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 PennLive.com 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.

The History Of The Number of Representatives In Pennsylvania Government

The next time a state representative or senator talks about the size of the legislature here are some facts for consideration from the state website.

GENERAL ASSEMBLY

In 1967, the Pennsylvania Constitution was amended to set the number of House members at 203.

When the House of Representatives first met in 1682, there were 42 members. By the early 1700s, that number dropped to 24 and then steadily increased to 76 by 1776.

In creating the Senate, the Pennsylvania Constitution of 1790 stipulated that this body should be no smaller than one-fourth of the House of Representatives and no larger than one-third, but it set no maximum for the House. When the House reached 100 members in 1855, a constitutional amendment in 1857 set that as the limit.

The Constitution of 1873 increased the Senate (then at 33 members) to 50 and set the House at a minimum of 200. Every county was guaranteed at least one member, regardless of its population.

The House peaked at 210 members for five sessions from 1955 until 1963. In order to adhere to the U.S. Supreme Court ruling of "one person, one vote," the Pennsylvania Constitution was amended to provide for 203 House members from districts "nearly equal in population." The first House to meet that standard convened in 1967.

John D. Forester Jr.'s Take On A Full Time Legislature

Yesterday, John D. Forester, Jr. penned this opinion in the Reading Eagle of the Pennsylvania legislature's claims to being a full time body.

I have a full-time job.

So far this year, I've taken one week of vacation and a few personal days, and I was off New Year's Day, Memorial Day and Independence Day. Not to mention weekends.

Still, I've managed to put in 130 workdays so far in 2010.

That's a full-time job.

State lawmakers also have full-time jobs.

So far this year, members of the House of Representatives have worked a total of 46 days, while members of the Senate have put in 44 workdays.

That's a full-time job?

State Senator Daylin Leach(leech of taxpayers money) tried to counter that opinion earlier this year with an op-ed column of his own. He blasted the Bonusgate Jury conclusion that Pennsylvania should return to a part time legislature. Yes, at one time Pennsylvania did have a part time legislature. In fact Pennsylvania only had 100 representatives in the 1800's.

Recently, the Pennsylvania Bonusgate grand jury issued a report which has received a great deal of media attention. This report had nothing to do with the specific criminal charges against specific individuals it investigated. This report was an extremely rare supplemental grand pronouncement on the state of our government, along with numerous recommendations for restructuring the entire Legislature.

The methodology, conclusions and recommendations of the report are, in many respects, dead wrong.

But because the grand jury's methodology was incomplete given its self-appointed role as the re-inventor of state government, its members' factual findings were often inaccurate. And given that, the recommendations based upon those findings were, for the most part, ill-conceived.

They also say being a Pennsylvania legislator should not qualify as full-time work. Wrong again. Most legislators spend 70 to 80 hours per week, every week, at their jobs and still struggle to keep up.


Inaccurate information leads to poor recommendations. Sure, some of the technical suggestions, such as consolidating House printing offices, might have merit, but their broad policy suggestions would do great harm to our state if implemented.

For example, a part-time Legislature is a terrible idea. We make decisions affecting tens of billions of dollars in complicated policy areas such as transportation, health care, criminal justice and economic development. In some matters, such as abortion, the death penalty and access to medical care, our decisions literally have life and death consequences.

Of course Senator Leach is way off the mark with his comments.

Nathan Benefield, director of policy research for the Commonwealth Foundation wrote an Opinion in The Mercury making the case for a part time Pennsylvania legislature.

Ask Pennsylvanians what comes to mind when they hear the words "state government," and the responses will regularly include corruption, late budgets, cronyism, wasteful spending, and ineffectiveness. In a January Franklin & Marshall College poll, only 16 percent of Pennsylvania voters said the state legislature was doing a "good" job.

It's not surprising, then, that the idea of returning Pennsylvania's Legislature to part-time is gaining steam given the lack of trust in our elected officials.

With a price tag that's grown to $300 million, Pennsylvania's 253-member General Assembly is the most expensive (and second largest) state legislature in the country. It's also among the four most "professionalized" in the nation, with staff totaling nearly 3,000. For perspective, the legislatures of Illinois and Ohio — the states closest in population to Pennsylvania — have 1,023 and 465 staff, respectively.

The annual salary for rank-and-file Pennsylvania legislators ($78,314) is the fourth-highest in the country.

