Posts Tagged governor

Leave Us Alone


It was a simple, yet revealing summary of the problems plaguing Pennsylvania’s businesses.  “Please stop trying to ‘fix’ it,” the business owner begged. “Leave us alone.”  That plaintive plea came as three new studies show our state’s economy is sagging under the weight of new regulations, higher taxes, and unsustainable government spending.

Recovery from the Great Recession of 2008-2009 has been one of the slowest in history.  But, some states have bounced back faster and farther than others.  Pennsylvania is not one of those states.  The Fall 2016 Keystone Business Climate Survey conducted by the Lincoln Institute of Public Opinion Research found half of the business owners/chief executive officers surveyed saying the state’s business climate has gotten worse over the past six months, and only five percent reporting improving business conditions.

Like other states the people who actually run businesses reported a dramatic deterioration in economic conditions in Pennsylvania during the Great Recession. Optimism returned briefly during the Corbett Administration, but tanked less than three months into Governor Tom Wolf’s tenure.

Governor Wolf began his administration pushing for historic increases in both state spending and in taxes.  The Republican-controlled legislature successfully derailed that effort last year, but then caved into $1.4 billion in higher spending this year – earning the disapproval of 86% of the owners/CEOs.  All of this creates a climate of uncertainty leaving one owner to comment: “We expect another shoe to drop making it difficult to operate in Pennsylvania.”

The biggest shoe that hasn’t dropped is who will pay to bail out Pennsylvania’s massively underfunded public pension system.  Business owners fear a significant portion of that burden will fall upon them.  And the problem is, to use a currently popular word, huge.

The American Legislative Exchange Council (ALEC) recently released a study of state pension systems entitled Unaccountable and Unaffordable.  It pegged Pennsylvania’s unfunded pension liability at nearly $212 billion dollars.  The commonwealth has amassed the 44th largest unfunded pension liability among the fifty states.

Compounding the problem is Pennsylvania has little room in which to maneuver in finding new revenue streams (taxes) to fund the public pension system.  The Tax Foundation’s State Business and Tax Climate Index found we have the 24th highest state tax burden in the nation.  We already have the most damaging taxes on the books: the Personal Net Income tax, Corporate Net Income tax, and a broad-based state sales tax.  Already suffering from a poor tax climate, any move to expand, increase or create new taxes would further erode our competitiveness.

These factors weigh heavily on the minds of business owners/CEO as they consider locating or expanding in Pennsylvania.  Forty percent said Governor Wolf’s proposed tax hikes have caused them to not expand their businesses.  That factor was second only to the explosion of new federal regulations in impeding business growth.

Why should non-business owners care about all of this?  Business relocation into Pennsylvania and the expansion of existing businesses will result in the creation of new jobs.  Penn’s Woods has lagged the national average in job creation in large measure due to state taxes and regulations.  The 2016 Keystone Business Climate Survey found 21% of the responding businesses reduced their employee compliment over the past six months while only 11% added employees.

Thus Pennsylvania continues on a downward spiral.  And there is little optimism among those on the front lines of business activity in the state for improvement at any point in the near future.  Uncertainty is Kryptonite to business development.  At the state level uncertainty abounds.  Governor Wolf continues to press for increased spending and higher taxes at a time when the commonwealth already faces a structural budget deficit.  The recent record of legislative Republicans has shaken confidence in their ability to either deal with cost drivers like the pension crisis or to successfully oppose future tax hikes.

The bottom line is Pennsylvania’s business climate will not improve, and significant job creation resume, until and unless state government gets spending under control, addresses the looming pension crisis, cuts onerous regulations and provides some measure of tax relief to businesses ready to expand but which are being held back by the heavy hand of government.

(Lowman S. Henry is Chairman & CEO of the Lincoln Institute and host of the weekly Lincoln Radio Journal.  His e-mail address is lhenry@lincolninstitute.org.)

Permission to reprint is granted provided author and affiliation are cited.

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Eye of the Storm


By Lowman S. Henry

As August melts into September the halls of the state capitol building are relatively quiet. This is a marked contrast to a year ago when state government was in what turned out to be the early phases of the longest budget stalemate in state history.  This year the budget, or at least the spending part of it, was done reasonably close to the constitutionally-mandated June 30th deadline, the revenue component followed several weeks later.

But is this just the eye of the storm?

In capitulating to too many of Governor Tom Wolf’s spending demands the state legislature larded up the budget with nearly $1.4 billion in new expenditures.  This despite claims of a $1.5 billion dollar “structural deficit” the governor claimed needed to be addressed.  Even those using Common Core math can calculate that left the state nearly $3 billion in the hole.

