Third and State

In a recent interview with Triad Strategies, I outlined some of our concerns about state tax cuts enacted over the past decade and the Governor's plan to enact a new round of state corporate income tax cuts in the years ahead.

Business tax cuts enacted since 1999 have drained close to $3 billion this year alone from state coffers. The cost of the tax cuts has more than tripled since 2002, with little to show for it. Pennsylvania ranked 27th in job growth in 1999-2000 and 34th in 2011-12.

As I told Triad: "If the goal is to use these tax cuts to improve Pennsylvania’s ability to create jobs, it just has not worked.”

Sharon Ward of the PA Budget and Policy Center Discusses Tax Policy from Triad Strategies on Vimeo.

A few other highlights from the podcast ...

On the Governor's plan to enact a new round of corporate tax cuts beginning in 2015 that will cost as much as $1 billion a year when fully phased in, I said: "It’s a great deal for profitable corporations, and it’s very meaningless for the 85% of corporations that pay less than $1,000 a year” in state corporate income taxes.

I also made the point that Pennsylvania needs real tax reform: "Tax reform needs to take a fair look at all the ways that companies take advantage of the tax code, and if you want to use some of those dollars to reduce the [corporate income] tax rate a little bit, that’s perfectly fine. But you’ve got to get the reform piece there, and I don’t see any tax reform in this plan."

This week at Third and State, we blogged about the impact of corporate tax cuts on state investments in education and health care, why state lawmakers got half a pie from advocates this week, and the takeaway from Pennsylvania's latest jobs report. Plus we shared a podcast with Sharon Ward on education policy in Pennsylvania.

IN CASE YOU MISSED IT:

• On state taxes and the budget, Michael Wood blogged about a new Pennsylvania Budget and Policy Center (PBPC) policy brief showing that the skyrocketing cost of corporate tax cuts are competing with state funding for schools, the state’s colleges and universities, early childhood education, and human services. 
• With business tax cuts taking a larger share of the budget pie these days, Chris Lilienthal wrote about how advocates with the Better Choices for Pennsylvania Coalition delivered half a pie to every state legislator this week to send a message that Pennsylvania needs real tax reform. We also shared a 3-minute video with highlights from the Pie Day press conference.
• On jobs and the economy, Mark Price analyzed the January jobs report for Pennsylvania.
• And on education, Sharon Ward talked with Triad Strategies about PBPC's new Education Facts Page, which presents data and analysis on public, charter and private education in the commonwealth.

IN OTHER NEWS:

• Read PBPC's latest policy brief titled $3 Billion Bill for Corporate Tax Cuts in 2012-13: Reduced Revenue Does Little for Jobs, Undermines Schools and Human Services.
• Learn more about public pension reform in Pennsylvania at the Keystone Research Center's Pensions Issue Page.
• Check out PBPC's Medicaid Expansion Resource Page, with more information on the federal opportunity to expand state coverage and how you can take action.
• And view PBPC's Education Facts Page with data on student enrollment, education funding, and school poverty.

More blog posts next week. Keep us bookmarked and join the conversation!

The week, advocates delivered half a pie to every Pennsylvania legislator to remind them that a decade of large tax cuts for businesses has left schools, health care services, and local communities with a smaller share of the budget pie. Watch the following three-minute video for all the highlights.

Over the past decade, Pennsylvania has enacted numerous corporate tax cuts, and the costs have skyrocketed, competing with state funding for schools, the state’s colleges and universities, early childhood education, and human services.

Laws to expand tax credit programs, change the way corporate taxes are assessed, reduce tax liabilities for merging mega banks, and eliminate the capital stock and franchise tax have drained a growing amount from the state treasury. The costs have more than tripled since 2003-04 from $850 million to just under $3.2 billion per year, as the Pennsylvania Budget and Policy Center documented in a new policy brief.

The most costly change is the phase out of the capital stock and franchise tax (CSFT), a process that began in 1998. It accounts for about two-thirds of the total tax cut bill.

Now Governor Tom Corbett has proposed a new round of tax cuts beginning in 2015 that will significantly reduce the state’s ability to pay for basic services. The largest piece of the Governor’s plan is to phase down the corporate net income tax (CNIT) rate from 9.99% to 6.99% between 2015 and 2025. The Governor’s proposal makes no attempt to close corporate tax loopholes, which allow some multi-state corporations to game our tax system and pay very little. 

