That is why we oppose this legislation, which that permits charter schools to enroll new students, add grade levels, and recruit students from outside the school district without the approval of the local school board.

We also oppose the provision of the legislation that creates an evaluation system for charter schools that makes it more difficult to compare charter school performance with that of traditional schools and undermines the ability of local school boards to hold charter schools accountable for financial management and educational performance. 

And we oppose the creation of a charter school advisory commission that does not represent all the stakeholders in the education of our children.

Pennsylvania has what is widely regarded as one of the worst charter school laws in the country, precisely because it does not give school boards the tools to regulate and hold charter schools accountable for the education they provide (or do not provide) to their students. But rather than fix the lack of transparency or accountability for charter schools in current laws, or fix the funding provisions that drive local school districts with many charters schools into distress, or fix how we provide funding to charter schools for special education, HB 530 makes the law worse.

Rep. Brad Roae Compares School Board Members to Hitler

October 19, 2016 - 3:12pm

This week, in a Facebook discussion with a person who seems to be one of his constituents, Representative Brad Roae (R-Crawford/Erie) felt it was appropriate to compare school board members in Pennsylvania blaming charter schools for the financial difficulties of their districts to Adolf Hitler blaming Jews for “everything that was wrong with the world.”

I’m not sure whether I should be more offended as a Jew or as a policy analyst by Representative Roae’s remark.

It is, of course, morally offensive to anyone who grasps the evil of Hitler’s murder of 6 million Jews, to compare it to any other crime. A general rule of thumb about Hitler comparisons is to not make Hitler comparisons. But to compare it to a public policy choice like the opposition of school boards to charter schools would be doubly offensive if it were not so utterly ridiculous.

The proper place of charter schools in our education system and, to take another issue Roae raises, the best way to provide pensions to teachers, is a complicated issue that deserves careful and detailed analysis—the kind of analysis we try to produce at the Pennsylvania Budget and Policy Center. (And the kind, by the way, that has not in the past led us to oppose all charter schools or all changes in our pensions.)

Rhetorical bombshells like those produced by Roae, are the opposite of that kind of detailed and careful analysis. If Roae were interested in honest thought rather than propaganda he would recognize that school boards who oppose pension “reform” might actually have a good point—that hiring and retaining good teachers is impossible if we don’t pay them well (which is a lesson people, like Roae, who support the free market always seem to forget when it comes to public employees.) 

Roae’s rhetorical bombshell demeans not just the work of those of us who try to analyze and advocate honestly for good public policy, but also the work of the many legislators on both sides of the aisle who take their responsibility to help produce good public policy seriously. Roae owes all of us an apology.

Congratulations to Board Member Jordan Yeager on Act 13 Decision

October 18, 2016 - 11:43am

In a win for environmentalists and municipalities, the Pennsylvania Supreme Court last month struck down a number of provisions to the state’s oil and gas law, Act 13. Keystone Research Center board member Jordan Yeager was the attorney who argued for the towns and environmental groups involved in the challenging the law.

This case addressed several issues left unresolved in the 2013 Supreme Court decision in Robinson v. Commonwealth, the original challenge to far-reaching oil and gas law (Act 13) passed by the legislature in early 2012 that restricted municipalities’ ability to restrict unconventional gas drilling using local zoning regulations. In the December 2013 Robinson decision, the Supreme Court ruled portions of Act 13 unconstitutional, including the one that restricted local zoning rights. At the time the court sent some components of the challenge back to the lower courts, and those issues have been working their way back to the Supreme Court.

In an 88-page opinion written by Supreme Court Justice Todd and joined by Justices Donohue, Dougherty and Wecht, the Pennsylvania Supreme Court ruled:

  • Unconstitutional a provision that required doctors who treat patients with ailments that might be associated with exposure to drilling pollution to sign non-disclosure agreements if they wanted information on chemicals drillers are using. The court found the provision unconstitutional because it applied only to the gas industry. The provision caused an uproar in the healthcare community and one doctor filed suit.
  • The Department of Environmental Protection (DEP) must notify private water well owners in the event of a nearby spill of gas drilling pollutants. Act 13 required the DEP to notify operators of public water supplies, but the law left out notification to private well owners—about 3 million mostly-rural residents rely on private wells for drinking water, many of them in shale drilling areas. The court ordered the legislature to fix this part of the law, and require notification to private well owners.
  • Unconstitutional the use of eminent domain by gas companies to take land for the use of underground natural gas storage facilities. The court said that while some portion of storage may benefit the public, it was primarily beneficial to business interests.
  • As originally ruled in the first challenge, the industry no longer has a fast track to commonwealth court when it comes to challenging local zoning ordinances that address gas drilling. And the Pennsylvania Public Utility Commission will no longer have any role in examining local zoning decisions.

