Posts Tagged legislators

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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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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Ending Corporate Welfare


Adoption of an annual budget is a core function of government.  Both the federal and state governments have failed to get the job done. At the national level there has been no budget for years, as congress passes “continuing resolutions” that keep the money flowing.  The budget impasse in Harrisburg is now in its third month, with Governor Tom Wolf rejecting the equivalent of a continuing resolution passed by legislative Republicans.

There are many reasons for this lack of agreement, but the bottom line is the age-old problem of too much demand for too few resources.  Eating up a large portion of both federal and state budgets is entitlement spending.  Taking away that which someone already receives is a near impossibility, yet neither budget crunch can be resolved until the spending side of the equation is addressed.

Republicans often point to social welfare as an area where spending can be cut, Democrats are adamantly opposed.  Corporate welfare is a different story. Here there is bi-partisan agreement.  Establishment Republicans love government hand-outs to big corporations. Despite lip service to the contrary, Democrats do too.

But, there is growing opposition among the GOP’s conservative base to continuing corporate welfare programs.  After all, how can you morally justify cutting social welfare when voting to give taxpayer dollars to wealthy corporations?  In order to address the systemic deficits present in both the federal and state budgets cuts in all such programs are needed.

At the federal level conservatives have been successful in closing down the Export-Import Bank.  This happened largely because the bank was up for reauthorization, meaning all congress had to do was nothing to put it out of business.  Congress is good at doing nothing, so the Export-Import Bank was allowed to expire.  But, supporters of the bank – which gives large, risky taxpayer-backed loans to big corporations – are working hard behind the scenes to resuscitate it, meaning the battle is far from over.

Here in Penn’s Woods the vehicle for corporate welfare is a little-known entity called the Redevelopment Assistance Capital Program (RACP).  Like most government programs it started small, with $400 million in borrowing authority in 1986.  By 2010, the last year for which complete information is available, borrowing authority had ballooned to $4 billion.

Unlike the Export-Import bank which merely finances risky loans, RACP is a grant program.  Meaning state government borrows money and then gives it to select businesses.  That is correct: state government borrows money, gives it away, and then repays the loans plus interest with tax dollars.  Worse, small businesses need not apply.  The grant program is only available for projects exceeding $1 million.

There is a set of criteria for a business to obtain a RACP grant, but since the final list of recipients must be approved by the legislature the politically well-connected have an advantage. There is no escaping the fact the entire effort amounts to little more than government picking winners and losers.

A new study by the Mercatus Center at George Mason University finds the program is itself a loser.  The study found: “The RACP is an inefficient and market-distorting program that mostly transfers economic activities from counties receiving less in RACP grants to counties receiving more of the grants.”  Another concern: the study found “RACP is likely to decrease economic growth in the long run since the market is ultimately skewed away from efficient investment and toward politically favored industries.”

The program is not even popular in the business community.  A recentKeystone Business Climate Survey conducted by the Lincoln Institute found 52% want the program eliminated entirely; another 40% think the amount spent on it should be reduced.  Over the years, the survey has consistently found business owners/CEOs would rather have across-the-board business tax cuts than such targeted grant programs.

Clearly programs like the Export-Import Bank and the RACP are nothing more than government welfare for politically connected companies.  The end result, at best, is government directing rather than expanding economic activity.  As budget-makers look for ways to bring government spending under control, reducing welfare – both corporate and social – must be part of the equation.

(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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PA Business Leaders Reject Wolf Tax Plans


The Governor of Pennsylvania decided to use his perceived electoral mandate to take on one of the biggest issues that has confronted and confounded the commonwealth for decades: property tax reform.  So he advanced a plan that would raise sales and personal income taxes in exchange for a cut in property taxes.

Sound familiar?  The year was 1989 and the Governor was Robert P. Casey whose tax reform plan was put on a statewide ballot referendum and was soundly defeated by voters.  Fast forward to 2015 and Governor Tom Wolf has placed on the table a property tax reform plan that strongly resembles the doomed Casey proposal. Except the Wolf plan doesn’t even include the dollar for dollar reductions required of the Casey effort.

As despised as property taxes are, and polling consistently finds the levy to be the most disliked, finding an acceptable alternative remains elusive.  The Wolf plan appears to have little support in the General Assembly; in fact House Republicans have passed their own proposal.  But it too fails to totally eliminate school property taxes leaving the door open for millage rates to simply increase again over time.

An indication of how unpopular the Wolf tax reform plan is can be found in the recent Keystone Business Climate Survey of business owners and chief executive officers conducted by the Lincoln Institute of Public Opinion Research.  Nearly 70% of the business leaders said the Wolf property tax shift would result in only a temporary drop in property taxes which would then go back up.  Another 14% predicted his plan would actually lead to property tax increases; only 15% expect to see property taxes decline under the Wolf proposal.