While the rate cut will be phased in over a decade, the cost will be immense. A 30% reduction in 2013-14 expected CNIT collections would cost $771 million.

More than half the states with corporate income taxes (23) have enacted combined reporting to close tax loopholes, and another 12 states have some form of an addback law that requires companies to add back interest, royalties and trademark expenses incurred with related companies.

Pennsylvania should follow their lead and take steps to close tax loopholes, improve accountability, and rein in corporate tax breaks. These proposals level the playing field for all businesses and make our tax system fairer.

Advocates delivered half a pie to every Pennsylvania legislator today. Why half a pie?

To remind them that a decade of large tax cuts for businesses has left schools, health care services, and local communities with a smaller share of the state budget pie.

Tax cuts enacted since 1999 have drained close to $3 billion this year alone from state coffers. The cost of the tax cuts has more than tripled since 2002, with little to show for it. Too often, these tax cuts are put in place with very little accountability or obligation for companies to create jobs. In fact, Pennsylvania ranked 27th in job growth in 1999-2000 but fell to 34th in 2011-12.

Budget cuts fueled by large business tax cuts also pass the buck to school districts and local governments – and onto local taxpayers.

Governor Corbett is now proposing a new round of tax cuts for 2015 and beyond that will cost as much as an additional $1 billion. The proposal includes no plan to close tax loopholes that allow companies to hide profits and avoid paying their share of taxes. 

Pennsylvania needs a budget that returns to tried-and-true investments in education and the public infrastructure that promotes long-term economic growth. After a long economic downturn, that is the path to more jobs, stronger communities, and a brighter future for our children. 

We can fund corporate tax cuts or we can fund our children’s schools, but increasingly we can’t do both. Giving larger slices of the pie to profitable corporations means less money in the classroom, fewer early childhood programs, and less support for local services. 

Pennsylvania needs real tax reform that levels the playing field for businesses that play by the rules, and stops giving away dollars that are essential to helping our children and families succeed. Only then will we be able to invest in a world-class public education and the community assets that build a stronger economy.

A few minutes before 5 p.m. on Friday, the Corbett administration released new data on the state's employment situation in January. The picture that emerged from the data was mixed.

On the one hand, the unemployment rate climbed by three-tenths of a percentage point to 8.2%, while the number of unemployed climbed by 18,000. On the other hand, nonfarm payrolls had a better month than typical with payrolls over the month climbing by 5,200 jobs. 

In 2010, nonfarm payrolls grew, on average, by just under 7,000 jobs a month; in 2011, that figured fell almost in half to 3,800 jobs a month; and in 2012, it fell again to 2,900 jobs a month. So, with growth of 5,200 jobs, January was better than average for the past two years. It is estimated that Pennsylvania needs average monthly job growth of 11,000 jobs a month to get back to full employment in three years. 

Returning to the household survey, unemployment in Pennsylvania started to climb in March of last year, as employment growth (as measured in that survey) slowed, while the labor force continued to grow. January was an extreme version of this pattern, with the household survey registering zero employment growth as the labor force grew, thus driving the number of unemployed up by 18,000. The increase of 18,000 in unemployment was the largest monthly increase in state unemployment since April 2009 when the economy was officially in recession.

After remaining about a percentage point below the national unemployment rate during the recession, Pennsylvania's recent climb in unemployment has eliminated what advantage the commonwealth had over the nation as a whole.

Employment growth would have most likely been stronger and the economy better able to absorb the increase in the labor force had national and state policymakers taken steps to grow rather than shrink the economy.

In Pennsylvania in particular, policymakers held back at least a half a billion in spending, refused to tax Marcellus Shale drillers at a rate competitive with neighboring states, and lowered corporate tax bills. While these policies were pitched as a boon to employment growth, Pennsylvania’s job performance has actually deteriorated.

State policymakers chose a path that required deep cuts in education spending and extended delays in badly needed investments in roads and bridges. Taken together, these policies mean the unemployment rate is higher than it should be in Pennsylvania and total employment farther away from full employment than it would otherwise be.

