Third and State
As the June 30th deadline looms, we have little more than rumors about what kind of Pennsylvania budget might be enacted by the General Assembly for 2016-17. But while some may find optimism in talk of getting the budget done, the rumors we are hearing about the details of the budget in the works are extremely worrisome.
We know that everyone on both sides of the aisle wants a budget done more or less on time. All members of the House and half the members of the Senate face reelection in November, and none of them want a long drawn-out budget and delays in funding schools and human services. Yet to reach agreement on a budget legislators have to find their way between their determination to get one done and the structural deficit that requires either some new revenues or difficult budget cuts.
More importantly, reaching agreement is not the only thing Pennsylvanians want. The state has serious needs – for K-12 and higher education, for human services, and for environmental protection – that are not being met now. And those needs must be met responsibly, with an honest budget that closes the structural deficit with real revenues or genuine cuts, not smoke and mirrors.
Unfortunately, if the rumors we hear are true, the budget likely to come out of the House of Representatives later week won’t meet any of those goals. We are hearing that the House is not looking for nearly enough revenue to close the deficit and is hundreds of millions short of where the Senate thinks it should be. We are hearing that this not only leaves almost no new funding for K-12 education, let alone higher education, but it will require cuts to human services. We are hearing that both those cuts and revenue projections will rely on estimates of lapsed spending, human service caseloads, and revenues that are extremely optimistic. We are hearing that the Liquor Bill, which we opposed, is projected to raise new revenues at a wildly optimistic rate. We are hearing that the extremely ambitious gaming and tobacco revenues the House is considering may not all get through the Senate. And we are hearing that the House is planning to pass a fiscal code bill that includes education provisions that are unacceptable to those of us who value public education.
And that means we are looking, at best, at one more dishonest Corbett-like budget, balanced with WD-40 and duct tape. No one in Pennsylvania, whether liberal or conservative, should want a budget like that. And no one who values shared prosperity in Pennsylvania should want a budget that fails to invest sufficiently in education, human services, and the environment.
It doesn’t have to be that way. No one, including we at PBPC, wants to raise broad based taxes on working people and the middle class. But, as we have shown, it is possible to institute a small .93% increase in the tax rate on what we call income from wealth (dividends, capital gains, business profits, royalties) and raise $775 million. Two-thirds of the revenue raised would come from those in the top 5% of incomes, while families in the bottom 60% would pay very little.
Right now, however, all the talk about the new found comity in the Capitol seems to be leading not to a genuine compromise, but to the House pushing an extremist agenda while everyone else is exhausted and rushing for the exits. Passing a budget on time is, however, far less important than passing a budget that meets the needs of Pennsylvania and is genuinely balanced. We hope the Senate and the Governor find the energy to stand up to what looks to be a disastrous House proposal.
As we move closer to a City Council vote on the sugary drink tax proposal, I want to offer some final thoughts about the idea and correct some misapprehensions about it:
1.While the tax itself is regressive, and the Pennsylvania Budget and Policy Center almost always opposes regressive taxation, the program as a whole is not regressive. To begin with, the opponents of the tax are simply wrong about one aspect of it. They have been arguing that it is doubly regressive because members of low-income families consume sugary drinks at higher rates than middle- and high-income families or that African-Americans drink sugary drinks at higher rates than white people (and keep in mind that these are two groups not one). Those are myths. The research on this issue is equivocal and does not support that claim.
2. More importantly, the focus on just the revenue side of the Mayor’s program is the kind of fundamentalism that all of us should reject. The Scandinavian social welfare systems that Bernie Sanders and others admire are funded in large part with a Value Added Tax (VAT), which is a sales tax on steroids. The VAT may be a regressive tax, but the whole system very much benefits poor and working people. Much the same is true with Mayor Kenney’s proposal. The tax falls harder on poor and working people. But the benefits of pre-K and community schools and playground and recreation center renewal are great and very much go to those lower on the income scale. Moreover, the tax is not all that high and is totally avoidable. The average person who reduces his or her consumption of sugary drinks by half will pay about $21 a year.
3. But that does not mean the sugary drink tax is an unreliable source of income in the near future. To think so is to take a very simple-minded approach to the issue. At best, the sugary drink tax will reduce consumption by 50% over five years. If we are lucky, over ten years there will be further reductions. But, by then the economic benefits of a substantial reduction in the consumption of sugary drinks will be felt among Philadelphians who will be paying less to manage chronic diseases and by the city which will have to spend less to treat those diseases in our health centers.
4. Those economic benefits will arise because the benefits of the sugary drink tax are striking and substantial. And while there is an element of paternalism in a tax that discourages unhealthy behavior (just as there is for cigarette and liquor taxes), the paternalism is not class or racially based. Whites and middle-to-high-income households (and these are two groups not one) consume sugary drinks at high rates as well. What is true is that Blacks and those with low-incomes suffer from diabetes and heart disease at higher rates than others – but there are many other causes of that disparity. So the health benefits of a reduction in sugar consumption may flow more to Blacks and those with low-incomes.
5. The sugary drink tax is not the only way the city and state are trying to encourage healthier eating habits. There is a very substantial, and successful, effort to bring supermarkets into low-income communities. The city and non-profits are also funding programs that encourage corner markets to improve their offerings and direct consumers to more nutritious and healthier foods. And the creation of this tax, like the creation of tobacco taxes, is just one part of a larger effort to inform people about the dangers of sugary drinks.
6. The impact of the sugary drink tax will thus be felt far beyond Philadelphia. And that’s why the beverage industry has been putting so much money into their dishonest campaign against Mayor Kenney’s proposal. If they lose here, other cities will be emboldened to take similar action. And the health of hundreds of thousands of Americans will benefit.
When I first started looking at this issue, I was inclined to oppose this regressive tax. But after a few weeks of study and after reading fifty academic articles on the economic and health impact of the tax, I changed my mind. This is a tax all progressives should support.
After ribbing Senator Wagner and his fellow members of the taxpayer caucus for not understanding the basics of budgeting, I want to acknowledge that they did come up with a really good idea today.
It appears that the Pennsylvania State Police take two sheets of paper to print tickets. Some intrepid investigator discovered that they could get the whole thing on one sheet of paper if they printed in landscape rather than portrait mode. At 8 cents per sheet of paper for the 542,000 tickets they print, that’s a savings of $43,384.
We at PBPC are always interested in making government cost efficient and we acknowledge that this is a great idea. We hope it won’t be delayed while we study whether it’s better to print landscape mode or just use two-sided printing.