Not only does the poll demonstrate disapproval of the Wolf property tax plan, but the survey found the biggest six month decline in business climate optimism since the onset of the Great Recession in 2008.  In fact, in the 20 year history of the poll only during that recession and in the aftermath of the 2001 terrorist attacks has business climate optimism dropped so far so fast.

Last September, for the first time since George W. Bush was re-elected in 2004, more business leaders said the state’s economic climate had improved that felt it had gotten worse.  The indicator rose into positive territory by just 1%, but it capped a steady move in a positive direction.  All of that has changed.  The number of owners/CEOs saying business conditions have improved over the past six months has fallen to just 13%, while the number saying business conditions have gotten worse has nearly doubled since last Fall.

The only variable to change during that six month period was the election of Governor Tom Wolf.  Governor Tom Corbett left office with a 52% job approval rating.  Governor Tom Wolf’s first job approval test yielded just 15% approval with 69% of the state’s business leaders saying they disapprove of the job he is doing.

Driving the dour mood among the people who actually run businesses – big and small – is a general disapproval of Governor Wolf’s budget proposals.  A total of 78% disapprove of his proposed budget.  Overall 80% say the governor’s proposed state budget will harm the state’s business climate.  As a side note, Pennsylvania’s high tax rates and stringent regulatory policies are viewed by the owners/CEOs as the biggest impediments to conducting business in the commonwealth.  They now fear that situation is about to get even worse so the state’s job creators are bracing themselves for higher taxes.

Overall the survey results represent a sound and complete repudiation of Governor Tom Wolf’s first proposed state budget along with the major revisions and tax hikes contained within the proposal.  Like Governor Casey before him, his ambitious tax reform plans are deeply unpopular and may be destined for the same fate.

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

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

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From Perception to Reality


There is an old saying in political circles that “perception is reality.”  Like many old saws there is a lot of truth behind that saying.  Perception is driven by messaging.  It is not necessarily the best policy that prevails, but the policy that benefits from the most effective messaging.  And effective messaging depends on sound arguments, superior strategy and a capable messenger.

Democrats and the GOP have arrived at a split decision when it comes to effective messaging in political campaigns.  Republicans have decimated Democrats at the legislative level.  In congress the GOP holds solid majorities in both chambers.  In the state legislature Republican majorities are at or near historic levels.  The executive branch is a different story. President Obama’s oratorical skills have laid waste to hapless GOP nominees.  Former Governor Tom Corbett was never able to effectively explain his policies to voters, paving the way for a Democratic victory.

Elections behind us, the task now turns to governing.  This is where the outcome of the messaging battle becomes more one-sided.  Congressional Republican leaders have been totally ineffective.  They have squandered their numeric majority by being strategically out-maneuvered, and are losing the perception war.

Despite the fact President Obama’s executive orders relative to illegal immigrants were ruled unconstitutional by a federal judge, and polls showing public opposition to his actions, the Republican congressional majority was unsuccessful in defunding the agencies tasked with implementing that policy.  Why?  They allowed Democrats to spin the defunding as a shutdown of the Department of Homeland Security.  In fact only a couple of small agencies within the DHS would have been affected.  Thus the debate changed from illegal immigration to national security. Congressional Republicans were backed into a corner, caved in, and gave the President a victory.

Now unfolding is a fight over the confirmation of Loretta Lynch as U.S. Attorney General.  Republicans have legitimate concerns relative to her interpretation of the constitution.  But, they have allowed Democrats to portray their opposition as sexist, or racist by opposing the confirmation of an African-American woman.  It was entirely predictable Democrats would play the race and “war on women” cards, but the GOP was unprepared to counter that message.  In the end, a woman who believes the President can effectively re-write the U.S. Constitution will likely be confirmed as Attorney General.

Here in Penn’s Woods the GOP has historically been equally inept at countering executive messaging.  Former Governor Ed Rendell was a master at backing legislative Republicans into a corner, picking off a couple of stragglers at the back of the herd, and winning enough votes for his budgets and policies.

Now, however, there is a new cast of characters in Harrisburg.  Governor Tom Wolf has opted to follow the Obama model and tack far to the Left in his first budget proposal.  New leadership is at the helm of both the House and Senate GOP and they represent caucuses far more conservative than those in office during the Rendell years.

Democrats have already begun spinning their message.  Rick Bloomingdale, president of the state AFL-CIO penned an op-ed calling Governor Wolf’s new budget progressive, conjuring up images of John Fitzgerald Kennedy daring us to be great.  This despite the fact working families will pay significantly higher taxes under Wolf’s budget proposals which amount to nothing either new or progressive, but are little more than a continuation of Rendell-era tax and spend policies.

The ball is now in the GOP’s court.  Republican legislative leaders must shed the yoke of the Corbett Administration’s failure to communicate and become effective advocates for a more responsible approach to governing.  Republicans have proposals that are time-tested, proven governing policies.  The challenge now is to effectively communicate that message and to stand strong against a governor – and mainstream news media – determined to spin false perception into reality.

(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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