Jordan said the decision is a big win:

“It’s great,” he said. “And it’s great for the residents of Pennsylvania to have the courts recognize that their rights matter more than the gas industry’s power in Harrisburg.”

Yeager said the court’s 88-page opinion repeatedly stressed the original law had serious flaws.

“It’s a great vindication for citizen’s constitutional rights,” he said. “The court said throughout the opinion, that Act 13 and these provisions were a special law that simply benefited the gas industry.”

Congratulations Jordan and Pennsylvania’s Supreme Court! It’s nice for the public interest to trump the gas industry’s interest for once. 

To encourage that simple idea to catch on in state legislatures, this past June KRC/PBPC and their partners in Ohio and West Virginia highlighted policies that would benefit the public interest in nine different Shale policy areas.  

The Revenue Shortfall and the Budget

October 7, 2016 - 10:33am

Almost as soon as the Pennsylvania budget was passed in July, rumors swirled about the legislature coming back—either in a lame duck session in December or next year—to fix it because it was not truly balanced. The Department of Revenue’s announcement yesterday that revenues for the year to date are running $218 million below estimates, makes revisting the budget even more likely.

In July, we at PBPC pointed out that estimates of some of the one-time revenues included in the budget—especially those from selling licenses for internet gaming, for a second Philadelphia casino, and for the expansion of alcohol sales—were possibly over-stated. We also said that we were not confident that enough money was appropriated to meet the likely caseload for medical assistance (The Commonwealth must appropriate its share of funding for these programs to continue to draw down the federal funding for them.) Those problems still remain.

But now we have a new, extremely serious issue. Tax revenues are falling 3.2% short of the year-to-date estimates. Tax revenues do vary a great deal from one time of the year to another. But if that trend were to continue, revenues for this year would be short $1 billion.

Given that the state is constitutionally prohibited from running a deficit, these problems must be addressed this year, either by a reduction in spending or through new revenues. As we will point out in subsequent blog posts on the current years’ budget, there is little room for reductions in spending. Most spending is mandated by contract or federal law. And in the areas where the state has some discretion—education, human services, and the environment—we spend far less than we should.

So the General Assembly is going to have to look again at revenues, and not just for the current year. Trouble looms ahead for the budget that will go into effect on July 1, 2017. The revenue shortfall for the current year means that revenue projections for next year are likely to be reduced. And since about half of the $1.3 billion in new revenues in the current year budget came from one-time sources, including the items mentioned above, the revenue situation for next year’s budget was already problematic. Even before we start looking at mandatory spending increases, we may be looking at a budget deficit for 2017-2018 of around $1 billion to $1.5 billion.

With a budget crisis looming, it would make sense for the General Assembly to look sooner rather than later at the sources of revenue that it would not consider raising in an election year: general taxes including the personal income tax, the sales tax and the corporate income tax. Given that incomes for all Pennsylvanians except those at the top of the income scale have been rising slowly, we we would urge the General Assembly to focus on taxes that do not fall on working people and the middle class. Instead, they should focus on three proposals we have put forward in the past:

  • An increase in the tax on income from wealth (dividends, capital gains, royalties, and estates.) An increase in the tax rate on these sources of income from 3.07% to 4% would raise close to $800, million and most of the revenue would come from families with the top 5% of incomes.
  • Closing the Delaware Loophole in the corporate income tax. We estimate that closing the loophole could raise roughly $200 million in revenue even while we reduce the tax rate. Small corporations that mainly operate in Pennsylvania will save money while large multi-national corporations will pay more.
  • A severance tax on natural gas drilling. Even at the currently low gas prices, a modest tax could raise $200-$300 million.

Elections sometimes bring out the best in our public officials. But sometimes they bring out the urge to avoid dealing with problems. Our General Assembly appears to have taken the later route this year. Perhaps they can redeem themselves sometime after November 8.

SNAP Works for Pennsylvania Children

October 3, 2016 - 9:12am

The Supplemental Nutrition Assistance Program (SNAP) helps PA families put food on the table. But we know now that it accomplishes much more than that.

Research increasingly shows that SNAP, formerly known as Food Stamps, can ward against the long-term effects on children of experiencing poverty, abuse or neglect, parental substance abuse or mental illness, and exposure to violence—events that can take a toll on their well-being as adults.  As a new Center on Budget and Policy Priorities report finds, SNAP helps form a strong foundation of health and well-being for low-income children by lifting millions of families out of poverty, improving food security, and helping improve health and academic achievement with long-lasting consequences. 