Another way to see the failure of this policy is by examining the time people remain unemployed. Reflecting a more mild recession, the percentage of people unemployed for more than six months was at 33% in the 4th quarter of 2011, which compared favorably to 44% in the rest of the country. However, as employment growth has slowed, the addition of 44,000 new people looking for work since March has led to an increase in long-term unemployment in the commonwealth. In the 4th quarter of 2012, 39% of the unemployed in Pennsylvania had been out of work for six months or more. Although still below the national figure of 41%, it is a troubling indicator to see on the rise in Pennsylvania.

 

In my interview with Triad Strategies last week, I discussed the Pennsylvania Budget and Policy Center's new Education Facts Page, which pulls together data and analyses on public, charter and private education in the commonwealth. We hope this web page will inform dialogue around state education funding and how we can provide better supports to students in our schools. Watch the short podcast below.

Education from Triad Strategies on Vimeo.

A few highlights from the podcast ...

Discussing the first couple of policy pieces on our Education Facts page, I explained that "we've looked at private school, charter school and total public school enrollment, and one of the things we've found is that charter school enrollment is going up at the same time that private school enrollment is going down. So the charter schools were actually taking students from private and parochial schools as much, if not more than, public schools."

We also looked at the lowest performing schools in the commonwealth that qualify for the new education scholarship fund and found that "not only are they the lowest performing schools, they are also the poorest schools: they are the ones with the highest percentage of students in poverty. ...

"If you want to deal with education issues, we have to look not just inside the classroom but what's going on in the community and what's going on with the kids."

This week at Third and State, we shared a podcast on the Governor's state budget proposal and the latest "pension primer" from the Keystone Research Center. We also blogged about the February jobs report, income inequality, a court ruling with implications for state health care funding, and more.

IN CASE YOU MISSED IT:

• On state budget and taxes, Michael Wood wrote about General Fund revenue collections missing estimate in February. Sharon Ward shared a podcast from her sit down with Triad Strategies where she discussed the governor's state budget proposal and the opportunity to expand Medicaid in Pennsylvania.
• On jobs and the economy, Chris Lilienthal rounded up the insights of leading national economists on the U.S. jobs report for February. Nonfarm payrolls in February increased by 236,000 jobs, and the unemployment rate fell to 7.7%.
• On pensions, Stephen Herzenberg shared the Keystone Research Center's latest "pension primer," which focused on how a 2010 law significantly reduced state pension costs going forward.
• Mark Price shared his op-ed on how we can break the back of rising income inequality in the U.S., published this week in The Guardian.
• On health care, Chris Lilienthal blogged about a court ruling finding that the diversion of tobacco settlement funds away from health care violated the state constitution.

IN OTHER NEWS:

• Check out the first three installments in the Keystone Research Center's new series of state pension primers intended to help demystify the often complex details at the heart of the pension debate.
• Read the Pennsylvania Budget and Policy Center's latest State Revenue Tracker.
• Check out PBPC's Medicaid Expansion Resource Page, with more information on the federal opportunity to expand state coverage and how you can take action.
• And view PBPC's Education Facts Page with data on student enrollment, education funding, and school poverty.

More blog posts next week. Keep us bookmarked and join the conversation!

This morning the U.S. Bureau of Labor Statistics (BLS) reported that nonfarm payrolls increased by 236,000 jobs. Over the past quarter, the nation has seen average monthly job growth of 191,000. The unemployment rate, meanwhile, fell to 7.7% in February, largely tranks to a drop in labor force participation.

Below are some key observations from D.C.'s leading labor economists on today's jobs report:

• Heidi Shierholz, Economic Policy Institute:

The unemployment rate dropped to 7.7 percent, its lowest level in the aftermath of the downturn. This increase was not due to a larger share of the working-age population landing jobs, however, as labor force participation slipped back to its lowest point of the downturn.

All in all this was a strong report, but we need reports this strong and stronger for several years to get back to health in the labor market.
 

• Dean Baker, Center for Economic and Policy Research:

There was some modest good news on the wage front with the average hourly wage increasing at a 2.85 percent rate in the last three months compared to the prior three. This would indicate some acceleration and actual real wage growth, but it is way too early to assume the pattern will continue. 