Now, at this rate of savings, we need 46,511 similar ideas to close the $2 billion deficit we face in the year beginning on July 1.
I’ve been doing political advocacy for over ten years and have been a teacher and writer about politics for a lot longer. I don’t surprise easily. But what I saw today at the press conference at which Senator Scott Wagner and the “Taxpayer’s Caucus” presented their three billion dollars in proposed budget cuts, left me almost speechless.
I walked into the room to see a list of cuts, and near the top was a $922 million cut to the Department of Human Services (DHS). I know how devastating real budget cuts of that magnitude would be to senior citizens who get long-term care through Medical Assistance, the working poor who get health care through the same program (which is called Medicaid everywhere else), and people who are intellectually disabled and mentally ill. So I was prepared for the worst.
But when I looked at the details, I almost started to laugh. Senator Wagner sounded and looked like a serious leader. But what he has proposed was a complete and utter fantasy.
He said we could spend the $500 million in savings that resulted from Governor Wolf’s acceptance of the Medicaid expansion on other programs. That was a key part of his plan to close the structural deficit.
But Wagner seems not to understand that those savings are already built into the budget for next year. Why? Because every year health care costs go up and the population of those eligible for Medical Assistance increases. The savings were real, but must go to pay the increased costs of the ongoing Medical Assistance program.
It’s as if Senator Wagner couldn’t understand why the Medical Assistance line item didn’t go down or why there wasn’t another line item “Medical Assistance Savings” that he could then reallocate to other purposes.
And this wasn’t the only example. Most of the other $922 million savings in DHS as well as the $158 million savings in GO-TIME are already included in the budget.
These supposed savings are simply fantasy cuts made with smoke and mirrors and the equivalent of monopoly money.
I don’t know whether Senator Wagner and his fellow Republicans are deliberately misleading people or simply don’t understand what they are talking about. But either way, it is shocking and appalling. These major parts of their proposal was simply not serious.
And, what’s worse, is that we are still facing an almost $2 billion deficit in the fiscal year that begins on July 1, and we still have no serious proposal from the Republican side of the aisle about what to do about it.
On Wednesday, the U.S. Department of Labor (DOL) raised the salary threshold under which working people can earn overtime pay. Under the new rule, effective December 1 of this year, most salaried workers – including managers and professionals – making less than $47,476 will now be entitled to overtime pay (most charitable non-profits will be unaffected by this rule change - read more here).
The Economic Policy Institute estimates this change will directly benefit just under half a million Pennsylvania workers or 22.6% of the commonwealth’s two million salaried workers.
Make no mistake, this is a huge win for middle class workers. Honestly I have trouble identifying another recent policy change that so clearly benefits middle income workers.
The reason this new policy will lift up families is because some salaried employees who regularly work overtime will get raises as employers find it more cost effective to raise their pay above the $47,476 threshold rather than pay overtime. Other employers, rather than pay overtime, will respond to this rule change by hiring more staff. So some workers will see higher pay, others will work fewer unpaid hours.
The key fact to remember is that, before this change, the threshold income for requiring salaried workers to be paid overtime was a salary under $23,660. Had the threshold kept pace with its 1975 level it would be $52,000 today. Allowing the threshold to fall by more than 50% removed overtime protections for millions of workers.
This change drives home the larger point that policymakers can change the rules governing our job market to bring back the middle class – even though they have too often done the opposite for 40 years.
Now it’s time for Pennsylvania’s General Assembly to build on President Obama’s effort to lift up working families by raising the Pennsylvania minimum hourly wage. That could give another 1.2 million Pennsylvania workers a raise by the end of the year.
Finally, for the policy geeks and groupies (what, it could happen?) out there, you may have heard that on June 8th and 9th we are organizing a conference. Well, you are in for a treat, as Dr. Heidi Shierholz, chief economist of the U.S. Department of Labor who helped develop the new overtime rule, will be speaking at the Crowne Plaza in Harrisburg on the afternoon of June 9. Dr. Shierholz is part of an all-star lineup of some of the best and brightest minds working towards building an economy that works for everyone! Register online here.
Something new and unusual happened in Harrisburg today. Senators Art Haywood, Vincent Hughes and Jay Costa put forward an idea that actually could help resolve the pressing fiscal cliff we face this year, and at the same time could make our tax system more progressive.
Despite partisan differences, three goals are more or less shared by everyone in Harrisburg. While their top priority may differ, for the most part, legislators all say they want:
1. to close the $1.8 billion structural deficit;
2. to spend more on education;
3. and to put no additional tax burden on low- and middle-income taxpayers.
Yet no one has presented a plan to accomplish this feat. In an election year, legislators will say that they are not willing to raise the income tax or sales tax – which could generate the necessary funds to close the deficit and fund education – because doing so would harm working people and the middle class. Under the uniformity clause of the PA Constitution, it is illegitimate to tax the same class of income at different rates, so we can’t just raise taxes on those with high incomes. And the tax proposals that legislators might accept – new tobacco taxes or a severance tax on natural gas drilling – by themselves do not get close to generating the revenues necessary close the deficit.
But now we have a real alternative. Senator Haywood’s legislation, which is based on a proposal PBPC put forward three weeks ago, calls for certain classes of income we call income from wealth – dividends; net income (from a business, profession, or farm); capital gains; net income from rents, royalties, patents, and copyrights; gambling and lottery winnings; and income from estates or trusts – to be taxed at a 4% rate. Income from regular wages and interest will still be taxed at the current 3.07% rate.
This proposal raises $758 million a year. And as the chart below shows, it barely raises taxes for the bottom 60% of households, those making $65,000 or less, who would pay between $2 and $28 dollars a year. It raises taxes by only $55 a year for the fourth quintile of households, making between $65,000 and $101,000. Even the next 15% of households, with an income of $101,000 to 201,000 only pay $118 a year. It is only when one gets to the top 5% of households that the tax really kicks in. The top 1% – income of $463,000 or more – pays $5,304 on average. And they can afford it.
(click the graph to enlarge)
In other words, it turns out that you can raise taxes just on those with high incomes in Pennsylvania despite the uniformity clause, as nothing in the Constitution prohibits different classes of income from being taxed at different rates.
And while $758 million doesn’t close the structural deficit, it gets us much closer to doing so, and makes it conceivable that a number of other small taxes that don’t hit low- and middle-income Pennsylvanians could get us the rest of the way there.
Sometimes a little creativity is needed to find the way out of a sticky political situation. Senator Haywood’s proposal has shown us a path toward resolving the current budget crisis; just in the nick of time.
