PBBC’s State Budget Summit

I spent Thursday in Harrisburg for the Pennsylvania Budget and Policy Center’s annual State Budget Summit.  This is the fifth such year I attended and learned quite a lot about our budget priorities.  That’s what a budget is:  the priorities we make as a Commonwealth and it says much about who we are as a people.  Where we allocate our resources and how illustrates where our priorities lie.  Gov. Tom Corbett’s lie with corporations, prisons and the privatizers of public services.

Mike Wood:

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Sharon Ward opened the day then Michael Wood, Director of Research led a discussion and PowerPoint of this year’s state budget.  Much of the day surrounded discussion of Medicaid expansion.  The Affordable Care Act goes into effect next year and Medicaid expansion has been controversial.  The U.S. Supreme Court ruled that individual states can decide whether or not to opt into the program.  Many Republican Governors have already opted out though some are reconsidering those decisions (Rick Scott in Florida for example).

Medicaid expansion would cover 500,000 additional Pennsylvanians.  A healthy workforce is a productive workforce and since federal dollars would cover all the costs the first few years there is no downside for Pennsylvania.  Even when state monies are required the economy should be recovered sufficiently and some smarter decisions concerning corporate loopholes can cover those costs.  Since state residents will still be paying federal taxes why should we go without Medicaid coverage while paying for it in other states?

When you drop your child off at day care do you wish your kid’s caretaker was healthy?  How about the barrista who makes your morning coffee, your doughnut or your lunch?  The flu shot through Pennsylvania this winter partly because workers don’t have health care coverage or sick days.  When they got ill they still had to go to work while they couldn’t go see a doctor.  How screwed up is that and how much did it cost us in lost productivity?

Three state legislators did a panel on state government with former Rep. Kathy Manderino moderating.  Sen. Jay Costa, Republican Rep. Todd Stephens and Rep. Mike Sturla covered many topics.

The panel:

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Gov. Corbett is fond of going around bragging he hasn’t raised taxes.  The fact he has.  Local taxes are skyrocketing due to state budget cuts.  Check your county and school property taxes if you aren’t sure.  This is called passing the buck:  Corbett cuts school funding and human services programs then your local government bodies have to raise taxes to cover those shortfalls.  A Dauphin County Commissioner lamented that since the Sandusky scandal pressures are on local Children and Youth Services to increase oversight on child molesters but aren’t being adequately funded to do so.  These are called unfunded mandates:  the state requires they do more but doesn’t pay for it.

The Governor’s first two years have seen cuts in corporate and business taxes in return for job creation.  Unfortunately we aren’t getting the jobs he promised.  Pennsylvania is now below the national average in job creation since he took office but tax revenues have dropped because of those cuts.  He has reneged on his promises that these tax reductions would bring new jobs.

Rep. Mike Fleck:

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Corbett is also going around claiming he didn’t cut K12 education by a billion dollars.  His argument is that those were federal stimulus funds that expired.  That’s true but then conservatives shouldn’t be claiming the federal stimulus program was a failure.  Interestingly they also paid for prisons but the budget for incarcerating people wasn’t cut only the schools were.  That tells us what his priorities are.

This year’s budget is $28.4 billion up from $27.8 last year.  Senate Republicans restored $500 million to last year’s budget and this one will emerge much different from what the Governor proposed.  He has built his proposal around three major initiatives which won’t be passed by June 30th and if they do eventually, will see lengthy court challenges.  Building a budget around them is political folly which will severely harm Corbett’s re-election campaign next year.  He can’t blame the legislature too much for not getting his way since it is controlled by his own Party.  The hallmark of this failed Administration is the Governor’s inability to work with others.  He has regularly tried to bypass the state legislature which has come back to bite him in the butt.  The Governor is treating the House and Senate as if they don’t matter and has turned his own Party leadership against him.  This tone deafness is going to be his downfall.

Click below for the remainder of my coverage:

One of the hard hitting statistics we saw was the difference is cuts to urban and poor school districts compared with wealthier suburban schools.  While the average cut statewide was $410/student some districts saw cuts as high as $1200.  Guess what?  They were mostly minority schools already suffering from vast inequalities of funding.

The three uncertain sources of funding in Corbett’s budget surround lottery privatization, gutting of public employee pensions and the privatization of the state liquor stores.  None is good policy and none is going to happen.  This means Corbett’s budget is DOA.

The lottery privatization is already on life support after Attorney General Kathleen Kane declared it unconstitutional.  Again the Governor went around the state legislature to do what he wanted to do.  This will be tied up in courts for some time provided Camelot Global Services doesn’t tire of the politics and walks away.  Corbett already returned its $50 million deposit.

Gutting public employee pensions also will not go through because it’s bad policy.  Pensions are deferred compensation and are contracts negotiated through collective bargaining.  Neither the Governor nor the legislature can negate those contracts.  The NCAA just sued Corbett for signing a bill requiring the Penn State settlement funds be spent only in the Commonwealth.  It attempts to negate the contract agreement signed between PSU and the NCAA.