It’s doing all that across Pennsylvania. SNAP is improving our children’s futures.

SNAP delivers more nutrition assistance to low-income children than any other program.  In 2016, SNAP will help about 20 million children each month—about one in four U.S. children—while providing about $30 billion in nutrition benefits for children over the course of the year. In PA, SNAP helps about 683,900 children each month, or about 1 in 4 of our state’s kids, as well.

SNAP’s benefits are modest, but they’re well-targeted to the families that need them the most. While participating families with children in PA receive an average of $379 each month, those with incomes below 50 percent of the poverty line get $498. That’s one reason why SNAP helps lift more children out of deep poverty than any other government assistance program. 

In fact, much of SNAP’s success can be attributed to its design, including that consistent national structure that effectively targets food benefits to those with the greatest need; eligibility rules and a funding structure that make benefits available to children in almost all families with little income and few resources; a design that automatically responds to changes in the economy; and rigorous requirements to ensure a high degree of program integrity. 

SNAP is helping to give thousands of PA children the foundation they need to succeed. Efforts to reform or enhance it should build on its effectiveness in protecting the well-being of our children—and those nationwide—and preserve the essential program features that contribute to that success.

Read the full rerport here.

SWPA 2016 Highlight: Non-College Pennsylvania Women Still Playing Catch Up

September 23, 2016 - 2:49pm

The post below is one of a series of posts about specific trends examined in the recently-released annual edition of The State of Working Pennsylvania.

We’ve already laid out how Pennsylvania men without a college degree have not shared in Pennsylvania's economic gains over the past few decades. What about women?

White women with less than a bachelor’s degree in Pennsylvania have fared a little better than similarly-educated men, experiencing a 13 percent increase in hourly earnings since 1979-81 -- a one third of one percent increase annually. Black women with less than a bachelor’s degree saw their inflation-adjusted hourly earnings decline 1 percent in the last 36 years. 

White, black and Hispanic women all still earn less than white men of the same education level; white women earn 76 cents for every dollar a white man earns, black women 69 cents; and Hispanic women 60 cents.

Wth productivity up 71 percent since 1979, the Pennsylvania economy has continued to generate new income: that income just hasn’t shown up in the paychecks of most workers, female or male. If we had an economy that spread gains equitably, working women without a college degree would have seen substantial gains in hourly wages over the past few decades. Their annual incomes would have grown even more because female labor force participation has significantly increased. 

So who is capturing all that new income? Data from the Internal Revenue Service, which tracks the growth of income from all sources (salary and wages, rents, capital gains and profits) reveals a radical redistribution of income since 1979 in Pennsylvania. In a state with 6.8 million families, the top 1 percent or 69,000 families have captured just over half (51 percent) of income growth since 1979. The top 5 percent in Pennsylvania have captured 77 percent of all income growth in the state since 1979.

As laid at the end of The State of Working Pennsylvania 2016, If we want wages and family incomes to rise steadily again, we need to shift away from policies that funnel so much of the benefits of economic growth to a tiny slice at the top.

Learn more about “The Agenda to Raise Pennsylvania’s Pay” that concludes SWP 2016 here

Learn more by reading the full report, The State of Working Pennsylvania.

An Extraordinary Year of Income Growth in Pennsylvania

September 16, 2016 - 9:11am

Yesterday the Census Bureau released data from the American Community Survey showing that median household incomes in Pennsylvania rose by just over $2,400 in the last year, strong evidence that an economy nearing full employment generates rising wages for workers. Higher-income families have now surpassed their pre-Great Recession incomes but the lower-income half of families have not.

Median household income in Pennsylvania rose from $53,290 in 2014 to $55,702 in 2015, an increase of 4.5 percent, according to the report. That reflects both a fall in the unemployment rate and a rise in median earnings for workers.

Strikingly the income growth that Pennsylvania households experienced was broadly shared with statistically significant increases in income in the last year for each income quintile. Households earning less than $23,005 a year saw the biggest percentage gains as their incomes rose 4.5% (an increase of $544), every other quintile saw percentage gains between 3.4 and 3.9% over the same period.

As extraordinary as 2015 was in terms of broad-based income growth the impact of years of declining income remains significant. Median household incomes in 2015 remained essentially unchanged from their prerecession levels (2007). And despite strong growth for low-income Pennsylvanians in 2015 their incomes remain 4.2% below prerecession levels.  Households with incomes greater than $69,000 (the Fourth and Highest quintiles) have incomes now 1.9% and 3.6% higher than in 2007, increases of about $1,600 and $6,600 in actual dollars. 