The 236,000 new jobs reported for February are a good sign and better than generally expected, but there is the risk that this is being driven by unusually good winter weather. This could lead to a situation like we saw last year with very weak job growth in the spring as the result of hiring being pulled forward. This is basically a picture of an economy that is showing modest growth, but has not yet felt the impact of the end of the payroll tax cut and the sequester.
 

• Heather Boushey, Center for American Progress:

Even though government cutbacks have slowed economic growth over the winter, this drag on the economy has not yet shown up in slower employment growth. We shouldn’t break out the champagne yet, however, as the sharp cuts in government spending implemented a week ago today will add roadblocks to recovery.
 

• Caroline Dobuzinskis,  Institute for Women’s Policy Research:

According to an analysis by the Institute for Women’s Policy Research (IWPR) of the U.S. Bureau of Labor Statistics’ (BLS) March employment report, one-third (80,000) of the new jobs added in February went to women while men gained 156,000. ...

IWPR analysis of the BLS payroll data shows as of February, women have regained 74 percent (2 million) of the total jobs they lost in the recession from December 2007 to the trough for women’s employment in September 2010 (2.7 million). Men have regained nearly 62 percent (3.8 million) of the jobs they lost between December 2007 and the trough for men’s employment in February 2010 (6 million).

Finally, Chad Stone of the Center on Budget and Policy Priorities, has some charts and tables illustrating today's jobs report. Here are just a few.

Pennsylvania policymakers made significant progress reducing the cost of state pensions with a 2010 law that cut the benefits of future employees, enacted new employee “risk sharing” to protect taxpayers in future economic downturns, and maintained public employee contribution levels that are higher than in most other states.

Over the next 30 years, the savings from these changes are estimated at $24.7 billion in the public school employees' pension plan and another $8.3 billion in the state employees' plan. Read more about this and other aspects of the pension debate at the Keystone Research Center's pension primer page.

Many already know that the Pension Reform Act of 2010 reduced pension benefits for new employees by more than one-fifth, capped the maximum pension benefit an employee can receive, and increased the time it takes for a pension to vest from 5 to 10 years. The law also increased the age and years of service an employee needs to retire with full benefits, and did away with an employee option to withdraw individual contributions at the start of retirement.

Few know about another unique provision of that law, which made Pennsylvania one of the first states in the nation to require employees to share in the risk of a future economic downturn.

Employees hired in 2011 or later must pay an additional “risk sharing” contribution of up to 2% if an economic downturn reduces public pension investment returns. The state and school districts can only require these higher employee contributions if they make corresponding increases in employer contributions.

This feature will give the state and school districts a disincentive to shortchange pension plans during future economic downturns. It makes it very unlikely that Pennsylvania will ever again accumulate large unfunded liabilities like it did over the last decade.

Finally, the 2010 law continues to ask public employees in Pennsylvania to pay a larger share of their salaries toward pensions than public employees in most other states. In fact, over the past decade, employees contributed almost twice as much toward public pensions as state and school employers.

I have an op-ed on The Guardian's web site today examining the problem that we all face in today's economy: income inequality. Give it a read.

With US unemployment near 8%, millions of Americans simply cannot find the work they need to keep a roof overhead, the lights on, and food on the table for their families. The problem is simple enough: there are not enough jobs to go around in an economy marked by slow growth and a growing number of job seekers.

To be sure, big and small firms alike are hiring to replace workers who retire or to expand as the economy recovers. For the newly unemployed, the competition for these job openings is fierce. Many find themselves locking horns with dozens, hundreds and sometimes thousands of fellow job seekers, all of whom are jockeying to score not a job but a job interview with a living human being.

Employers, inundated with job applications, are taking shortcuts to winnow the field of job applicants, eliminating from consideration applicants who are currently unemployed or have been out of work for more than a few months. Some are excluding job candidates with their credit score.

In what is essentially a game of musical chairs, employers are taking away more and more of the chairs before the music even starts. None of these strategies are unique to recessions; employers use them when unemployment is high or low. But with the unemployment rate high, these practices are prolonging the pain for millions of Americans unlucky enough to have a lost a job following the worst recession in decades.

