Wednesday, July 1, 2015

The 2015/16 Budget Season is almost over, well… not really

The 2015/16 Budget Season is almost over, well… not really. The June 30 deadline has passed and Republicans in the House and Senate have shown that they have a plan (or at least a rigid ideology) and they are sticking to it.

For the past four years, Republicans who controlled the legislature in both the House and Senate, along with a Republican Governor, passed one irresponsible budget after another. As a result, Pennsylvania plummeted from seventh in job creation to 50th, dead last, the structural deficit grew, education funding was slashed, the state’s bond rating was downgraded multiple times, more than 20,000 teachers and school staff were laid off and are still out of jobs, student test scores dropped, a reasonable tax on the severance of Marcellus shale gas never materialized and local property taxes skyrocketed.
When the results of the Republican’s policies were crystalized in last year’s gubernatorial election, even Republican legislators looked for someone to blame for the abysmal state of affairs. Gov. Corbett became the face of the failures that Republican legislators had promoted and voted for in lock step. Even Republican legislators claimed Corbett was to blame and they were spared the wrath of the voters. You would think they might have sensed the public’s dissatisfaction with their failed policies. But now they are continuing down the same path; lowballing the state’s deficit, over-projecting future revenues, looking for one-time revenue sources and accounting gimmicks, digging their heels in on ideological issues, and refusing to address the budgetary issues that Pennsylvanians want addressed.  The status quo that got us to where we are today is alive and well in the Republican caucus but Pennsylvania cannot afford to continue down the road to ruin.   
Gimmicks won’t put teachers and school support staff like nurses and counselors back in our schools. Avoiding a Marcellus shale severance tax at all costs won’t improve the scholastic climate for all Pennsylvania children and pretending that you can eliminate local property taxes without replacing the revenue won’t provide property tax relief for homeowners throughout the state.
After years of budget cuts and accounting gimmicks, even former Corbett Budget Secretary Charles Zogby conceded that the Legislature and Gov. Wolf would need to generate more revenue for this year’s budget to balance.
Holding the budget process hostage by falsely claiming they need pension “reform” to balance the budget is little more than a bait and switch scam. Act 120 of 2010 “reformed” the pension system by capping and reducing benefits, increasing employee contributions, eliminating early withdraws and more. That has already saved millions and the revised plan is 100 percent solvent and costs three percent of payroll to maintain.  It is the unfunded liability in the old system that is the cost driver and Republican proposals do little or nothing to fix that. Some of their 401 (k) proposals actually make the problem worse. 

Republican plans to sell off one of the state’s most valuable assets, our liquor stores, provide questionable one-time fixes but come with future revenue losses and the increased social costs that occurred in other states that privatized. Even those who do support those ideological issues, but are serious about budget realities, understand that they are one-time funding sources that provide no long-term answers to the state’s budget problems.

The people of Pennsylvania elected Governor Wolf to serve because they wanted change. They want to see a real difference in how Pennsylvania conducts its business. Gov. Tom Wolf has taken an innovative approach that would improve the way the state conducts its business and, in turn, refocus efforts on schools that teach, jobs that pay, and government that works. He has proposed restoring education funding, implementing a fair Marcellus shale tax and providing property tax relief for homeowners. Unfortunately, Republicans continue to perpetuate the status quo and continue to stifle legislative efforts that would move Pennsylvania forward and provide meaningful solutions to our problems.

The people of Pennsylvania did not reelect Tom Corbett. They also did no reelect his policies and agenda, but you would be hard pressed to tell that if you look at what the Republican legislature promoted as a budget this year. This session is shaping up to be like a second term of Corbett without Corbett around. Maybe the real problem is the Republican dominated House and Senate.

Gov. Wolf understands that the people of Pennsylvania elected him because they didn’t want another four years of those same failed ideas and policies.

Looks like it could be a long hot summer… 

Friday, June 26, 2015

“Republicans say they will go at it alone on budget”

I would have never seen that coming…oh, wait…I did.

Governor Wolf gave his budget address on March 3. Immediately after, Republicans took to the microphones decrying the fact that the new governor was proposing to do something different than they had done in consort with former Governor Tom Corbett in the prior four years.