While one very strong year has made up part and for some families all of the ground lost since 2007, as The State of Working Pennsylvania 2016 shows, it has not reversed the stagnation or decline of wages (and for most families, incomes) that goes back to 2000 and, in some cases, to the late 1970s. That’s why families in Pennsylvania still need “The Agenda to Raise Pennsylvania’s Pay” outlined at the end of SWPA 2016. That agenda would keep unemployment low through job-creating investments in infrastructure and education. It would also use policies to lift wages and therefore incomes more directly. Only with such an agenda can we get beyond a few good years for wages and incomes—as in the late 1990s—and lock in broadly shared prosperity for the long term.

New Data, Good News: Health Insurance

September 14, 2016 - 5:23pm

Most news is bad news. And political campaigns are more likely to flag what is wrong with our country than what is right with it. So, it’s not surprising that in the heat of a presidential election, we are more focused on what is wrong with our country than what is right with it.

But as the federal government updates its statistics on income, poverty and health care this week, we can take a moment to appreciate the good news—government at the federal and state level has been increasingly successful at encouraging broadly prosperity.

We start today with health care. The Affordable Care Act remains controversial and even those of us who support it recognize that further reforms are needed to guarantee that quality health care remains affordable to everyone.

There can be little doubt that the ACA is working in Pennsylvania and beyond. Between those who bought health insurance on the Pennsylvania Exchange, and those who were newly eligible Medicaid—which happened when Tom Wolf became Governor—the number of people who were uninsured in the Commonwealth declined by 420,000 from 2013 to 2015. In 2013 9.7% of Pennsylvanians did not have health insurance. In 2015, only 6.4% did not.

There is no question that the expanding Medicaid in Pennsylvania made a huge difference. We won’t have detailed information about how Pennsylvanians secure health insurance for another day or two. But nationwide, states that expanded Medicaid saw the uninsured rated drop from 12.8% to 7.2%. But in states that did not expand Medicaid, the uninsured rate only dropped from 16.9% to 12.3%.

Studies of the ACA nationwide and in particular states have shown that it already has improved health care for millions of people. All kinds of people have benefitted but those most likely to lack coverage in the past, such as racial and ethnic minorities, young adults, part-time workers, people with less education, and low-income families, have done so most dramatically. And the impact has been felt where it matters most, on the health of recipients of Medicaid. An examination of Medicaid in Oregon showed that  “compared with similar people without coverage, people with Medicaid were 40 percent less likely to have suffered a decline in their health in the previous six months.”  Other research shows that the expansion of Medicaid coverage for low-income adults in Arizona, Maine, and New York reduced the death rate  in those states by 6.1 percent. We can expect similar good results in Pennsylvania.

These benefits have been achieved not only without dramatic increases in health care costs but while the growth in overall health care costs has slowed down and are now projected to be $2.6 trillion less between 2014 and 2019 than projections made right after enactment of the ACA. And while aggregate health care costs recently ticked up again, they are growing at rates substantially below the average of the last 15 years and are likely to be the result of the expansion of health insurance to those who lacked it before. On a per per enrollee basis, health insurance costs for those who have private insurance and Medicare are still growing at historically low rates. And costs per enrollee for Medicaid have continued to be substantially lower than for either private insurance or Medicare.

There is no question, then, that the ACA and other federal and state programs do a great deal to improve the health of hundreds of thousands of people in Pennsylvania.

SWPA 2016 Highlight: Non-College Educated Men in PA Falling Farther Behind

September 14, 2016 - 12:29pm

The post below is one of a series of posts about specific trends examined in the recently-released annual edition of The State of Working Pennsylvania, written by Keystone Research Center Executive Director and economist Stephen Herzenberg and Research Director and economist Mark Price.

Many parts of Pennsylvania have been known for decades as blue-collar, working class communities. In these communities, manufacturing jobs sprouted and provided family-sustaining jobs from one generation to another, usually for men. As the economy has shifted, these communities and these men, many with only a high-school degree, have suffered. While this is familiar to most Pennsylvanians, the economic facts that tell the story never fail to stun. For example, let's take a look at wages over time for working-age men (aged 18 to 64) in Pennsylvania with less than a bachelor’s degree. As you do keep in mind that this is a BIG group--seven out of every 10 working-age men in Pennsylvania.

After adjusting for inflation, the median wage for white men with less than a bachelor’s degree in 2013-15 remained $2.18 per hour below its level in 1980 (1979-81). That means a full-time, full-year worker receives $4,500 less in wages annually today than 35 years ago!