As troubling as this is for the newly and long-term unemployed, they are not the only ones paying a price for the shortage of work in the economy. All of us are feeling the effects in our wages, which are not keeping up with growth in prices. Economist Emmanuel Saez estimates that so far in the recovery the income of the vast 99% of families has fallen, while the top 1% has scooped up what income growth there is.

That may be the lasting legacy of our current job shortage - and one that we must begin to address as the economy slowly returns to health in the years ahead. Even though most of us are working harder and smarter, an increasing share of the income growth from our increased efforts are not showing up in our take home pay or even as benefits like health care or pensions.

Economists John Schmitt and Janelle Jones have found that although the typical low-wage worker today is better educated and has more labor market experience, they earn less today than their more inexperienced and lesser educated counterparts of three decades ago.

Economist Larry Mishel has found that since 1979 low- and middle-income workers have increased their hours of work much more than the top 5%, yet the biggest wage gains have consistently accrued to the highest earners.

Top-earning women are the exception to this rule, stepping up work hours by a whopping 81% since 1979, and yet they still work fewer hours than women on average. Given these trends, it is no wonder that even before the recession a growing share of all income growth was being captured by an increasingly exclusive group of wealthy earners.

Too many workers today are trapped in a cycle of unemployment and underemployment driven by a prolonged job shortage and employers all too happy to write them off. Policymakers in Washington DC have acted with malice by taking steps to prolong the jobs shortage with budget cuts and by refusing to make long overdue investments in education, training and our aging infrastructure.

The failure to address the job shortage is rooted in abnormally high income inequality. No thoughtful person would make it a higher public policy priority to defend a corporate tax loophole than to provide food assistance to a young mother and her child in need. But to paraphrase Upton Sinclair it is difficult to get a member of congress to understand something, when their campaign donations depend on their not understanding it.

It is well understood what policy steps would ease the job shortage but implementing those steps in Washington DC requires overcoming the immense financial interests that are benefiting from rising inequality.

There remains only one way to break the back of rising inequality, and it requires workers organizing to demand higher pay, better working conditions, paid sick and family leave, and a decent pension. In other words, only you can take your economy and democracy back.

Those are easier words to say than live on in an economy with high unemployment where employers face minimal penalties for firing workers for just talking about organizing. But doing anything less means we will all continue to work harder and smarter for a smaller and smaller share of the wealth we create.

A Commonwealth Court judge has ruled that the diversion of tobacco settlement funds away from health care for low-income Pennsylvanians violated the state Constitution. The Philadelphia Inquirer has more this morning:

A state judge has ordered the Corbett administration to reinstate funding for programs that provided health insurance to tens of thousands of low-income Pennsylvanians.

In his ruling Tuesday, Commonwealth Court President Judge Dan Pellegrini found that two statutes that stripped money from the adultBasic and Medicaid programs were unconstitutional because they diverted money from the federal tobacco settlement to finance items other than health care in the general budget.

"This is a significant victory for people in Pennsylvania who work hard and play by the rules, but can't afford private insurance," said William R. Caroselli, a lawyer whose firm represented more than 100 former adultBasic recipients in the suit that triggered the ruling.

"AdultBasic was created to help the working poor. It's not a handout, and it presents no cost to the taxpayers. What the administration did was reprehensible, and we are pleased that the Commonwealth Court ordered them to reinstate this important program."

AdultBasic was created in 2002 to provide affordable health coverage to low-income working Pennsylvanians who either lacked job-based coverage or were denied outright because of pre-existing health conditions.

Governor Corbett, shortly after taking office in 2011, ended the adultBasic program rather than renegotiate a funding agreement between the commonwealth and Pennsylvania’s four Blue Cross/Blue Shield plans to continue providing support for the program. More than 40,000 Pennsylvanians lost their adultBasic coverage and joined the ranks of the uninsured. Many have struggled to live without health coverage.

I sat down with Triad Strategies Monday to discuss the Governor's 2013-14 budget proposal and the opportunity to expand Medicaid health coverage to hundreds of thousands of Pennsylvanians under the Affordable Care Act. Take two minutes to watch the highlights below.