Last month, the state’s 2015-16 budget impasse finally came to an end --- more than nine months after it started. But there was little time to celebrate. As quickly as one budget debate ended, a new one began.
Legislators and the governor now must begin in earnest to craft and finalize a 2016-17 budget. They have two months to do it. The state’s fiscal year runs from July 1 to June 30 each year, and May and June are the most critical months for finding consensus.
Despite the differences between the Democratic governor and Republican legislature last year, they were able to find a few shared priorities. Among them was a decision to set aside $1 million to fund the Pennsylvania Agricultural Surplus System (PASS).
With PASS, the state’s charitable food organizations will work with Pennsylvania’s agriculture sector and farm communities to feed those in need. Millions of pounds of Pennsylvania-grown fruits and vegetables that otherwise would go to waste each year instead will support nutritious family meals.
PASS was created by Act 113 of 2010. The program had never been funded beyond the pilot phase, until now.
Let’s hope the modest accomplishments with PASS last year are a sign of progress for this fiscal year.
Because as important as PASS is, the State Food Purchase Program (SFPP) remains the critical lifeline for food banks. SFPP provides cash grants for the purchase and distribution of food to low-income individuals.
Unfortunately, for years, the SFPP has been chronically underfunded. In 2006-07, the state allotted $18.75 million for SFPP. Since then, funding has dropped 7.5 percent to $17.4 million. The current budget plan kept funding flat --- even though the number of residents eligible for SFPP has increased by 23 percent over that same period.
SFPP is needed now more than ever.
Food insecurity among Pennsylvanians has increased from 10 percent of our population to 14.2 percent.
An estimated 2 million people in Pennsylvania --- one in seven --- turn to food pantries and meal service programs to feed themselves.
Food costs have increased 24 percent over the last decade and continue to rise. Grocery store prices are expected to go up by as much as 2.5 percent in 2016, according to the U.S. Department of Agriculture. That’s on top of the 1.2 percent increase in 2015. Families and food banks alike are feeling the pinch of these higher costs.
The governor’s current budget would increase the SFPP line item by $2 million. $1 million of that increase will go to PASS. It’s a start, but it’s not enough.
There is enormous pressure on food assistance providers.
As legislators get busy in May and June to craft the 2016-17 budget, they need to remember that hunger is an issue that transcends political boundaries. There isn’t a single community in Pennsylvania that isn’t affected.
And if we want to truly help all those in need, then the final spending plan should include $21 million for SFPP and $5 million for PASS.
This is a guest post from Sheila Christopher, Executive Director of Hunger-Free PA. It was originally posted at their blog here.
For the education data geeks out there (admit it, you're probably one) here is data comparing new classroom funding (in budget geek speak that's the basic education subsidy plus the ready to learn block grant) by school district as proposed under the bi-partisan budget framework versus the same funding under the final budget for 2015-16.
For those of you who have already blocked out the last four months of education policy back-and-forth, the bi-partisan budget framework proposed increasing classroom funding in 2015-16 by $377 million. What finally became law only boosted education funding by $202 million.
The excel file that you can download here gives you a table of funding amounts by school district. It also lets you build your own graph like the one below for your school district, and finally presents our graphical analysis of the changes in funding after breaking down school districts by poverty status (new funding by poverty / cuts remaining by poverty).
The resolution of the 2016-17 budget should be oodles of fun now go vote!
April 22, 2016
The Insider News is a weekly look at the work of the Keystone Research Center and the Pennsylvania Budget and Policy Center.
20th Anniversary Conference
Are you registered yet for KRC’s 20th Anniversary Conference? It's just around the corner — June 8-9 — and it's going to be amazing. We'll celebrate 20 years of progressive economic activism and kick off KRC’s next decade of collaboration with statewide and local partners to achieve a Pennsylvania economy that works for all. Speakers include Saru Jayaraman, Restaurant Opportunity Centers United, and Carmen Rojas, The Workers Lab. Plus two dozen interactive workshops and hundreds of your friends and colleagues.
Join us for the conference — and think about becoming a sponsor. There are lots of sponsorship and advertising opportunities, big and small. Check them out here orcontact Stephanie Frank for more information.
Space is limited, so register today!
Last week, we told you about the launch of the Pennsylvania's Choice campaign. A diverse collection of organizations from across the state, including education advocates, community service organizations, faith-based groups, environmental groups and labor organizations have come together to bring attention to the devastating consequences of budget cuts across the commonwealth and to advocate for a Pennsylvania budget that best serves the people.
Since last week, we've added new member organizations and held planning meetings with organizers in 31 districts across the state.
One ask — if you haven't already done so, please sign up for updates and information by clicking here.
This is the best way for you to stay informed about campaign activities and opportunities to engage. Please sign up!
This Week's PBPC Podcast
On this week's podcast, we welcome SEIU 668 President Tom Herman to talk about how budget uncertainty affects his members across the state, and why SEIU 668 felt it was so important to join the Pennsylvania's Choice budget campaign.
On Monday, May 2 the Campaign for Fair Education Funding along with parents, students, teachers, and school and community leaders from across the state will rally for fair education funding at the state Capitol in Harrisburg.
WHO: The Campaign for Fair Education Funding
WHAT: Rally for Fair Education Funding
WHERE: The state Capitol, Harrisburg
WHEN: Monday, May 2 (12:30 p.m. press conference in the Main Rotunda)
WHY: There is no more pressing issue facing lawmakers than fixing Pennsylvania's broken public school funding system
Want to join? Fill out this form and someone from the Campaign will be in touch with you!
KRC/PBPC In The News
By Marc Stier - The sugary-drink tax proposed by Mayor Kenney, also known as the "soda tax," is controversial because it takes a greater share of the income from poor families than rich ones. And since we at the Pennsylvania Budget and Policy Center are fundamentally committed to economic justice, we are always inclined to be suspicious of taxes that do that.
PBPC Director Marc Stier appeared on PCN this week to talk about the budget and PBPC's recent paper about options for new revenue. Video of the interview is behind a paywall, but available on the PNC Select site.
According to John Dodds, the Keystone Research Center has estimated that the increase in wages would generate $121.5 million though income and sales taxes.
“We can help better the lives of 1.2 million low-wage workers who have gone without a state increase in the minimum wage since 2007,” said Dodds, who believes Republican leadership is blocking legislation and preventing a vote on the issue.
Marc Stier, Director of the Pennsylvania Budget and Policy Center, discusses the Pennsylvania Choice Campaign and why telling stories about the effects of budget cuts can move the needle in Harrisburg.