That wage plunge explains why the national and Pennsylvania conversations in an election year focus a lot on the trials and tribulations of the white men. It also explains why some voters respond to divisve appeals that imply white men's economic losses result from gains made by other race or gender groups. SWPA 2016 examines wage trends for every race, enthicity, gender, and education combination. Therefore, as well as documenting downward mobility of working-class white men, the report allows us to fact check how "other groups" are doing.

We'll focus in this blog on black men without a bachelor's degree. It turns out they've been hammered even more than their white counterparts. Black men without bachelor’s degrees in Pennsylvania now earn $3.90 per hour less than in 1979-81, which is $8,100 less per year for a full-time, full-year worker. (There weren't evough Hispanic men in the job market to estimate wages back to 1980 but in the most recent period, 2013-15, Hispanic men with less than a bachelor’s degree earned 78 cents for every dollar a similarly educated white man earned.)

Facing a lack of opportunity, white and black men without a bachelor’s degree have also dropped out of the labor market a lot. While 14 of every 100 working-age Pennsylvania white men without a bachelor's degree did not participate in the labor market (work or actively looking for work) in 1979-81, that number has now jumped to 21. For black men, the jump has been from 22 to 34, so that one third of working-age black men don't participate in the job market (and that's without taking into consideration the incarcerated population).

The broader message of SWPA 2016 is that different groups of working Pennsylvanians shouldn't get angry with each other because no group is doing very well (as we'll show you for women and for more educated groups in subsequent blog posts). In fact, the only group doing really well is the top 1 percent. While the productivity of Pennsylvania workers has improved by 71 percent since 1979, wages have barely budged. The top 1 percent has received more than half of the total increase in income over this period. If we want wages and family incomes to rise steadily again, we need to shift away from policies that funnel so much of the benefits of economic growth to a tiny slice at the top. 

Learn more by reading the full report, The State of Working Pennsylvania.

Education Voters of PA Statement on the Oral Argument Before the PA Supreme Court for the School Funding Lawsuit

September 14, 2016 - 8:58am

The following is a guest post from Susan Spicka, Executive Director of Education Voters of Pennsylvania. It was originally posted on their blog here.

Following oral argument of the school funding lawsuit before the PA Supreme Court, Susan Spicka, Executive Director of Education Voters of PA, made the following statement at a press conference at Philadelphia City Hall:

My name is Susan Spicka and I am the Executive Director of Education Voters of Pennsylvania and a parent of two children who attend public schools in the south central part of the state.

I am here today to most strongly urge the PA Supreme Court to allow the school funding lawsuit to go to full trial to give families their day in court so that they can tell the stories of how inadequate state funding is impacting their children.

My daughters attend the Shippensburg Area School District, which educates about 3500 students. In the past five years, our middle school has eliminated the shop, home ec, foreign language, swimming, and writing programs. Students in the high school have lost a guidance counselor along with language arts, business, technology, and foreign language teachers; classes are crowded throughout the district, even in the earliest grades; and our computers are antiquated and frequently unusable.

The textbooks in our district are decades-old and so out-of-date that my daughters’ teachers regularly create materials from scratch and photocopy them in order to be able to teach to the current state standards.

As part of my job, I talk to parents and travel throughout Pennsylvania. I have seen firsthand that my daughters’ district is not an outlier.  In fact, throughout the Commonwealth, school districts have quietly and stoically made heartbreaking cuts that make the Shippensburg seem like a lucky school district.

The deprivation in our public schools is deep and it impacts children from McKean County to Luzerne to Somerset to Wayne to Franklin to Westmoreland Counties and everywhere in between.

Children throughout the Commonwealth are sitting in crowded classrooms. There are children who go to schools that don’t have music or art teachers. Hundreds of thousands of children in the poorest communities in PA have little or no access to a school library or books outside of what their teacher can provide in the classroom.

Our schools are so under-resourced that a professor at our local university recently remarked that many of his incoming freshmen don’t know what a library is.

There is nothing “thorough or efficient” about Pennsylvania’s current school funding system, which guarantees that the poorest children will attend schools that do not have adequate resource to provide students with the opportunities they need to succeed in school today or in their lives after graduation.

The courts must intervene. The Supreme Court must allow this case to go to trial and then the courts must act and rule in favor of the plaintiffs. They must declare what is happening is legally wrong and join the demand for a just remedy so every child in Pennsylvania, from the smallest rural district to the largest urban district, will have an opportunity to learn.