Pennsylvania was facing a projected $2 billion structural deficit and Republicans felt confident that the governor would be forced to renege on his campaign pledges to restore funding for basic education and start turning the ship that was heading for the abyss. Surely, the governor would have to hunker down and look for gimmicks and one-time fixes just to get by and make it through another year while he waited for the economy to turn itself around.

While the structural deficit projection for this year has dropped to about $1.5 billion, if it is addressed by gimmicks and one-time fixes again as legislative Republicans propose, we are staring at a $2 billion structural deficit again next  year. You can only transfer balances between credit cards and put off paying bills so long until the gig is up. We already know the consequences of these maneuvers…state bond rating downgrades, job losses, higher local property taxes and lower student performance.

Instead, Wolf is demanding that the legislature take action with proposed meaningful solutions to address the deficit and reinvest in education, restore former cuts to human services, provide a fair tax structure to encourage business growth and jobs, and deliver on property tax relief for homeowners. After four years of Republicans gimmicks and their current stance of perpetually neglecting the issues instead of facing them, one could speculate that they are ideologically opposed to the notion of fiscal responsibility. Proposing their own budget that ignores the fiscal crisis, points to the fact that they are more focused on philosophical wins for the fringe of their party than they are on producing a fiscally sound budget that prioritizes Pennsylvania’s citizens.

If the Republicans in the House and Senate want to debate ideology and pontificate about union busting, the perils of a living wage, the pitfalls of people actually having access to affordable healthcare, executive orders and booze in convenience stores, they have the power to call session days all summer long. But for them to refuse to deal with the fiscal issues of the state until their ideological needs are met is simply irresponsible.

It could prove to be a long summer. 

Thursday, June 4, 2015

Gas industry should pay fair share in Pa.

The natural gas industry’s drilling of Pennsylvania’s Marcellus Shale provides economic benefits to the state including job opportunities and a reliable domestic energy source. That has been true in every state where the industry exists. A recent study by the American Petroleum Institute stated that the natural gas industry is responsible for $34.7 billion to the state economy and Pennsylvania’s shale gas production has increased exponentially over the past few years. Yet Pennsylvania is the only major gas producing state that does not charge a severance tax.

The industry generously profits from the Commonwealth’s natural resources. A reasonable severance tax would help address the state’s needs and invest in one of our greatest resources: Pennsylvania’s children. The opposition to a commonsense severance tax is being fed to the public directly from the industry and their paid operatives and fails to acknowledge the inherent need to fund Pennsylvania’s schools and take care of our environment.

Despite claims to the contrary, natural gas companies remain strongly profitable. In 2013 the market value of natural gas produced in the Keystone State was $11.8 billion compared to $4 billion in 2011. Drillers paid just 1.9 percent of that in impact fees. As the industry flourishes, the PA Department of Revenue reports the industry’s corporate net income taxes paid in 2013 fell below pre-Marcellus drilling levels in spite of increased production.

The industry and its special interest allies continue to perpetuate the myth that Pennsylvania’s favorable tax climate is the cause for Pennsylvania’s low natural gas prices; but the facts show otherwise. The reality is that an estimated 80 percent of the natural gas produced in PA is exported out of the state and thus any additional cost due to a severance tax would be paid mostly by non-Pennsylvanians. Furthermore, Pennsylvania’s residential prices in February 2015 were 53 cents higher than West Virginia’s and our commercial prices were 54 cents higher.

The Pennsylvania Chamber of Commerce, Commonwealth Foundation and others special interest groups claim that a severance tax would negatively impact Pennsylvania’s competitive edge to attract more gas drilling. Drillers haven’t left Alaska, Texas, North Dakota, West Virginia or any other state with gas reserves that are taxed. The total energy under the ground in Pennsylvania is estimated to exceed the energy value of Saudi Arabia. Pennsylvania has the natural resources with an estimated 1.925 billion cubic feet of recoverable gas in the Marcellus Shale and would still be offering a competitive business environment for the industry. At the same time that a small impact fee went into effect in Pennsylvania in 2012, Pennsylvania jumped from seventh to third in the rankings of natural gas producing regions. Unfortunately, the majority of that impact fee revenue stays in localities with gas wells and does not apply to areas with pipeline and compressor station disruptions.