Today is April 15, also known as "4-15."
In 300 cities in 40 countries today fast food workers are driving home the point that "McJobscost us all." Pennsylvania workers in multiple service industries are now very active in the Fight for $15.
For example, nearly 5,00 nursing home workers at 42 nursing facilities in Pennsylvania recently achieved contracts that lift their wages to $15 per hour over time. KRC reports released two days before "4-15" in 2015 and on November 9 made the case for this increase.
Just a couple of weeks ago, UPMC in Pittsburgh announced it will increase wages to $15 per hour as noted in this KRC statement and this Pittsburgh Post-Gazette column quoting KRC.
Airport workers in Philadelphia, fast-food workers, security guards and janitors have also been active and achieving victories in the Pennsylvania Fight for $15...with organizing efforts building in home care and child care.
Check out this graphic (also copied below) from the Center for American Progress, which explains how important the "and a union" part of the phrase "Fight for $15 and a union is." You see, $15 per hour in the near term would be a massive gain that drastically expands the number of living-wage jobs. But "and a union" — unions that once again represent at least 35% of the workforce anchored service industries that can't relocate — would make tens of millions of McJobs part of the middle class permanently.
Hats off to the Fight for $15 workers in Pennsylvania and across the country for helping to save America from itself and lighting the fire that eliminate the scourge of inequality from our job market, or political system, our communities, and our schools.
Over the past five years, Harrisburg has mastered the art of pitting school districts, parents, and students against each other in order to draw attention away from the damage their policies and the lack of adequate state education funding have inflicted on children, schools, and communities throughout the Commonwealth.
In the 2015-2016 budget, lawmakers tossed out a handful of crumbs in new state dollars to school districts desperate for state funding. They then proceeded to encourage school districts and parents to fight over these crumbs by telling Pennsylvanians that there would be winners and losers in the 2015-2016 budget, depending on how this new money was distributed.
Creating a school funding Hunger Games and manipulating schools districts and parents to fight against each other for crumbs has been a brilliant political move for lawmakers who don’t support funding education. So many school districts and parents have been focused on who gets more and who gets less, that most have failed to notice that every single school district in Pennsylvania is a loser with the 2015-2016 budget, no matter how the funding is distributed.
Lawmakers who support the 2015-2016 budget have good reasons for wanting to distract people from closely examining this document.
The 2015-2016 budget, which is a creature of the Republican Party, contains a meager increase for schools that is less than 2%. This increase doesn’t pay for the state-mandated cost increases all school district will face, let alone allow school districts to begin rebuilding their schools after years of deep cuts in opportunities for children.
This budget fails to address Pennsylvania’s charter school law, which Auditor General Eugene DePasquale recently called, “the worst in the United States.” This budget continues to send about $200 million in state funding intended for children with special needs to charter schools to be used to pay their operating expenses. This budget proposes to pay for construction reimbursement payments owed to school districts by issuing $2.5 billion in bonds and incurring at least $1.5 BILLION in interest payments and bank fees. Lawmakers have not shared how they plan to pay off this substantial new debt.
Harrisburg’s 2015-2016 budget ensures that Pennsylvania will continue to have the shameful distinction of having the most inequitable school funding in the nation, where our poorest students receive the fewest opportunities. In fact, if lawmakers continue to provide this level of state funding increase in future budgets, they will ensure that children in preschool today will graduate from high school before the inequities in Pennsylvania’s school funding system are fixed.
While Harrisburg continues to haggle over how to distribute the crumbs in this state budget, it is time for Pennsylvanians who believe all children deserve a chance to get a quality education to stop fighting against each other in our districts and instead focus our attention on the Capitol. We must hold lawmakers accountable for the decisions they make that hurt our children and our schools and put an end to Harrisburg’s school funding Hunger Games.
This is a guest post from Susan Spicka, Director of Education Voters of Pennsylvania. It was originally posted at their blog here.
A diverse coalition of groups from across the state, including education advocates, community service organizations, faith-based groups, environmental groups and labor organizations launched the "Pennsylvania's Choice" campaign today to bring attention to the devastating consequences of budget cuts across the commonwealth and to advocate for a Pennsylvania budget that best serves the people.
If Pennsylvania continues to enact unbalanced state budgets, the commonwealth will run a deficit that grows every year. Without new tax revenues, Pennsylvania will not be able to maintain the needed funding for education, human services, the environment, or community and economic development.
"Pennsylvania's Choice" partners will be organizing in areas across the state, bringing together community members to make clear to elected officials that, if the state cannot secure new revenues, these communities will face devastating cutbacks to programs in these and other areas that are critical to Pennsylvanians every single day.
Utilizing earned media events, digital media and face-to-face meetings, the campaign will be highlighting stories of how budget cuts — and continued threats of additional budget cuts — are affecting Pennsylvanians from rural communities, to suburban towns to big cities.
Many of the partner organizations were in Harrisburg today for a kick-off press conference:
Marc Stier, Director of the Pennsylvania Budget and Policy Center explained the genesis of the campaign: “We’ve come together because it is time to face the reality of the fiscal cliff. We’ve come together because the time for budget balanced in name only is over. We’ve come together because we must avoid the devastating cuts that would be necessary to balance the budget without new revenues. We’ve come together because we know that it is possible to raise new revenues without putting the burden on Pennsylvania’s middle class. And while we call the campaign ‘Pennsylvania’s Choice,’ we’ve come together because we know that the truth is we really have no choice. We must deal with the fiscal crisis honestly and transparently. Or we will all suffer terribly.”
“The Arc of Pennsylvania supports a budget which protects and enhances the right of people with disabilities to live, learn, work, and thrive in their communities,” said Ashlinn Masland-Sarani, Policy and Development Director for The Arc of Pennsylvania. “The Arc of PA and its members believe that providing community access to people with disabilities and supporting their families is a core responsibility of our state government.”
"The people of Pennsylvania have a right to clean air, pure water, and the preservation of the environment - that right is compromised if the lead agency charged with upholding it can't even afford to fill necessary vacant positions. The Department of Environmental Protection has been systematically underfunded for years, and we cannot allow that to happen again in 2016,” said Sierra Club - Pennsylvania Director Joanne Kilgour.
"We can no longer afford to continue down the same path of papering over the problem with accounting gimmicks unsustainable revenues and empty rhetoric. Our children cannot afford it. Our communities cannot afford it. Our Commonwealth cannot afford it,” said JoAnne Sessa, Secretary-Treasurer, Service Employees International Union (SEIU) Local 668.