To pay for this spending orgy some $650 million in new taxes were cobbled together, and accounting gimmicks employed, to produce a “balanced” budget.  But the budget isn’t really balanced and even that $650 million contains projected revenue that will never actually materialize.  For example, lawmakers planned to charge the state’s casinos $1 million each to purchase 24-hour liquor licenses.  Apparently nobody thought to ask if the casinos wanted such licenses, as there now appears to be no takers.

The budget also includes revenue from on-line gambling.  The problem is legislation has yet to be passed authorizing on-line gambling.  After adopting the budget, the General Assembly adjourned for a two month recess delaying any possible revenue from that source deep into the fiscal year.

And, predictably, the taxes that were hiked on existing businesses are having a dramatic negative impact.  A 40% tax imposed on vaping supplies is driving many vaping stores – almost all of which are small businesses – out of business.  That means not only will projected revenue from the tax fall short, but the state will also lose out on sales tax revenue as the stores shutter their doors.

That Republicans in the legislature caved into $1.4 billion in new spending defied logic.  The GOP had fought an epic budget battle with the governor the previous fiscal year and won. Not only did they win, but not a single lawmaker seeking re-election was denied by voters due to the budget fight.  After posting a historic win, Republicans essentially forfeited the next game.

All of these elements are coming together to produce the perfect fiscal storm as budget talks begin for next year.  Don’t forget that “structural deficit” of $1.4 billion hasn’t been addressed.  A significant portion of the new taxes enacted this year will fail to materialize.  And, Governor Wolf continues to demand a lengthy menu of spending hikes – and the taxes to pay for them.

Making matters worse the governor and the legislature have not been able to agree on how to deal with cost drivers, particularly the skyrocketing cost of public employee pensions.  Pension costs are gobbling up the lion’s share of any new revenue produced by a still slow-growing state economy.  Republicans have passed pension reform only to see it vetoed by Governor Wolf. There are new legislative proposals on the drawing board, but they fall woefully short of resolving the problem.  Even if some reform is enacted it will likely have minimal impact on the upcoming 2017-18 state budget.

Given all of this, will Republicans stick to their pledge that without addressing cost drivers they will not enact broad-based tax hikes – such as raising the personal income tax, expanding and/or raising sales taxes – or  will they again cave into the governor’s tax and spending demands?  Much rides on the outcome of this looming budget fight, primarily the fiscal health of the commonwealth.

But, 2018 is a gubernatorial election year and this budget will be enacted as the campaign heats up.  Governor Wolf, if he seeks re-election, will want to show his base voters that he delivered the goods of higher spending.  Republican voters will judge the GOP-controlled legislature by their ability to resist higher spending and more taxes.  Add these competing political imperatives to the state’s perilous fiscal circumstances and we should brace ourselves for the second wave of the hurricane.

(Lowman S. Henry is Chairman & CEO of the Lincoln Institute and host of the weekly Lincoln Radio Journal.  His e-mail address is lhenry@lincolninstitue.org.)

Permission to reprint is granted provided author and affiliation are cited.

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Déjà vu All Over Again


‘Tis budget season again in Harrisburg.  Governor Tom Wolf and the state legislature face a June 30th deadline for enacting the 2016-17 spending plan. If it seems like we just finished the budget; that is because it took until April for the longest fiscal stand-off in state history to be resolved.  And now, it is time to begin anew.

Hopefully, not the lengthy stand-off part.

June is typically when the heavy lifting on crafting the new budget is done, particularly the last week of the month when legislators act like college students pulling an overnighter to get their assignments finished.  In this case though, there is no penalty for tardiness.

The big question under the capitol dome is will there be a summer re-run of the 2015-16 budget drama, or will the state budget actually get done relatively close to the constitutional deadline?  So far, the signals are mixed – but ominous.

Will it be, as Yogi Berra once said, “déjà vu all over again?”  Two factors point to another epic battle.  First, Governor Wolf’s “budget address” last winter lacked any content actually pertaining to the budget. Instead, he unleashed a tongue lashing at the legislature for failing to approve his historic tax and spending increases.  This was as well received as an illegal alien at a Trump rally.  Second, not a single legislator lost in April’s primary as a result of the budget battle.

That second factor is significant.  With all House members and half of the Senate up for re-election this year pressure is normally on to avoid anything even remotely controversial so as not to upset the electorate.  However, Republicans in particular are emboldened because they stood their ground, bested Governor Wolf in round one, and were rewarded by voters.  This gives them no incentive to cave to the governor’s tax hike demands.  Quite the opposite, voters in their districts clearly don’t want expanded state spending and the taxes needed to pay for it.