In 2009, Chesapeake Energy said, “We gladly pay a severance tax in every state where we’re active, except in New York and Pennsylvania.” The industry needs to make a reasonable investment in the Commonwealth, the same as all hardworking Pennsylvanians do, to improve our educational system and our future. As Governor Tom Wolf has repeatedly warned, we cannot continue to do the same thing and expect a different result. The last administration’s policies had a devastating effect on the Commonwealth and we are working hard to reverse that and turn Pennsylvania back into an innovator and leader in energy as well as education. We need to work with the Governor to break the cycle of placing oil and gas interests ahead of Pennsylvania’s children and our environment.

Monday, March 16, 2015

A budget that serves the citizens of PA into the future or one that caters to the special interests of the past?

That is the central question surrounding this year’s budget proposal.

In his budget address, Governor Wolf laid out a plan to move Pennsylvania forward by investing in education and jobs to drive the state’s economy in the coming years.

Despite the partisan rhetoric in the post-budget address spin room, I hope the Republicans will accept the “fresh start” Pennsylvanians called for this past November and finally produce a budget that fixes our structural deficit instead of adopting yet another gimmicky budget to maintain the status quo.

The evidence is undeniably clear; what was done in the past four years has not worked. PA went from 7th in job creation to 50th; education test scores went from consistently rising to consistently falling; the state’s bond rating was downgraded multiple times; PA’s resources were exploited; and after several years of failed attempts, many PA workers simply stopped looking for a job.

All citizens of PA need to ask their legislators….
  • Will you vote for property tax relief for me or will you continue to protect the bottom line of special interests?
  • Will you vote for funding for schools that get results for the children in my community or will you continue to protect the special interests?
  • Will you vote for quality Pre-K for kids so they are ready to start school or will you continue to protect the special interests?
  • Will you vote for community colleges and job training that train workers for family-sustaining jobs or will you continue to protect the special interests?
  • Will you vote for solving pension issues or will you continue to protect the special interests?
  • Will you vote for increasing the minimum wage so that no one who is willing to work full time has to live in poverty or will you continue to protect the special interests?
  • Will you vote for a truly balanced budget or the cost of structural deficits of the special interests?
  • Will you vote for fair corporate tax rates for all businesses or special rates for some special interests?
  • Will you vote for taxing Marcellus Shale like every other state with natural resources or will you continue to protect the special interests?
  • Will you vote for paying appropriately for charter schools or will you continue to protect the special interests?
  • Will you vote for freezing college tuition costs or will you continue to protect the special interests?
  • Will you vote for expanding health care for access to all working families or will you continue to protect the special interests?
Governor Wolf’s bold budget proposal will put Pennsylvania back on the right fiscal path and benefits the citizens, not the special interests, of Pennsylvania.




Wednesday, December 17, 2014

Corbett, Republicans ignored the problem for four years

During his recent mid-year budget briefing, Corbett administration Budget Secretary Charles Zogby said the cost growth in the 2015-16 state budget, which was cited as the reason for the projected $2 billion deficit, is nothing new. Which begs the question: Why didn’t they do something to deal with it, instead of ignoring it for the past four years?

If Zogby and others knew the one-time revenue fixes used to balance the last four state budgets would not solve the state’s overall fiscal problem, that begs more questions: Did they use those tactics merely for “window-dressing” of the budget or were they simply being irresponsible with your tax dollars?

Another example of the Corbett folks simply ignoring the problem with state finances is that everyone knew Act 120 of 2010 included mandated cost increases in the out-years, yet Corbett actually proposed reducing the payments to balance the budget instead of meeting the obligations.

While Zogby might be continuing the false claim that the Corbett administration didn’t raise taxes on middle-class families, the fact is those families did get hit with higher taxes, such as property tax increases and higher gas taxes.

Meanwhile, legislative Republicans and Corbett also gave away the store to the tune of $2 billion in corporate tax breaks instead of fixing our ongoing structural budget deficit problem. Those tax breaks didn’t result in more jobs as promised, instead Pennsylvania’s job growth plummeted from 7th to the bottom of the pack at 50th.

Zogby went on to admit that one-time budget fixes don’t work, yet he continues to push for more one-time revenue gains like selling the liquor stores, electric competition and pension reform. Those ideas simply won’t solve Pennsylvania’s structural budget deficit.