On the Governor's budget, I said: “Frankly, we think it's a House of Cards. The Governor used a variety of very tenuous funding sources to support a number of initiatives that people think are very important, including additional funding for education, and obviously the transportation funding is very important to people.”

On pensions, I raised concerns about how the savings from proposed pension changes are already spent in the budget on important priorities like intellectual disabilities, pre-kindergarten and child care, even though the pension changes face legislative and legal hurdles.

On the Medicaid expansion, I said: "The Medicaid expansion is too good a deal for Pennsylvania to pass up. … For a very small investment of state dollars, you get a large influx of outside [federal] dollars, which are going to be great for our health care economy as well as our population."

I also offered a note of optimism about the likelihood of the Governor taking this opportunity: "We’ve seen a number of other governors, I think there are eight Republican governors now that have adopted the Medicaid expansion. They’ve done the math; they’ve determined it is a good deal. There is a fair amount of flexibility that is already built into the law so there will be a way to shape this Medicaid expansion to meet the needs of Pennsylvanians."

For a second straight month, Pennsylvania General Fund revenue collections fell short of targets, dropping the fiscal year-to-date revenue surplus to $105 million, or less than 1%.

February collections missed estimates by $48 million, or 2.8% of monthly estimates. All major General Fund tax streams, with the exception of corporate taxes, fell short of projections in February, which is typically the smallest month for revenue collections. 

That the shortfalls were so widespread and overall collections fell short of estimate for a second straight month make this a bit concerning as we head into the two most important months for revenue collections – March and April.

For the 2012-13 Fiscal Year, overall collections are $105 million, or 0.7%, above estimate, with tax collections exceeding estimate by $65 million, or 0.4%. 

Personal income taxes (PIT) fell $37 million, or 5%, short of estimate in February, while sales tax collections were below estimate by $9 million, or 1.3%. For the fiscal year, PIT is $39 million, or 0.6%, above estimate, while sales tax is $193 million, or 3.2%, lower than expected. 

Corporate taxes continued to exceed monthly estimates, this time by $2.7 million, or 4.4%. For the fiscal year, corporate taxes are now $270 million, or 19.6% higher than expected. With March and April critical months for corporate tax collections, this amount could grow or shrink significantly. Added to this is the uncertainty regarding quarterly corporate tax payments since the reduction of the capital stock and franchise tax rate at the beginning of 2013.

In his recently released budget proposal, Governor Tom Corbett projected finishing the fiscal year with a $232 million revenue surplus. March and April collections will largely determine if these revised targets are met. If collections fall short over the next two months, it could prompt further reductions in the 2013-14 budget.

This week at Third and State, we blogged about the impact of federal sequestration cuts on Pennsylvania, how the Governor's pension plan is digging a deeper hole for taxpayers, and New Jersey joining a growing list of states to embrace the expansion of Medicaid under the Affordable Care Act.

IN CASE YOU MISSED IT:

• On federal budget and taxes, Chris Lilienthal wrote about the direct, disastrous impact federal sequestration cuts will have on Pennsylvania families, children and the economy.
• On state pensions, Stephen Herzenberg blogged about a new series of "pension primers" from the Keystone Research Center, including the first two installments in that series detailing how the Governor's pension proposal is digging a deeper hole for taxpayers.
• On health care, Chris Lilienthal blogged about New Jersey Governor Chris Christie's decision to join a growing bipartisan group of governors embracing the opportunity to expand Medicaid health coverage under the Affordable Care Act.

IN OTHER NEWS: 

• Check out the first two installments in the Keystone Research Center's new series of state pension primers intended to help demystify the often complex details at the heart of the pension debate.
• The Pennsylvania Budget and Policy Center has more on the impact of sequestration cuts on the commonwealth.
• And check out PBPC's Medicaid Expansion Resource Page, with more information on the federal opportunity to expand state coverage and how you can take action.

More blog posts next week. Keep us bookmarked and join the conversation!

Update: The American Family Economic Protection Act failed to get the 60 votes needed in the Senate for the bill to proceed to a final vote. The vote was 51-49 in favor of advancing the bill.

Automatic federal cuts to a broad range of crucial services are scheduled to go into effect tomorrow. These cuts will have a direct, disastrous impact on Pennsylvania families and children, and leading economists have warned of the damaging impact it will have on job creation and our economy. 