There is a direct link between our full-time Legislature and our state economy. A Commonwealth Foundation analysis shows a strong connection between legislative professionalization and higher spending per capita, a higher tax burden, and less economic freedom. Specifically, each increase in the level of professionalization results in an estimated $441 increase in spending per person, and a 0.4 percent increase in taxes as a percentage of income. For highly professionalized legislatures, like Pennsylvania's, the effect is five times those estimates.

In contrast, consider the case of Texas. The Lone Star State has twice the population of Pennsylvania and is four times the size of the Keystone State geographically. Yet, the Texas legislature meets once every two years for 140 days to produce a biennial budget. When Texas lawmakers need to deal with emergency situations or revise their budget, they return for a limited, special session. During its 2007 session, Texas' legislature passed 1,672 bills, while Pennsylvania's full-time General Assembly passed less than one-fifth that number.

Over the last two years, Texas has created more jobs than Pennsylvania and the other 48 states combined!

The Department of Justice gives Pennsylvania an "F" for its limited disclosure of legislators' assets, holdings, and related information. A December 2008 USA TODAY analysis of Department of Justice statistics ranks Pennsylvania tied with Florida as the 11th most corrupt state in the union (with 4.5 public officials convicted for every 100,000 residents).


Brad Bumsted of the Pittsburgh Tribune-Review chimed in with his own Opinion this weekend.

In all, 27 legislators, former lawmakers and staffers have been accused of crimes since 2008. That counts the federally indicted Fumo and former state Rep. Frank LaGrotta, D-Lawrence County, sentenced to House arrest after pleading guilty to two felony counts of conflict of interest.

The Ories, DeWeese and Perzel maintain their innocence.

The surge in corruption cases, at least in the public's mind, hasn't yet reached critical mass. It will unfortunately take more charges before the public demands a complete and thorough overhaul of the Pennsylvania General Assembly.

Legislators have used state tax money as their own, creating an Incumbency Protection Program that has perverted representative government and robbed Pennsylvanians of fair elections.

The title of Bumsted's Opinion says it all "When will enough be enough?"

Outgoing Specter Honored With $10 Million Dollars Of Pennsylvania Tax Money

Just when Harrisburg was trying to convince Pennsylvania taxpayers that this year's budget has sacrifices in it(and it does for SELECT non-profits and social programs) this story surfaces from the political watchdog group, Commonwealth Foundation, that Pennsylvania taxpayers are supplying $10 million for the "Arlen Specter Project Library Center" and another $10 million to Johnstown for the "John P. Murtha Center for Public Policy".

Nathan Benefield of the Commonwealth Foundation, a fiscally conservative Harrisburg-based think tank, responded by e-mail: "Unbelievable. Not only are taxpayers going to be forced to shoulder the burden for these projects (which despite billions in spending over the years, have shown no economic benefits), but they're not even getting proper credit. At least call it 'The Taxpayers Library' or the 'Pennsylvania State Debt Center.'"

It's amazing that Rendell sneaks in these legacy projects but touts education as the headliner for the budget. Ed always gets you looking left when you should be looking right.

Arlen, will veterans be able to read about tax on prosthetics in your library?

What Budget???

The Capitol Building in Harrisburg should be renamed the Spin Machine building.

From the Commonwealth Foundation:

Pennsylvania Education Spending

•Pennsylvania's education spending increased from $4 billion in 1980 to over $25 billion in 2009-a 133% increase in per-pupil spending (from $6,171 to $14,420, in 2010 dollars).
•Since 2000, enrollment has decreased by 26,960 while schools have hired 32,937 more staff members.
•School district fund reserves are almost eight times the amount of Gov. Rendell's proposed $354 million increase in state subsidies.

A Taxpayer's Budget 2010: Responsible Spending for Pennsylvania

A Taxpayer's Budget 2010: Responsible Spending for Pennsylvania identifies opportunities to cut over $4 billion in wasteful state spending in Gov. Rendell's proposed FY 2010-11 budget. The report also offers a series of recommendations for resolving the current revenue shortfall and reducing the size and burden of government on Pennsylvanians.