“The 2015-2016 budget embodies the absolute failure of our state government both to meet the needs of Pennsylvania's public school students and to pay the obligations the Commonwealth owes to school districts in construction reimbursement payments,” said Susan Spicka, Director of Education Voters of Pennsylvania. “With this budget many schools will experience a substantial decrease in money available to support academic programs and services for students and communities will shoulder significant additional costs, as the state has shifted a considerable financial obligation onto the shoulders of local taxpayers. Education Voters of PA is joining together with the diverse coalition that makes up the PA’s Choice campaign so that we can work together to ensure that the travesty of the 2015-2016 budget does not repeat itself.”
Learn more about the campaign at www.pachoice.org.
Organizations Supporting “Pennsylvania’s Choice”
The Arc of Pennsylvania
Bucks County Women’s Advocacy Coalition
Community Action Committee of the Lehigh Valley
Consumer Health Coalition
Education Rights Network
Education Voters of Pennsylvania
Great Public Schools Pittsburgh
Greater Philadelphia Coalition Against Hunger
Mental Health Association of Northwestern Pennsylvania
Mental Health Association in Pennsylvania
Mental Health Association of Southeastern Pennsylvania
Pennsylvania Budget and Policy Center
Pennsylvania Council of Churches
Pennsylvania Food Banks
Pennsylvania Health Access Network
Pennsylvania Mental Health Consumers’ Association
Pennsylvania State Education Association
Philadelphia Federation of Teachers
Pittsburgh Federation of Teachers
Public Citizens for Children and Youth
SEIU Healthcare Pennsylvania
Service Employees International Union (SEIU) Local 668
Sierra Club - Pennsylvania Chapter
Unitarian-Universalist Pennsylvania Legislative Advocacy Network (UUPLAN)
It appears that some elements in the Republican Party of Pennsylvania have one and only one goal – to not raise taxes.
It doesn’t matter if spending in our classrooms, and especially in the classrooms in our lowest income communities, have not recovered from the Corbett cuts of 2011-12; they won’t raise taxes.
It doesn’t matter if waiting lists for mental health and intellectual disability services grow; they won’t raise taxes.
It doesn’t matter if tuition keeps rising for our colleges and universities.
It doesn’t matter if the budget is “balanced” with smoke and mirrors; they won’t raise taxes.
It doesn’t matter if the ratings agencies can see through the smoke and mirrors and plan to downgrade our credit again; they won’t raise taxes.
And now that all the special funds have been raided, all the bills have been put off to the following year, and all the tricks and gimmicks have been used, and we find ourselves facing a fiscal cliff of almost $2 billion dollars; they still won’t raise taxes.
Suspended as they are, in mid-air over Pennsylvania’s fiscal cliff, they have to do, or at least say, something. And so they say we must balance the budget by cutting it, starting with waste, fraud, and abuse.
If that is their position, then it is time, as we used to say on the playgrounds of my youth, for them to put up or shut up
It’s time for them to Name The Cuts.
Name the line items you are going to cut.
Name the $1.8 billion of waste, fraud, and abuse to be found.
If you can’t do that – and no one who is both knowledgeable and honest will say that there is anywhere close to $1.8 billion of waste, fraud, and abuse in the current budget – tell us what programs you will reduce and eliminate.
Don’t tell us about “across the board cuts.” That’s just one more way to duck responsibility for the consequences of your inaction. Name them.
Name the cuts in programs that serve seniors needed to balance the budget
Name the cuts in school funding needed to balance the budget
Name the cuts in programs that serve those with mental illnesses needed to balance the budget.
Name the cuts in programs that serve those with intellectual disabilities needed to balance the budget.
Name the cuts in higher education funding or financial aid to students needed to balance the budget.
Stop the games. Stop the dissembling. Stop the pretense.
Name the cuts. If you really think we can balance this budget just with cuts, without devastating education and human services in Pennsylvania, show us how.
And if you can’t, then let’s start talking about how to raise taxes fairly.
The following is a guest post from Susan Spicka, Director of Education Voters of Pennsylvania. It was originally posted at their blog here.
In the 2015-2016 Republican budget, many members of the General Assembly failed to deliver state funding owed to school districts and demonstrated that they are unwilling to pass a responsible budget that pays for the state’s obligations to public schools and meets the needs of Pennsylvania’s children.
In the 2015-2016 budget, lawmakers eliminated $305 million in construction reimbursement payments that the state was and remains obligated to make to PA’s school districts through the Planning and Construction Workbook (PlanCon) program. PlanCon is a longstanding program that provides school districts with partial reimbursement for qualified new construction and renovation projects. School districts are obligated to make construction payments with or without state reimbursement from the PlanCon program. The loss of $305 million in state funding represents a substantial decrease in money available to support academic programs and services for students.Below are some answers to other questions about the 2015-2016 budget in regards to education funding: How does the Republican budget cut $75 million in state funding to K-12 schools?
The budget provides an increase of $150 million in Basic Education Funding (BEF), $50 million in the Ready to Learn grant (RTL), and $30 million in special education funding and eliminates -$305 million in construction reimbursement payments to school districts, resulting in a loss of -$75 million for schools.
How many school districts were counting on PlanCon construction reimbursements from the state this year?
The majority of school districts in PA were owed reimbursement for construction costs in the 2015-2016 budget. These reimbursements range from less than $20,000 in some districts to over $1 million in others, depending on the project.
The PlanCon reimbursement issue extends beyond schools that did not receive money they were owed and expecting in the 2015-2016 budget. In recent years, many construction projects have received approval for reimbursement payments, but the state has not begun making payments for these new approved projects. Instead, the legislature has placed recent construction projects in a “pipeline” and failed to make any payment at all to school districts for these obligations. PA is delinquent in more than $1.7 billion in reimbursements that are owed to schools in the “pipeline”.Did lawmakers propose to fund PlanCon in the Fiscal Code by issuing $2.5 billion in new debt?
Yes. In the absence of adequate funding in the budget to pay for the state’s PlanCon obligations, lawmakers proposed a scheme to fund construction reimbursements in the Fiscal Code by issuing $2.5 billion in bonds to raise money that would be used to pay for this obligation to school districts.Why did Governor Wolf veto the Fiscal Code bill?
Governor Wolf vetoed the Fiscal Code bill because, given Pennsylvania’s poor credit ratings and the negative outlook signaled by credit ratings agencies after the passage of the Republican budget, borrowing $2.5 billion would have been prohibitively expensive. The interest rates the Commonwealth would pay to borrow money right now would be unaffordably high.If PlanCon payments to school districts had been funded, would the state funding increase in the Republican budget be enough to meet the needs of Pennsylvania’s students?