Converting fixed benefit pensions into 401(k) programs means employers (the state and school districts) get off free contributing to those retirement accounts, they are subject to the whims of the market, they’ll require double the administrative costs and many public employees will leave their jobs when their pensions get robbed.  It will then be more difficult hiring qualified workers and teachers for less than private sector wages when their benefits don’t balance out those losses.

Privatizing the state Wine and Spirit Shoppes went nowhere in the last session and is DOA.  Until Corbett comes up with a plan to replace the $500 million/year they contribute to state coffers he doesn’t have a coherent plan.  All that’ll likely come out of this will be the ability for consumers to purchase six packs at grocery and convenience stores.

This means $625 million of the Governor’s budget revenues don’t exist.

Meanwhile the cuts on Corporate Net Income taxes (CNI) and the Capital Stock and Franchise Tax (CSFT) keep reducing revenues without creating new jobs.  The corporate tax rate often quoted by conservatives is a sham because few businesses actually pay the 9.9% CNI.  Loopholes and credits gut those rates.  Until we begin closing things like the Delaware Loophole we won’t really collect the revenues necessary to build an educated and trained workforce.  That’s reduce our competitiveness in the future.

There were two sessions of breakout workshops during the day.  I spent some time in each of the morning ones and attended parts of two of them in the afternoon.  The four morning sessions dealt with communications advice for budget advocates, educating children for the new economy, building a fair tax system and what Medicaid expansion means for Pennsylvania.  Dr. David Brown of West Chester University had a startling fact about the popular Teach For America program:  80% of participants leave teaching within three years.  To me this means Teach For America is a dismal failure.  He also cited how much of a factor it is for teachers who get Master’s degrees and the positive impacts they have in classrooms.

The Medicaid expansion panel:

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In the Medicaid breakout Antoinette Kraus of the Pennsylvania Health Access Network pointed out that with Medicaid expansion many low wage workers who would be enrolled in the plan would save their small employers ACA penalties.  In other words if you have a small business and your workers can be covered by Medicaid expansion you’ll be legal under the ACA and won’t pay any penalties.  This covers businesses with at least 50 workers.

The fair tax system panel:

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Did you know that only 8% of the Department of Public Welfare’s budget goes to actual welfare benefits?   Especially since Corbett cut TANF by 77%.  But the agency really is more of a Health and Human Services Agency.  Not all of the lottery profits go to senior citizen programs either although that is mandated by law.  

The pension reform panel:

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The four afternoon workshops covered the tax shift to local municipalities, pensions, human services and communications advice for talking about values.  I got stuck in the pension workshop because it is so important and the discussion was so good.

I learn a great deal at this summit every year and it helps me in my coverage of state government all year round.  The PBPC also posts regularly here on these issues.

Kathy Manderino:

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Manderino and Rep. Todd Stephens:

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Rep. Mike Sturla:

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Sen. Jay Costa:

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Pennsylvania AFL-CIO Marches For Jobs

As the state and national situation for working people grows dimmer and dimmer union members in Pennsylvania are rallying for jobs this Labor Day weekend.  The nation’s biggest deficit is in jobs and the people are angry and getting angrier as elected officials in Harrisburg and Washington keep eliminating jobs instead of creating them.

From the unions:

WASHINGTON — Unions in Pittsburgh are bringing a special focus on jobs and the unemployed to their Labor Day parade this year, dubbing the event a “March for Jobs.” Organizers expect more than 70,000 people to march in Monday’s event, but they’ve made clear to politicians perceived to be hostile to the labor movement that they will be turned away.

“This year we are inviting union and non-union, laid-off, unemployed and underemployed workers and their families to march with us on the eve of President Obama’s much anticipated announcement of a jobs program aimed at putting America back to work,” said Jack Shea, president of the Allegheny County (Pa.) Labor Council.

“We will be marching to show President Obama we are behind all serious efforts to create jobs and encourage him to pull out all the stops by putting the power of the federal government fully behind an aggressive jobs program,” Shea added.

Earlier this week, a group of union officials in Wisconsin made headlines for barring GOP politicians from marching in the Labor Day parade in Wausau, Wis. The labor council reversed its decision after Wausau’s mayor said the city would not co-sponsor an event that bans individuals based on party affiliation.

Pennsylvania AFL-CIO spokesman Marty Marks said that only friends of the labor movement, regardless of political party, are invited to march in the Pittsburgh Labor Day parade. The local labor council reimburses the city for parade-related expenses.

About six Republican politicians were invited to march this year, along with a larger number of Democratic officials. Invited guests include U.S. Rep. Tim Murphy (R), U.S. Sen. Bob Casey (D) and state Sen. John Pippe (R-Allegheny).