Conversely, Democrats – who have become essentially an urban party in Pennsylvania – represent districts that benefit from state taxpayer largesse.  Their constituents want more spending because they are on the receiving end, thus those voters returned their representatives to office as well.

Stuck in the middle are the endangered species of suburban Democrats who represent so-called “swing districts.”  Largely located in western Pennsylvania, these districts have been flipping from Democrat to Republican in recent cycles.  This is where the biggest electoral battles of 2016 will be fought, and those Democrats are on the hot seat.

This brings us to the one factor that could bring about a prompt budget resolution: Democratic desires not to lose even more of their seats.  Already Republicans hold legislative majorities not seen in over a half century.  The electoral map does not offer Democrats much hope.  At least three Senate Democrats are imperiled while the GOP faces no significant opposition to holding their seats.  In the House, most battles will again be fought on the little remaining Democrat turf in the western part of the state.

In each of those districts the trend line has been favorable for Republicans, and the Democrat constituencies are far more conservative than those found in urban areas.  Thus, Democratic candidates in each of those districts can ill afford to be tagged with supporting Governor Wolf’s tax and spend agenda.  This is incentive for Democratic leadership to postpone until next year any epic battle over the budget.

Should that occur Pennsylvania taxpayers will have only a brief respite.  Governor Wolf must stand for re-election in 2018 meaning his last shot at enacting his bold plans to expand the size and scope of state government will come next year.  Lose, and his image as an isolated and ineffective chief executive will be cemented into place.  But for Tom Wolf, even winning comes with some risk: will statewide voters actually reward a governor who just imposed upon them a historically large tax hike?

The only thing we can say for sure is it will be interesting to watch.

(Lowman S. Henry is Chairman & CEO of the Lincoln Institute and host of the weekly Lincoln Radio Journal.  His e-mail address is lhenry@lincolninstitute.org.)

Permission to reprint is granted provided author and affiliation are cited.

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The Worm in the Education Apple


There is an old saying in politics that “perception is reality.”  That is how former Governor Tom Corbett got blamed for cuts in funding to public education that never happened.  To this day many Pennsylvanians believe he took an axe to education funding when in fact he left office with more state dollars being spent on K-12 education than at any point in the commonwealth’s history.

To drive the point home, Governor Tom Wolf campaigned promising to be the education governor.  He has done more to damage public education than any governor in recent history. This reality has been cloaked in the perception that he is pro-education.  In fact Wolf is really just pro-union, propping up a system that fails both students and taxpayers.

It is true he has proposed historic increases in education spending – and the higher taxes to fund that spending.  But, the proposed increases in both taxing and spending are so large they have proven politically impossible to implement. The untenable nature of these increases are such that even in the hyper-partisan atmosphere of the state capitol some Democrats have refused to go along.

The chances of Governor Wolf getting Republican support for more reasonable increases in k-12 public education spending are high if, as demanded by GOP leadership, reforms to cost drivers are included.  But the governor has adopted a “my way or the highway” attitude which gridlocked the process and produced a historic budget stand-off.

In the process of fighting that battle, the so-called education governor pushed school districts across Penn’s Woods to the cusp of closing due to the lack of state dollars flowing into their coffers.  Worse, many had to borrow money to keep their doors open, incurring costs that took dollars away from students.  His administration, willing to spend money to keep state bureaucracy operating, turned down appeals from school districts for relief.

Even if Governor Wolf were to push his education spending increases through the legislature precious few dollars would ever be spent benefitting students.  That is because the state’s pension system has become fiscally unsound. Its investments are under-performing projections and too generous benefits are draining the system faster than current employees add new dollars.  At the school district level, property taxes are rising to cover costs and the preponderance of any new state dollars directed to education must go to prop up the system as well.

June a year ago the legislature passed significant pension reform.  It was immediately vetoed by the governor who parroted the union line that the system is fine, just underfunded.  Thus an opportunity to at least partially address a major cost driver was missed.  The end result: fewer dollars available to directly benefit students.

Governor Wolf has also been waging a war on charter schools.  Even more so than traditional public schools, charters operate with minimal cash flow.  The epic budget battle resulted in teacher lay-offs, and even the closing of some charter schools.  More will likely close as the governor implements administrative policies aimed at forcing charter schools out of existence.  These policies are designed to deny parents and students valuable educational choices in an effort to preserve the union-dominated monopoly of public schools.

The latest example of Governor Wolf placing union interests over student interests involves legislation that would replace the seniority-based system for determining teacher lay-offs with a merit based system.  In other words, instead of “last in, first out” the best teachers would be retained.  At present, the legislation is on Governor Wolf’s desk – and he has vowed a veto.