Finally, Zogby now admits that legislative Republicans and the Corbett administration created a structural budget deficit of $2 billion, yet here are just a few of the things that incoming Speaker of the House, then House Majority Leader, Mike Turzai said about the budget during final passage on June 30th:

“We have been nothing but responsible.”
"We have been fiscal stewards.”
“We have been about governing.”
"Let us talk about responsible governance.”
“We have been prudent, fiscally responsible, and prioritized state spending on the most vulnerable in our society.”
 “We are fiscally prudent, recognizing we have a responsibility to the taxpayers.”
Maybe not so much …

Wednesday, December 3, 2014

Bad Republican fiscal policy got us into this budget mess

After attending today’s mid-year budget briefing by Budget Secretary Charles Zogby, the multi-billion dollar budget deficit that Pennsylvania is facing is not unexpected given the past four years’ budget messes and the bad news is not likely to end.

The Independent Fiscal Office’s latest report revealed a multi-billion dollar budget deficit that was reaffirmed today by Secretary Zogby and points to a dreadful fiscal crisis for our new governor. It is certain that the extent of the gap is massive and we cannot continue with the same fiscal policies of the past four years and expect anything other than a continued deficit projection.

I see three main points concerning the budget deficit:

1.    Gov. Tom Corbett’s fiscal year 2014-15 budget was based on one-time revenue sources that the administration now admits was bad policy.

2.    The Corbett administration already borrowed to meet operational expenses and projections indicate the state will be cash flow negative from January through March 2015.

3.    The Republicans that control the House and Senate marched in lockstep with the Corbett administration on fiscal policy for the last four years. They also need to be held accountable for this failed fiscal policy and be willing to work to change it in a bipartisan manner that produces solutions.

Additionally, our state has fallen from the top 10 in job creation to last in the nation over the past four years.

This budget situation also has bad ramifications for policy proposals, such as infrastructure, jobs and equitable education funding, because most initiatives need state money to implement.

The Wolf administration offers a different fiscal policy that received a strong mandate in the recent election. This most recent forecast makes it even more obvious that we need to follow that change in policy.

I’m definitely ready for a fresh start, which begins Jan. 20.

Wednesday, September 17, 2014

The state checkbook is out of money!

Bad Republican budgeting maneuvers that have crippled the state’s ability to meet its obligations during the past four years have led the state to borrow money from itself.

What's that you ask? How does Pennsylvania borrow money from itself?

Well it goes something like this: the state's checkbook (the General Fund) is what Pennsylvania government uses to pay its recurring bills. This week, the General Fund ran out of money so the state Treasurer had to create a $1.5 billion line of credit out of a cash investment fund operated by the Treasurer. Of that line of credit, $700 million was immediately used. Kind of like using your credit card to pay your mortgage.

The administration has stated that this will actually save the state money, which is laughable. If this were actually true, it should be common practice every month and why hasn't Governor Corbett done this sooner? Ha!

In fact, actual loans to be used for the General Fund have only been done four times.  Even if these types of loans were common, it still begs the question as to whether they should be used for General Fund purposes at all. In this case, using them is an indication of an underlying symptom of inadequate and negligent budgeting. There are only a handful of valid reasons for using the Short Term Investment Program (STIP), but a failure of leadership is not one of them.

If the budgeting process was done correctly, with an accurate revenue forecasting methodology, and a realization that new revenue was needed instead of asking working families to pay more and school districts to make due with less, this whole line of credit would be unnecessary. The Corbett Administration claims they needed to do this to advance funding to Philadelphia schools, but these schools need this money because they were underfunded by Governor Corbett. It is like blaming someone else for your bad budgeting.

But you don't have to just take my word for it that these were terrible budget decisions.

The Independent Fiscal Office and the nation’s three major credit rating agencies have all noted that choices made in recent Pennsylvania budgets are creating a structural budget deficit that cannot be solved with the one-time fixes proposed and passed by the Corbett Administration and Republican controlled House and Senate.

It seems that Governor Corbett and his Republican friends prefer budget gimmicks that set up the next governor for a deficit from day one.

It's time for a fresh start.