State government consumption and spending of taxpayer money have grown dramatically in recent years. Since 1970, Pennsylvania's total operating budget has increased from $4.2 billion to $65.9 billion, an inflation-adjusted increase of over 167%.[1] As a share of state personal income, Pennsylvania's operating budget rose from 8.8% in FY 1970-71 to an estimated 13.2% in FY 2009-10-an increase of more than 51%.[2]

The effect of this tax-borrow-and-spend agenda has not produced the promised economic revitalization, but stagnation. During Ed Rendell's tenure as governor, Pennsylvania ranks 32nd, 41st, and 39th in job, personal income, and population growth, respectively, among the 50 states.[3]

On October 9, 2009, after an unprecedented 101-day delay, the Pennsylvania General Assembly approved, and Governor Ed Rendell signed, a $27.8 billion General Fund Budget for FY 2009-2010. A revenue shortfall has since emerged, and politicians will be scrambling to fill a multi-billion dollar budget gap with rising pension contributions and the disappearance of federal "stimulus" dollars on the horizon. Against Commonwealth Foundation recommendations, the FY 2009-10 budget exhausted the state's "Rainy Day" fund and other one-time revenue sources. A Taxpayer's Budget 2010 offers budgetary and public policy alternatives to deal with this fiscal crisis.

A Taxpayer's Budget 2010 identifies wasteful and unnecessary programs in the state budget and off-budget agencies and offers recommendations for improving government services and reforming the budget process for greater efficiency. Our recommendations are organized into three sections:

•Eliminate Wasteful Spending: A Taxpayers Budget 2010 identifies $4.13 billion in spending cuts - $1.00 billion from the state General Fund Budget, $2.21 billion from other operating funds, and $926 million from the capital budget and off-budget programs.

•Adopt Market-Based Delivery of Government Services: Spending on public education, benefits for state workers, and Medicaid is growing far beyond taxpayers' ability to pay. By adopting market-based reforms in the delivery of services, state government can not only reduce costs, but improve quality.

•Adopt Spending and Budgetary Transparency Reforms: Transparency in government spending and instituting performance-based budgeting would help identify and eliminate wasteful expenditures, as shown in other states.
Before imposing tax increases on working Pennsylvanians and job creators, Harrisburg policymakers need to prioritize spending, justify all $66 billion in state spending, and cut waste from state government.

Pennsylvania ran up a $3 billion loan to the U.S. government that will need to be repaid back starting the end of this year according to this article by LARA BRENCKLE of The Patriot-News.

The submitted budget document relies on $850 million coming from the federal government for Medical Assistance that has not been passed by Congress or the Senate yet.

Pileggi warned that even if a new budget is approved by the deadline, a state revenue deficit in the range of $4 billion to $5 billion will await the new governor-elected in November

Finally the fiscal bill that must accompany the budget that spells out where the revenues will come from that are delineated in the budget has not been passed. Legislators will tell you that budget is in place

In recent days, House and Senate leaders expressed a determination to enact a on-time budget for the first time during Mr. Rendell's tenure. But this feat will likely be accomplished by leaving action on the fiscal bill, which is normally part of the budget package until later in the week. The fiscal bill is important because it spells out where the revenues originate. The agreement doesn't provide for a tax on smokeless tobacco and cigars or a hike in the state cigarette tax, as Mr. Rendell had sought.

It's like writing checks out of a checkbook but not calling the bank to find out if the funds are there or not. This budget is nothing but a political document so incumbents can make a "claim" they got it done on time. In reality it is a misrepresentation of a failed effort to meet their obligation and the duties of their office. Inflated figures, bogus income, and maintenance of per diems don't qualify Rendell to call this a "conservative" budget.

PA House Dems Ram Through Tax Hike

From CommonwealthFoundation.org:

PA House Democrats Try to Ram Through Tax Hikes

May 25, 2010--Last night, the Pennsylvania House Appropriations Committee -- on a straight party line vote, with only Democrat support -- amended into a bill (HB 325) related to volunteer firefighters' tax status a $330 million tax increase. House Democrat leadership is trying to fast-track this bill for a vote on Tuesday night or Wednesday morning, even though some of the proposals have yet to be publicly debated by the House.

HB 325 would impose a severance tax of 8% of value plus 7 cents per thousand cubic feet, on natural gas extraction, giving Pennsylvania the highest comparable severance tax rate in the nation. The majority of states with a natural gas severance tax also delay implementation, offer tax exemptions, or discount the tax in hard-to-drill areas (like Marcellus Shale) to encourage drilling. For example, Texas and Arkansas reduced their severance taxes for high-cost gas wells by nearly 80%.