The Senate has an opportunity today to take a first step toward halting these across-the-board cuts, known as sequestration. The American Family Economic Protection Act is up for a vote; if enacted, it would delay cuts until January 2014 to give Congress time to develop a balanced approach to deficit reduction.

Sequestration is bad policy. It will hurt the still-struggling economy and undermine our ability to invest in critical priorities for our children and communities. In Pennsylvania alone, 5,400 fewer low-income children will be served by Head Start or receive child care subsidies; 1,000 fewer victims of domestic violence will receive help; and 3,500 fewer individuals will receive substance abuse treatment.

In education, Pennsylvania will lose $26.4 million in funding for primary and secondary schools as well as $21.4 million for children with disabilities, impacting tens of thousands of students. Jobs will also be lost. Pennsylvania is estimated to lose more than 78,000 jobs in FY 2012/FY 2013.

There will also be cuts to nutrition programs for children and the elderly, mental health services, rental assistance, home heating help, law enforcement, environmental protection, food safety and more. More details here.

There is a better way. The American Family Economic Protection Act would raise revenue from wealthy households who currently pay a relatively low tax rate; close loopholes on certain corporations; and include an equal mix of defense and non-defense spending cuts, with the non-defense cuts coming from reductions in farm subsidies. It would raise up to $110 billion, the amount needed to offset the sequester through January 2014.

Take a moment to email Senators Robert Casey and Pat Toomey to urge them to adopt this bill. It will provide Congress with more time to develop a balanced approach to deficit reduction that is far more responsible than sequestration.

The high cost of meeting current pension obligations is often cited as the main reason Pennsylvania needs a substantial overhaul of its pensions system. So it is a little puzzling that Governor Tom Corbett has put forth a plan that will actually increase pension costs for the state, school districts, and ultimately taxpayers.

That is the finding of the first two in a series of pension primers the Keystone Research Center released this week. So how exactly does this plan drive up costs?

First some background: The Governor’s pension proposal, starting in 2015, would enroll new employees in a defined contribution plan akin to a 401(k) account. This transition away from the current defined benefit pension plans for state and school employees produces significantly higher employer costs over time — costs the Corbett administration has not acknowledged.

It is really a one-two punch for taxpayers. It increases state and school district debt for current pensions and drives up costs for future pensions. The last thing policymakers should do now is dig an even deeper pension hole.

But that is what the Governor's plan does. As future state and school employees are enrolled in a new 401(k)-like plan, the employees who remain in the existing pension plans will age over time, and increasing numbers will retire. As the time-frame shrinks over which pension assets must be paid out in retirement checks, fund managers will shift to less risky and more liquid assets that have lower rates of return. This means the state and school districts will have to put in additional contributions to meet their pension obligations to current workers and retirees. 

At the same time, contributions into individual accounts made by new employees and matched by employers will be siphoned off from existing pension fund assets, further eroding investment earnings and increasing costs for the state and school districts.

More than a dozen states, including California, Minnesota and Texas, that have carefully examined defined contribution proposals similar to the Governor’s have concluded it is not the best course of action, in part because it would increase unfunded liabilities. Studies show that incremental modifications to defined benefit plans that reduce long-term costs and increase contributions — much as Pennsylvania did with the Pension Reform Act of 2010 — are more cost efficient.

States that have actually adopted 401(k)-like plans have no better track record. Since closing its teachers’ defined benefit plan in 2005, Alaska has seen the employer contribution rate jump significantly. In Michigan, which began enrolling all new state employees in a 401(k)-type plan in 1997, unfunded liabilities skyrocketed. 

Just as troubling, the per employee costs to the state and school district employers associated with the new defined contribution plans will be one-third higher than the per-employee costs of the current pension plans. The total increase in cost will be modest at first — increasing by about $5 million each year as more and more new employees enrolled. Fully phased in, the increase in cost will be $179 million each year, more than half of which will be paid by school districts and local property taxpayers.

Paying more for less is not the pension reform that most Pennsylvanians are looking for.

