Friday, November 26, 2010

2011- A Look Back And What's Ahead, Hold Onto Your Wallet

John Cole Times-Tribune Toon

It seems Pennsylvania government can't run from the "pay raise" issue. In 2005 legislators tried to ram through a "pay grab" mistakenly labeled a pay raise. As Pennsylvanians are learning once again legislators already receive an automatic pay increase every year authorized in a 1995 law.

The problem with the automatic pay increase is the index used for its calculation. Instead of the overall Consumer Price Index used for most in private industry and seniors receving Social Security Pennsylvania legislators figured out that the CPI for mid-Atlantic states runs slightly higher. As a result their automatic pay increases since 2003 gave them an additional 10% boost more than if the overall CPI were the benchmark.

In these trying economic times and a bloated, over-staffed state, Pennsylvania lawmakers should reject the pay increase until they resolve the budget deficit and pension crisis issues. As this article by Jan Murphy at points out the costs to Pennsylvanians over the "pension grab of 2001" will escalate due to recent legislation designed to lessen the impact.

The law is aimed at addressing the soaring costs of the state's public pensions systems. Here's a look at what it means: TAXPAYERS: It smooths out the anticipated spike in taxpayer contributions to fund the pension systems. But it costs taxpayers more in the long run. It is akin to refinancing a 15-year mortgage to a 30-year mortgage, which makes the monthly payments smaller but the overall amount paid bigger.

Critics such as the Commonwealth Foundation assail the added debt and say it doesn't address the looming crisis. Supporters say the new law is nonetheless a good start by saving costs on new workers. NEW EMPLOYEES: They now must have 10 years of service to become vested, compared with five for current employees. State employees must work until age 65 (instead of 60); school employees must work until 62 (instead of 60).

New workers receive a 25 percent reduction in retirement benefits. They also are barred from taking a lump-sum payment of their contributions upon retiring. CURRENT EMPLOYEES: These changes do not impact any school or state employees hired before Jan. 1 or incumbent lawmakers. Their benefits remain the same.

As Senator Lisa Boscola points out in her February, 2005 flyer Pennsylvanians have faced the following tax increases since 1997.
  • 1995 Automatic Pay Raise
  • 1997 Gas Tax Increase
  • 2001 Legislative Pension Grab
  • 2002 State Tax Increase
  • 2003 State Income Tax Increase
  • 2004 Occupational Privilege Tax Increase
The tax increases don't include what happened on the county and local level as well as our school district property taxes. In 2002 a COLA was added to the pension benefits as well.

The following stats are from the Berks Patriot Presentation by Nathan Benefield of the Commonwealth Foundation.

Pennsylvania has the 11th highest state and local tax burden, up from 24th in 1990. It is 43rd in job growth, 47th in population growth, and 48th in personal income growth.

People are moving out of Pennsylvania due to this horrendous environment. United Van lines reports 58% of movers are leaving Pennsylvania and Allied Van Lines reports that number at 60%.

As the American Conservative points out Pennsylvania has the highest Corporate Net Income Tax rate in the world.

The Commonwealth Foundation reminds us of the unemployment trust fund debt facing Pennsylvania taxpayers to the tune of $3 billion. Pennsylvanians will also be faced with paying back $800 million to the MCare fund due to a court order.

When the stimulus money runs out in 2011 Pennsylvania's bicameral legislature and Governor Tom Corbett will have a daunting task facing them to fix what is wrong.

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