Absolutely not. The General Assembly’s failure to deliver on what it owes school districts through the PlanCon program is just one example of the state’s failure to pay its share of education funding.
More than 25% of the $200 million increase in BEF and RTL funding will go to banks instead of children’s classrooms because lawmakers did not include reimbursements to school districts for the extraordinary interest payments and fees they have incurred as a result of the budget impasse that was caused by the state government.
The $150 million that is left after school districts pay bank fees and interest is a meager increase that fails to begin solving the state’s long-term school funding crisis, continues to underfund schools that educate the most vulnerable children in the Commonwealth, and ensures that Pennsylvania will maintain the dubious distinction of being the state with the most inequitable school funding system in the nation.Is Pennsylvania’s financial outlook/credit rating better now that the General Assembly passed a 2015-2016 budget?
No. Within hours of Governor Wolf announcing that he would not sign the Republican budget, three credit ratings agencies criticized the budget, signaling their continued negative outlook for the Commonwealth.
PNC stated, “We do not expect the budget to come close to solving Pennsylvania’s fiscal pressures, including its structural budget gap, which is sizeable and growing. Without broader policy changes, Pennsylvania’s structural deficit will worsen.”
Moody’s wrote, “The approved budget relies on nearly $1 billion of one-time measures to balance the budget, does not include a pension contribution at the fully actuarially required level and casts no light on the government’s ability to reach compromise on its long-term fiscal challenges.What needs to happen now to get school funding back on track and Pennsylvania’s fiscal house in order?
Governor Wolf and the legislature must immediately begin working on the 2016-2017 budget and negotiating in good faith and in the best interests of our children so that the travesty of the 2015-2016 budget will not repeat itself.
Lawmakers must support a responsible, balanced 2016-2017 budget that:
- Raises reasonable new revenues to pay for the state’s obligations, closes the $2 billion structural deficit, and provides an increase of $400 million in school funding in the 2016-2017 budget; and
- Pays for PlanCon obligations to school districts either through new revenue in the budget that fully funds a line item or through issuing bonds that are available to PA at an affordable interest rate because lawmakers pass a responsible, balanced budget that triggers an upgrade in PA’s credit rating.
Lawmakers must dig deep and find the courage to make tough decisions and pass a responsible 2016-2017 budget. They must not pass another budget that fails to pay for the state’s obligations, hurts children, and ensures that students throughout the Commonwealth will endure yet another school year in underfunded schools that cannot provide them with the opportunities they need to be successful in life now and after they graduate.
An Explanation of Our Infographic, “Especially for Poor Districts, Drastic Corbett Education Cuts Remain”
So what difference does a budget actually make? Why should we care that we wound up with the Republican budget for this year (HB 1801), rather than the bi-partisan budget agreed to in December 2015 (SB 1073), let alone the budget Governor Wolf proposed in March 2015?
The difference for the education of our kids is found in this first figure above. The $846 million cut from classrooms in 2011-2012 has never fully been restored. And because more funding was cut and less funding restored in the districts that have a higher poverty than a lower poverty rate, state spending per student in those districts remains substantially behind what it was in 2010-11. We call the difference between what was spent per student in 2010-11 and what is spent today the “funding gap.”
The bi-partisan budget – the one agreed to by Governor Wolf and the leaders of the Democratic and Republicans caucuses in the state House and Senate in December – increased classroom spending by $377 million. It would have substantially reduced, but not closed, the remaining funding gap in the districts with the highest poverty rate, reducing it to $217 per student. The funding gap in the schools with the lowest poverty rate would be reduced to $29.
The Republican budget appropriated $177 million less than the the bi-partisan budget for Basic Education Funding, the Ready to Learn program, and Special Education. And, their fiscal code bill would have distributed education funding in a way that provided far less to schools in high poverty districts, even though those schools were hardest hit by the Corbett cuts. Thus they would have left the funding gap for the schools with the highest poverty rate at $441. The funding gap for the lowest poverty schools would be $56.
And note that the disparity in reducing the state funding gap comes on top of what was already one of the most unequal distributions of total education spending in the entire country. As we’ve pointed out recently, schools in low-poverty districts in Pennsylvania spend 33% more than those in high-poverty districts. (And, of course, these figures do not account for the impact of inflation on reducing the value of state funding.)
So what difference does a budget make? It’s the difference between providing all of our kids an adequate education or drastically short-changing kids, especially those who live in high-poverty areas. And that makes a difference. For the states that fund their schools equally have the best results.
The inequality in the education we give to rich and poor kids in Pennsylvania has long been morally indefensible. And the inadequate Republican budget we are now living under in 2015-16 does little to improve or relieve it. We must do better in the budget for 2016-17 fiscal year.
Some Technical Details
1. For those who want the whole picture, figure 2, provides the rest of the story. We have divided the 500 school districts in Pennsylvania into four groups of 125 school districts each, based on the percentage of children under 18 living below the poverty line. To make figure 1 easier to grasp, we excluded the middle two quartiles. They can be found in figure 2.
2. We also excluded Governor Wolf’s original budget proposal for 2015-16. It is included in figure 2. The Governor’s proposal was even better than the bi-partisan budget. Even it did not completely close the classroom funding gap. But the Governor explicitly said that his proposal for 2015-16 was the first part of a multi-year plan to create adequate and equitable funding for our schools.
3. There we explain in more detail We also want to be clear about exactly what we are talking about when we say “classroom funding.” We are not referring to overall levels of spending on education at the PreK-12 level. The total level of spending can be useful for some purposes but it can also be misleading. The state spends a great deal on education that is important but does not find its way directly into the classroom. For example, while funding for public libraries and school transportation is important, money spent for these purposes does not directly affect what happens in the classroom. That is also true, in a different way, for teacher’s pensions. Good pensions help schools attract and retain excellent teachers. But the recent rise in spending on teacher’s pension does not reflect a new commitment to improving the quality of teachers in our schools.
To compensate for these and other vagaries in PreK-12 education funding, PBPC has developed a narrower definition of the state’s commitment to education which we call “classroom funding.” It includes the basic education subsidy for each school district plus formula enhancements, charter reimbursements, accountability block grants, and, when looking back at previous years, funding for schools that came from the American Recovery and Reinvestment Act (ARRA). (see footnote)
4. Finally, for reasons we’ve discussed elsewhere, we should point out that the Governor, rightly, vetoed the most recent fiscal code bill, which used the new funding formula to distribute the new state funding for education included in the Republican budget. We support the new funding formula. But as we’ve pointed out before, we believe that the only way to be fair to all schools is to apply the formula for new school funding after the funding gap from 2010-11 is restored. The Governor has not announced how he will distribute the new funding included in the Republican budget. We hope that the Governor distributes more of this money to the high-poverty schools that have a large funding gap, as he did with the funding he did not line-item veto in the appropriation bill adopted in December, HB 1460.