Chris Christie is the latest to join a growing bipartisan group of governors embracing the opportunity to expand Medicaid health coverage under the Affordable Care Act. The New Jersey governor announced his decision during his budget address today. The Star Ledger has more:

As for his decision to expand Medicaid, the Republican governor, a critic of President Obama's Affordable Care Act, could reap up to $300 million by expanding the state program in the coming budget year.

For weeks, a coalition of labor, religious, family and consumer groups waged an aggressive letter-writing and media campaign encouraging Christie to expand the Medicaid program. Doing so, they argued, would allow 300,000 uninsured and childless people to apply for Medicaid.

During his budget address, Governor Christie said that expanding Medicaid "will provide health insurance to tens of thousands of low-income New Jerseyans, help keep our hospitals financially healthy, and actually save money" for the state's taxpayers.

Governor Corbett, for his part, has opted not to follow the lead of Republican governors in Ohio, Michigan, Arizona, New Jersey and several other states that have agreed to the federal expansion of health coverage. It is a decision that has real consequences for the state's economy as well as hundreds of hardworking low-income Pennsylvanians who have no health coverage. Click here or on the map above to learn more.

Last week, a report estimated that the optional expansion of Medicaid under the Affordable Care Act — and the billions in annual federal investments that come with it — would support more than 41,200 new jobs across Pennsylvania's economy in 2016.

This week at Third and State, we blogged about how ALEC is trying to sell snake oil to the states, a new report finding that an expansion of Medicaid would support tens of thousands of new Pennsylvania jobs, and the Pennsylvania Budget Summit which took place in Harrisburg this week.

IN CASE YOU MISSED IT:

• On budget and fiscal policies, Sharon Ward blogged about new research striking a stake in the heart of claims by ALEC that its policies of lower taxes, fewer workplace protections, and diminished public investments is good for the public.
• On health care policy and the economy, Chris Lilienthal wrote about a new report finding that the expansion of Medicaid under the Affordable Care Act would support more than 41,200 new jobs across Pennsylvania's economy in 2016.
• On state budget and tax policy, we pulled together live tweets from the Pennsylvania Budget Summit all in one place.

IN OTHER NEWS:

• The Pennsylvania Budget and Policy Center has posted resources from the Budget Summit online. This includes our Just the Facts on Pennsylvania Spending, Taxes, Debt and Tax Fairness.
• PBPC has launched a new Education Facts Page, with Pennsylvania data on enrollment in public, private and charter schools in the commonwealth as well as information about education funding and school poverty. Check it out.
  

Governor Tom Corbett's decision to pass on a federal opportunity to expand health coverage under the Affordable Care Act is a missed opportunity on many levels. It is a missed opportunity for the hundreds of thousands of hardworking low-income Pennsylvanians who would have the security of knowing that they can see a doctor when they get sick. And it is a missed opportunity for the state's health care economy.

A new report out this week finds that the optional expansion of Medicaid under the Affordable Care Act — and the billions in annual federal investments that come with it — would support more than 41,200 new jobs across Pennsylvania's economy in 2016.

The report, released jointly by the Pennsylvania Health Access Network and Families USA, spotlights a wide range of health care and economic benefits that Pennsylvania would see by embracing this opportunity.

As we have noted, there is growing bipartisan agreement that expanding Medicaid coverage is too good an opportunity to pass up. Just this week, Florida Governor Rick Scott joined six other Republican governors in agreeing to the expansion, saying "While the federal government is committed to paying 100% of the cost of new people in Medicaid, I cannot, in good conscience, deny the uninsured access to care." Federal dollars would cover all the costs of expanded coverage from 2014 through 2016. By 2020, federal dollars would still cover 90% of the cost.

The new study finds that in addition to supporting 41,200 Pennsylvania jobs, an expansion of health coverage would also increase economic activity in the commonwealth by $5.1 billion in 2016, reduce spending on state-funded health care programs for the uninsured, and strengthen the state’s health care system. Increased jobs and business activity would also increase state revenue to support other priorities.

“The Medicaid expansion is a win-win-win proposition for the people of Pennsylvania,” said Ron Pollack, Executive Director of Families USA. "It would reduce the number of people who can’t afford health care; it will increase the number of jobs throughout the state; and it will strengthen the state’s economy.”

Is Governor Corbett listening?