Unless you are doing Common Core math, when you add all these factors together what you get is a governor whose every action has harmed students and made the state’s system of public education even more fiscally fragile than it was when he took office.  All of this is being done to prop up the very labor unions that financed the governor’s election.  For taxpayers, and for students, it is a very large worm in the education apple.

(Lowman S. Henry is Chairman & CEO of the Lincoln Institute and host of the weekly Lincoln Radio Journal.  His e-mail address is lhenry@lincolninstitute.org.)

Permission to reprint is granted provided author and affiliation are cited.

 

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Uncharted Waters


On one point there is unanimous agreement under the capitol dome in Harrisburg: Pennsylvania is in uncharted fiscal waters.  Never before in the history of the commonwealth has a state budget impasse lasted this far into the fiscal year.  There are no signs of agreement on a pathway forward.  And the deadline for next year’s budget is now on the horizon.

Despite all of this there has been little public outcry.  Recent polling suggests Governor Tom Wolf’s approval ratings have taken a hit, but the filing deadline for candidates to run for state House and Senate seats came and went in mid-February leaving most lawmakers with no or token challengers.  And, for the most part, the machinery of state government chugs onward.

Unlike past periods of budgetary disagreement state workers have continued to be paid throughout this impasse.  This as a result of past court rulings that held employees who in fact show up for work and perform their jobs must be paid.  As a result, essential – and many non-essential – state services have continued unabated.

Since the state constitution requires passage of a budget before spending can take place you might think state coffers would be overflowing with unspent tax money.  You likely have noticed that despite the lack of a budget, state income taxes are being deducted from your paycheck and you continue to pay sales tax on purchases.  The state, however, is broke.

The state treasury a couple of months back took out a $2 billion loan supposedly to keep the cash flowing.  But, without a budget how can the state spend so much money it actually had to take out a loan to stay in business?  The answer is over $37.5 billion has been expended, much of it prior to the partial budget resolution that occurred in January.

This has caught the attention of Republican legislators who point out Governor Wolf does not have the authority for such spending.  Worse, what gets paid and what does not get paid is basically happening at the discretion of the Governor.  Senate Republican spokeswoman Jennifer Kocher told the Pittsburgh Tribune-Review that Wolf is spending as if he has “an open checkbook.” She pointed out, for example, the governor continues to fund the state corrections system even though he line-item vetoed that portion of the state budget.

The governor’s spending priorities have been controversial.  Last Fall the state treasury floated a “loan” to the House Democratic Caucus because they had run out of money to pay staff due to the budget impasse.  A couple of months later that same treasury denied the City of Erie School District a loan to keep schools open.

Worse, the Wolf Administration has been less than transparent in making public details of its unauthorized spending.  State Representatives Chris Dush (R-Jefferson) and Seth Grove (R-York) have had to file Right to Know requests to obtain information.

All of this has prompted calls for Auditor General Eugene DePasquale to conduct an audit of the state spending that is occurring during the budget impasse.  The GOP brought out the heavy artillery to make the request which came from House Appropriations Chairman Bill Adolph (R-Delaware) and Senate Appropriations Chairman Patrick Browne (R-Lehigh).  They head the legislative committees vested with budgetary power.

Governor Wolf triggered the ongoing budget battle by requesting, actually demanding, a massive increase in state taxes and spending.  Interestingly, the amount of money spent by his administration over the past seven months surpasses the total annual budget passed by the legislature and partially vetoed by the governor.  This has given rise to concerns that the governor plans to spend to his preferred level regardless as to whether or not he ever receives legislative approval.  That could turn the current fiscal and political crisis into a constitutional crisis.

Much like President Obama at the national level Governor Wolf has made it plain he plans to implement his agenda by whatever means necessary even if it means trampling the constitution.  His unchecked and unauthorized spending spree is proof positive he is doing just that.

(Lowman S. Henry is Chairman & CEO of the Lincoln Institute and host of the weekly Lincoln Radio Journal.  His e-mail address is lhenry@lincolninstitute.org.)

Permission to reprint is granted provided author and affiliation are cited.