For more details about recent changes in state funding for education and the different 2015-16 budget proposals, that put forward by Governor Wolf, by the Republicans and as a result of the bi-partisan negotiations, see our recent paper Understanding the Numbers in a Budget Crisis.
For more detail on classroom funding and the data sources necessary to estimate classroom funding each year, see Waslala Miranda, Undermining Educational Opportunity: Pennsylvania’s Unequal Restoration of School Funding, Pennsylvania Budget and Policy Center, October 21, 2015, online at https://pennbpc.org/sites/pennbpc.org/files/finaledcutsbrief.pdf
As most readers of this blog know, Pennsylvania just concluded a 2015-16 budget process nine months late because the legislative majority was unwilling to raise enough revenue to begin funding schools more adequately and equitably.
While unwilling to find another roughly $200 million dollars to fund schools, however, the legislature last week passed, and sent to the Governor’s Desk, a bill (HB 1326) that could increase privatization of water utilities in Pennsylvania, raising water rates for hundreds of thousands of Pennsylvania households. The bill could end up being a backdoor tax increase that ultimately costs taxpayers several hundred million dollars per year.
Maybe the difference here is that the additional money the Governor wanted would have gone mostly to lower- and moderate-income rural and urban schools that experienced the deepest school funding cuts in 2011-12. By contrast, the hidden tax increase from higher water rates at private utilities would go mostly to fatten the bottom lines of private, for-profit water companies such as Aqua America.
Undeserving poor and middle class; deserving rich. Get it?
Most of us haven’t heard about HB 1326 because we’ve been so focused on the drawn out budget battle. In addition, advocates for public water and wastewater systems had understood that the bill would not run this session. As a result of these factors – and, we assume, effective lobbying by the private water industry – the bill passed the Senate unanimously last week after having earlier passed the House 175-22.
Because HB 1326 has not been given the public scrutiny it should have been, we urge Gov. Wolf to veto it. If the bill is sent back to the legislature, the Independent Fiscal Office should conduct an analysis of the range of plausible costs of the bill to consumers, and the Department of Environment Protection should issue an analysis of potential impacts on the environment and smart growth.
Without getting too weedy, the bill could accelerate privatization of municipally owned water and wastewater utilities because it changes the regulations governing their sale price. As it stands, when a private company buys a municipal water or sewer system, it pays the “original cost” of the acquired utility, as depreciated over the years rather than the unregulated “fair market value” (FMV). If the public entities selling the utility don’t get as much money under the current “original cost” approach, they have less incentive to sell. There is an exception to “original cost” valuation now for small (3,300 customers or less) or “nonviable” utilities. In these cases, the PUC may already authorize any reasonable purchase price so long as rates will not “increase unreasonably.” (HB 1326 also includes another sweetener for private buyers because it allows them to defer improvements for up to four years.)
HB 1326 would make FMV pricing the rule rather than the exception. The bill also eliminates important consumer protection provisions that allow the PUC to review acquisitions and determine whether the value is reasonable and whether the merger provides a public benefit. The upshot of all this is that a shift to FMV pricing may make it much more enticing for municipalities to sell their publicly run water systems because they will be paid more. The Pennsylvania bill is based on a similar bill enacted in Illinois in 2013 with the backing of an Illinois free-market think tank.
How do we know that this bill might cost Pennsylvania consumers hundreds of millions of dollars per year? Here’s how.
According to the national non-profit Food and Water Watch in a February 2016 report, private water systems in Pennsylvania charge an average of 84 percent more than public systems per year, adding $323 to a typical household’s water bill. There are 4.8 million households in Pennsylvania. If HB 1326 led to 10 percent more of Pennsylvania’s households (480,000 households) being served by private water companies and paying $323 more per year each, the total cost to consumers would be about $155 million annually.
Interestingly, of the 18 individual states for which Food and Water Watch publish separate data (see Appendix A, pp. 12-13), Pennsylvania and West Virginia private utilities win the prize for the highest average annual water rates in the county – the only ones over $700 per year. The third place state (Illinois) is more than $100 lower per year at $586. Food and Water Watch also found that half of the top 10 most expensive water systems in the country are in Pennsylvania. This likely reflects the fact that PA already has very “investor friendly” laws and regulations for water companies. In fact, Janney Montgomery Scott, a financial services firm, ranks Pennsylvania as number one for its regulatory climate for private water utilities – Pennsylvania’s regulation are the “gold standard” (literally) for companies that want to hit their Return on Equity (ROE) targets (see p. 55 in this source).
The February 2016 Food and Water Watch report also shows that facilitating privatization of water and other utilities goes against the national trend of increasing public ownership. Since 2007, the number of people served by private water companies nationally has shrunk by 18 percent (8 million people). There are sound reasons to favor public ownership of the natural monopolies we call utilities: as well as accountability and affordability, these include more equitable and environmentally responsible service, and better jobs. In many parts of Pennsylvania, plentiful, high-quality water is also an economic development and quality of life asset – one that privatization threatens to undercut.
What we know after a little digging gives us pause about HB 1326 and leaves us with the following questions.
- Since private water and waste water service is working so well that it is shrinking nationally – despite the powerful corporate and ideological support it has – should Pennsylvania be going against the trend and encouraging more privatization?
- Should this significant regulatory change happen while legislators and advocates are focused elsewhere – and without adequate hearings, fact-finding and analysis of potential impacts?
- Doesn’t better regulation of water and wastewater utilities that saves consumers a few hundred million dollars a year qualify as reining in waste and abuse, which leading lawmakers now champion?
- If consumers spend a few hundred million dollars less on water and wastewater utilities might it not be a little easier for the state to adequately fund education?
In sum: a veto of HB 1326 by Gov. Wolf would give the legislature and stakeholders a chance for a do-over on a critical issue where it looks to us like Pennsylvania needs a do-over.
Listen to the extremist Republicans who are blocking a Pennsylvania budget deal and you might hear the echo of American revolutionaries standing up to King George.
The stakes seem to be beating back a Governor who seeks to drastically expand the size and scope of our state government.
Need some examples?
- The Commonwealth Foundation calls for overthrowing the cycle of ever-increasing spending and taxation.