The House Democrats' proposal is higher than Gov. Rendell's proposed 5% tax on value plus 4.7 cents per thousand cubic feet. "Gov. Rendell's proposal was already economically detrimental to the development of this clean, affordable, and safe energy source, but the House Democrats' irresponsible actions last night just doubled-down on bad economic policy," said Matthew J. Brouillette, president of the Commonwealth Foundation. "Instead of finding a way to curb their over-spending habits, they have unfairly targeted one of Pennsylvania's greatest economic opportunities for job creation and prosperity in decades."

The legislation would also impose a new tax on smokeless tobacco, and would raise the cigarette tax another 30 cents per pack. The smokeless tax would also harm Pennsylvania's tobacco industry - most notably small farmers, including Amish and Mennonite - another growing sector (indeed, Pennsylvania is one of the only states where tobacco farming is expanding).

Based on the Pennsylvania State Tax Analysis Modeling Program (PA-STAMP), designed by economists at the Beacon Hill Institute at Suffolk University, the Commonwealth Foundation estimates that these tax increases will result in 4,200 fewer private sector jobs in Pennsylvania next year alone.

ACTION STEPS:
1. Please sign the petition for a "Taxpayer's Budget" ... and forward this email to friends, family, and coworkers and encourage them to sign it, too.

2. Contact your state legislators and urge them to support a "Taxpayer's Budget" that meets three criteria: Reduces taxes on working Pennsylvanians and job creators; eliminates corporate welfare, WAMs/pork-barrel projects, and special interests spendin; and balances the budget without accounting gimmicks, shell games, or new debt.

3. Write a letter-to-the-editor urging the General Assembly and the Governor to adopt a "Taxpayer's Budget."

REMEMBER: The Commonwealth Foundation will crown one Pennsylvania resident the 2010 Grassroots Champion, and award that person $500. For details on how to qualify, click here

Pennsylvania's Budget Woes and Todd Eachus's Promise?

At the Hazleton Chamber of Commerce's most recent Red Carpet Breakfast House Majority Leader Todd Eachus was the main speaker. Jim Dino reported on the event for the Standard Speaker.

In his address Mr. Eachus made the following claim.

"We are projecting a $500,000 shortfall in the 2010-11 budget," Eachus said to a Greater Hazleton Chamber of Commerce Red Carpet Breakfast audience at Capriotti's in Tresckow. "There is an $800,000 medical assistance payment due from the federal government. If that is paid, we will be within range of our two-year budget planning process."

Eachus said the state was faced with a $3.2 billion budget shortfall. He said Senate Bill 850 attempted to remedy the problem by cutting several items out of the budget.

"But we could not simply cut our way out of the $3.2 billion budget hole," Eachus said. "We had to cut spending, but also add new revenues, and transfer money from other funds. We protected the integrity of state programs that help children, seniors and other vulnerable citizens."

So spending was cut by $1.75 billion, and another $1.6 billion in fund transfers was achieved. Eachus said the state managed to identify $1.2 billion in new revenues, including a tax on small cigars.

"We managed to approve a tax on small cigars, but other cigars and smokeless tobacco is still not taxed in Pennsylvania," he said.

Other new revenue streams are expected from the introduction of table games at Pennsylvania's casinos, as well as taxes on oil and natural gas extracted from the Marcellus Shale in northeastern and north central Pennsylvania.

One has to wonder whether Mr. Eachus checked in with the Pennsylvania Department of Revenue lately. Their figures show Pennsylvania is $477 million behind in revenues for 2009-2010 according to a report filed by the Commonwealth Foundation.

Pennsylvania Deficit Watch | March 2010

The Pennsylvania Department of Revenue reports that through the end of February, state General Fund revenues are $477 million below estimate for the 2009-10 fiscal year.

•Tax collections have been below estimate in all eight months of the fiscal year, and down month-over-month from last year for every month except October, which included $1.8 billion in transfers from other funds and one-time revenue sources.
•The 2009-10 budget (passed in October 2009) included tax increases and assumed slight revenue growth.

•In his budget address earlier this month Gov. Rendell, confirmed Commonwealth Foundation predictions that his budget spent too much--projecting the shortfall will reach $525 million by the end of fiscal year 2009-10. Based on the latest estimates, and with the two largest revenue collection months yet to come, the budget shortfall will likely surpass this total.

Eachus's claims were based on the 2010-2011 budget skipping what is happening in 2009-2010 in his "two-year planning process".