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This Week on Lincoln Radio Journal: Wolf Budget Speech


Radio Program Schedule for the week of February 13, 2016 – February 19, 2016

This week on Lincoln Radio Journal:

  • Eric Boehm has news headlines from Watchdog.org
  • David Taylor of the PA Manufacturers Association; Matthew Brouillette from the Commonwealth Foundation and Kevin Shivers from the National Federation of Independent Business-PA have a Capitol Watch analysis of Governor Tom Wolf’s annual budget address
  • Lowman Henry has a Town Hall Commentary on the proposed closing of the Public Employees Retirement Commission

This week on American Radio Journal:

  • Lowman Henry talks with Stephen Moore of Freedom Works and Fox News about President Obama’s proposed oil tax
  • Andy Roth of the Club for Growth has the Real Story on why the president’s budget is dead on arrival in congress
  • Eric Boehm is joined by Nathan Benefield of the Commonwealth Foundation for a Watchdog Radio Report on Pennsylvania’s budget crisis
  • Colin Hanna of Let Freedom Ring, USA has an American Radio Journal commentary on Donald Trump and the Republican Presidential Nomination

Visit the program web sites for more information about air times. There, you can also stream live or listen to past programs!

http://www.lincolnradiojournal.com

http://www.americanradiojournal.com

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Governor Wolf PERCs Up


After just one year in office it is clear Pennsylvania Governor Tom Wolf is the most spendthrift governor in the nation.  After all, his proposed and still unresolved 2015-16 state budget called for a tax hike greater than that of all other 49 states combined.  It was a bit startling to see this ultra-big government advocate actually announce he was going to shutter a state agency.

You might think fiscal conservatives would applaud his move to close the Public Employees Retirement Commission (PERC) an obscure state agency that most Pennsylvanians don’t know even exists.  But, any time a politician acts out of character it is a good idea to dig deeper into his or her motives.  Such is the case with Governor Wolf’s proposed elimination of PERC.

According to its website, the Public Employees Retirement Commission is responsible for “monitoring public retirement plans in Pennsylvania, studying the retirement needs of public employees … develop objectives and recommend legislation to the Pennsylvania legislature.”  PERC further administers various mandated reporting on the health of public employee pensions and funnels state funding to municipal pension systems throughout the state.

This trip takes us through the tall weeds of Pennsylvania’s arcane and convoluted public employee pension system, but the bottom line is PERC is responsible for monitoring the health of municipal pension systems and in the process of performing that duty raises a red flag when such plans are headed into financial trouble.  As such it performs an important watchdog function especially at a time when a significant number of municipal pension systems, especially in cities, are under fiscal stress.

In addition to providing independent oversight of municipal pension systems, PERC is required to administer the process of distributing some $250 million annually to municipalities.  According to a news release from State Representatives Stephen Bloom, Seth Grove and Keith Greiner, that amounts to 20% of the contributions that are made annually to municipal pension funds.  The representatives, Republicans all, voiced concern that without those funds many municipalities would be forced to raise property taxes.

Concern over the potential demise of PERC has produced something rare in Harrisburg, bi-partisan agreement.  State Auditor General Eugene DePasquale, a Democrat, said: “If people think there’s a (municipal) pension problem now, wait until municipalities don’t get their (Act 205) payments.”   That DePasquale, who has been one of the more rational voices on fiscal matters would sound such a warning speaks to the seriousness of the issue.

To complicate matters further Governor Wolf plans to shut down PERC without seeking legislative approval.  Using the “pen and phone” approach popularized by President Obama, the governor says the agency is simply going to cease to exist.  Republican lawmakers are crying foul pointing out the governor has no authority to close an agency authorized by an act of the General Assembly.  So not only does Governor Wolf’s plan to sunset PERC put public pension plans at risk and likely trigger municipal tax increases, but it creates a constitutional crisis as well.

Pension reform has been a major component of the ongoing budget battle between Governor Wolf and the Republican-controlled legislature.  Senate Majority Leader Jake Corman, among others, has vowed not to consider any of the governor’s proposed broad-based tax hikes until the state’s pension crisis is resolved.  Why then would Wolf want to complicate matters by tossing PERC under the bus?

Perhaps because Governor Wolf simply refuses to admit there actually is a pension crisis. In his view, pension systems across Penn’s Woods are just fine – all they need is more money.  As a captive of big labor the governor is committed to blocking any and all attempts at pension reform instead favoring throwing billions more in taxpayer dollars into systems at all levels that are simply no longer viable.

While many municipal pension funds, especially those administered by townships, are financially secure, state employee funds and those in larger cities must either be reformed or taxpayers will see historic tax increases.  That Governor Wolf would open a new front in the pension battle by moving to shutter PERC shows not only is he not serious about pension reform, but he will do everything in his power to prevent it from happening.

(Lowman S. Henry is Chairman & CEO of the Lincoln Institute and host of the weekly Lincoln Radio Journal.  His e-mail address islhenry@lincolninstitute.org.)

Permission to reprint is granted provided author and affiliation are cited.

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