- Representative Russ Diamond, for whom even the Republican budget is too large, says that, “The running theme here seems to be that state governments should remain monoliths of scope.”
- Representative Scott Grove says, "It has always been about Wolf and his desire to increase the spending, size and scope of state government."
- And, Senator Scott Wagner seemed ready to commit tyrannicide when he told the Republican State Committee that “we had him down on the floor with our foot on his throat and we let him up. Next time, we won’t let him up.”
Putting aside the embarrassing tone of Senator Wagner, does any of this make sense? The short answer is “absolutely not.”
The standard way of measuring the size of government is to look at the share of Gross Domestic Product (GDP) taken by government spending and taxes. From 1994 to 2011, state government expenditures averaged 4.71% of the state GDP. It has been remarkably stable, ranging from 4.22% to 4.90%. The last four years of draconian cuts to public education and services by the Corbett administration saw spending fall to 4.38% of GDP.
So, far from growing inexorably, government was stable in Pennsylvania – at least until Governor Corbett’s radical, and extremely unpopular, reductions in spending.
Does Governor Wolf want to reverse direction and drastically expand the government as Republicans in Harrisburg say? Again, the answer is no.
His budget proposal for the current year would still leave state expenditures at 4.65% of GDP, below the twenty-year average. And spending under the bi-partisan budget framework, to which he and the Republican leaders agreed, is even lower at 4.57%. That figure not only splits the difference between the Governor’s plan and the Republican budget (4.49%), but is close to the average of the Corbett years.
Look at state employment and the results are the similar. Far from growing, state government employs 440 fewer people than in 1990, while non-government employment has grown by 664,300.
Does Governor Wolf propose to hire thousands of new government bureaucrats with new spending? The answer here, too, is no. The governor wants to send almost all of that money to the 500 local school districts across the state.
The truth is that the extremists in the Republican Party don’t want to stop the government from growing. They want to continue on the Tom Corbett path and shrink government more. The $1.8 billion structural deficit the state faces next year is, for them, an opportunity for more radical reductions in spending on education and human services.
This radical path not only has been rejected by Pennsylvanians, but it also ignores the experience of every advanced country, starting with our own.
The widely shared prosperity that characterized America for most of the twentieth century was created by a partnership between the public and private sectors. The entrepreneurial skill of business people and the innovations of technologists were necessary to our prosperity. But so were the public investments in a highly-educated workforce, a first class transportation and communication infrastructure, and a scientific and technological network second to none.
Spending on those public goods made our prosperity possible. It also had two other positive consequences. It created the opportunity that ensured that the whole community would benefit from the talents and energies of everyone, and it protected those among us who, through no fault of their own, suffered from physical, emotional or intellectual disabilities.
That’s what most people in Pennsylvania want, regardless of political affiliation. They don’t want an over-weaning, all-powerful government; they want a partnership between public and private sector, one that benefits all of us
And what do the extremist Republicans want? Only, it seems, to cut taxes. The Republicans say tax cuts increase our prosperity. But $2.4 billion a year in corporate tax cuts gave us a structural deficit, not economic growth. Only the rich and corporations benefited.
No one wants a Leviathan in Pennsylvania – an overwhelming, all-consuming government. But most of us want the kind of government that once brought everyone opportunity and prosperity. That’s the common sense view Pennsylvanians voted for in 2014 that the extremist Republicans are rejecting today.
The Inquirer’s Joseph DiStefano reported last week that Standard and Poor’s is threatening to cut Pennsylvania’s credit rating due to the states failure to address the structural budget deficit. Ratings on debt issued by Pennsylvania have been downgraded five times in the last four years and every downgrade costs the commonwealth tens of millions of dollars on each billion dollars of borrowing.
Indeed DiStefano reports that, “Pennsylvania taxpayers had to pay investors an extra 0.52 percent interest to sell bonds as of last month, more than any state except New Jersey and Illinois, according to a report by PNC Financial Services Group.”
Spending more than we should to borrow money means spending less on making sure that every child in Pennsylvania gets access to a high quality public education.
What often gets lost in the discourse about future tax increases or spending cuts is the reality that the state has already made drastic cuts to public education and social services over the last few years, while still running up future deficits and we’ve seen the consequences. While many are content on pointing fingers at Governor Wolf for vetoing the GOP budget proposal in December, the reality is he, unlike GOP leadership in Harrisburg, is willing to address the hard truths about the state’s fiscal future.
S&P is confirming what Governor Wolf has been saying for months. The only remaining option for a sustainable budgetary environment in Pennsylvania is the consideration of reasonable revenue mechanisms. Now that it isn’t just their political opponents who are saying it, will the GOP leadership listen?
This week, Governor Tom Wolf announced that, through executive order, he would require Pennsylvania state workers under his jurisdiction and employees working on future state contracts to be paid at least $10.15 an hour.
Prior to his action, these workers making the minimum wage, many of whom who are heads of household, were often not making enough money to live above the poverty line. None of them were making enough money to have what economists call a living wage -- the wage rate required to meet minimum standards of living in a given area. In many places across the state, a living wage for workers with a family is well more than even the $10.15 an hour that this executive order raises wages to. You can see MIT's calculations for living wage by family by Pennsylvania county and metro area here.
We have a moral obligation to ensure those working in Pennsylvania are paid enough to make ends meet.
This week's executive order is just the first step. The minimum wage needs to increase for all workers in Pennsylvania. And that’s true not only because it helps working people, but also because it relieves pressure on Pennsylvania’s budget. People who make the minimum wage spend almost all they earn. Thus raising the minimum wage generates new economic activity. Keystone Research Center estimates that a higher minimum wage will increase revenues from the Personal Income Tax by $45.6 million and the Sales Tax by $75.9 million. And it will also decrease state expenditures because many working people making the minimum wage will move from traditional Medicaid (which we call Medical Assistance in Pennsylvania) to the expanded Medicaid created by the Affordable Care Act. The federal government reimburses Pennsylvania for a bit less than half the cost of traditional Medicaid, but the reimbursement rate for expanded Medicaid is 90% or more. We estimate that raising the minimum wage for all Pennsylvanians will reduce state spending by $104 million.
At a time when we face a structural deficit of about $2 billion, we can’t afford to pass up this opportunity to reduce it by $225 million simply by raising the minimum wage to $10.10.
But beyond that, we can't look past the moral obligation we have, as a Commonwealth, to make sure that working Pennsylvanians are able to support themselves and their families. Raising the minimum wage is the right thing to do. And the time is now.