The Commonwealth Foundation report includes more information.

Gov. Rendell's plan to address the current year shorfall include proposed budget include:

•Use of remaining General Fund balance ($354 million after October transfer of $1.8 billion from other funds)

•$135 million in reductions from enacted 2008-09 budget

However, despite last year's $3.2 billion shortfall, and a mid-year pledge to make budgetary cuts, the governor and General Assembly failed to reduce spending accordingly.

Gov. Rendell's proposed 2010-11 acknowledged the long-term fiscal imbalance - namely that the current budget exhausted all the state's one-time revenue sources, such as the "Rainy Day Fund;" the federal stimulus funding disappears after the 2010-11 fiscal year; and the state faces dramatically higher state pension contributions beginning in 2012-13. However, Rendell's budget calls for more of the same:

•A $1.3 billion increase in General Fund spending.

•Reliance on an addition $850 million in federal Medicaid funding, which has yet to pass Congress.

•Delaying pension payments, pushing higher costs onto future generations.

•New Taxes:

◦Sales tax expansion to 74 currently untaxed items & lower rate - generating $531 million in additional revenue next year and $866 million the following year.

◦Reduces CNI from 9.99 to 8.99, imposes combined reporting - generating $66 million next year and $167 million the following year.

◦New tax on natural gas extraction - $161 million in 2010-11 and $260 million thereafter.

◦New cigar/smokeless tobacco tax - $42 million per year.

◦Elimination of the vendor discount for sales tax collection - $75 million per year.

If there ever was a case of smoke and mirrors Eachus's claims fall into that category. Pennsylvania is not through the 2009-2010 year yet. Eachus should be addressing this shortfall rather than pandering about his two year projections. One has to wonder how Eachus will be able to back up his claims when the state is headed for a $900 million dollar shortfall by June if the present trend continues. One must also keep in mind that the 2009-2010 budget had $1.8 billion injected to it largely from transfers and not tax revenue.

In case Eachus didn't look out the window; the economy is not recovering any time soon. In this election year Eachus will be passing out his WAM money probably starting very soon. As you can see it is money Pennsylvania does not have but obviously he is taking a cue from Paul Kanjorski and Nancy Pelosi. Then again, Kanjorsk has his own problems trying to "Rangel" out of his $16,000.00 fund-raising/public relations dilemma.

Day 95 AND No Budget In Pennsylvania

Democrats and Republicans. Get over yourselves. A budget is a blueprint. It can be altered at any time. It is time to end the table games, (and it is okay if you want to start them). Cut the legislative staff in half- around $150 million plus benefits savings. Eliminate the WAM money- $100 million savings.

According to CommonwealthFoundation.org here is the latest braintrust proposal.

•Exempts purchases of helicopters and helicopter parts from the sales tax. This may seem a bit bizarre, like something thrown in to get the vote of one lawmaker with a helicopter manufacturer in his district, but I believe it was inspired by my pointing out that buying everyone their own Airwolf was cheaper than Corridor One.
•Increases the sales factor for corporate taxes to 83% this year and 90% next year.
•Increases the amount of net operating loss corporations can carry forward.
•Increase, retroactive to January, 2009, the Capital Stock and Franchise Tax to 2.89 mills. This rate would remain until 2012, when the phaseout would resume. The new elimination date would be January 1, 2014.
•Tax on Medicaid payments to Managed Care Organizations.
•25 cents/pack increase in the state cigarette tax.
•Tax on cigars, smokeless tobacco, and other tobacco products - 30% rate (when sold to retailer)
•License fees for tobacco manufacturers, wholesale dealers, and retailers.
•Natural gas severance tax - 5% of gross value plus 4.7 cents per thousand cubic feet (and lots of provisions how that revenue will be divied up).
•Educational Improvment Tax Credit (EITC) - increase in income eligibility for families.
•Reduces all tax credits by 33% - including the EITC and presumably the Film Tax Credit.
•Tax Amnesty for 2009-10 (delinquent as of June 30, 2009; amnesty period of April 26-June 18 2010.
•Table Games (if approved in separate legislation):
◦ License fees : $20 million from category 1 (racino) or 2 casinos, $7.5 million from category 3 (resort hotel).
◦Tax: 34% of daily gross table revenue.

Imagine that. No proposal to legalize marijuana. Is it me or is that last pproposal akin to what the Mob would extract on loan payments?