Two prominent GOP politicians who were not invited to march were U.S. Sen. Pat Toomey and Gov. Tom Corbett. When asked what the labor council would do if they said they wished to participate, Marks replied, “We would politely decline their participation.”

In fact, the Allegheny County Labor Council has already turned down Joshua Wander, the sole GOP candidate for Pittsburgh City Council. Shea told Wander that the parade was invitation-only and the council had already endorsed his opponent, according to the Pittsburgh Tribune-Review.

“Many candidates do march,” Wander told the newspaper. “I not only wanted to walk as a candidate, but I also wanted to walk for the Republican Party.”

In 2009, Vice President Joe Biden marched in the Pittsburgh parade.

Marks said that while the Labor Day event always features unemployed workers marching with their affiliated unions, this is the first year there will be a special place for the unemployed in the parade to emphasize the need for job creation.

“We represent workers, not just union workers. The work we do helps all workers, and we don’t want these people forgotten,” said Marks, addding, “We want to put the focus back where it needs to be. It needs to be on creating jobs, and helping these people we want to feature in our parade because they deserve it. They’re working Americans who want to work. America wants to work, Pennsylvania wants to work, and we want people to know it and not forget it.”

The Pittsburgh parade kicks off at 10:00 a.m. on Monday, preceded by a press conference with unemployed workers at 9:30 a.m.

The State of Working Pennsylvania

Every September the Keystone Research Center issues its State of Working Pennsylvania.  They introduced it today via a conference call with media representatives and the data is alarming.  One of four Pennsylvania workers found less paid work last year than they desired.  43% of likely voters either were unemployed or knew someone unemployed.  There are 7 1/2 applicants for each job opening and even college graduates and those with advanced degrees have seen their unemployment rates double.

3400 Pennsylvanians have lost their jobs due to government budget cuts.  On average there are 513,500 unemployed workers in Pennsylvania every month and at some point last year 14.3% of all Pennsylvanians were out of work at some point.  That comes to 938,100.

Update:  A White House statement on jobs this morning says 20,000 local government jobs were lost in August and 398,000 since February.  Those are national numbers.  Budget cuts cost jobs.

Meanwhile CEO pay rose 23% while worker’s wages declined 3.1%.  Brian Roberts, CEO of Comcast earned $31,000,000.  Wages rose only for the top 5% of wage earners in the Commonwealth.  Business profits now comprse 26% of all national income yet companies are not hiring.

There exists a serious shortage of demand, for workers, for products and for services.  As wages stagnate and jobs are cut to austerity budgets the ripple effect will send the economy into another recession.  Rural Pennsylvania will be hit especially hard as Social Security, food stamps and unemployment compensation runs out.  UE benefits expire at the end of this year.  Social Security and food stamps are on the chopping block in Washington.

Every dollar of government spending has a ripple effect through the economy.  My spending is your income and if I can’t spend you lose income.  Each dollar spent by government creates $1.42 in economic activity.  Yet Gov. Corbett is sitting on $1.5 billion in extra revenues the state could use to stimulate our economy.  This would have been enough to NOT cut any educational budgets.

We need a further round of vigorous stimulus spending including revenue sharing, something originated by President Nixon, infrastructure work to repair our failing systems and to produce good living wage jobs.  Contracting now is inexpensive and borrowing is attractive due to low interest rates.  We could begin building schools, roads, bridges, mass transit, water and sewage systems and the like at a substantial savings because contractors are underbidding to gain work.  Issuing bonds for the work would be cheap and we’d have the improvements for the foreseeable future.

Unfortunately Gov. Corbett doesn’t see things this way.  Like many others in his Party he has become a fan of austerity.  These “leaders” want to roll back economics which actually work, regulations which actually work and monetary policies which actually work for a system which gave us a succession of boom and bust economies from 1857-1928.  During that era of non governmental interference in markets America was in recession 48% of the time.  Things were radically unstable and people lost their entire life savings regularly.

Since then our economy has been in recession only 18% of the time.  Why would we return to failed policies?  As the KRC says in its report “Advocates of austerity idolize a time when recessions were longer and more frequent.”  Vote Republican and this is what you’ll get.  Unfortunately for the red “T” of Pennsylvania this is what they voted for and they’re going to be hurt disproportionately.  I suppose you get what you deserve sometimes.

State Budget Conference

I spent Monday in Harrisburg attending the Pennsylvania Budget and Policy Center’s annual conference on the state budget.  Michael Wood and Sharon Ward did presentations about the disaster which Gov. Corbett unveiled last week.  The $27.3 billion roadmap for state spending reflects no new taxes or fees meaning gas drilling companies continue receiving OUR natural gas for free.

Perhaps not totally free as it cost them several million dollars to buy the new Governor and numerous members of the Pennsylvania legislature.  While Tom Corbett was cutting corporate taxes and demanding the middle class pay for them, he cut education funding by billions.  No surprise this after he cited New Jersey Gov. Chris Christie as his model during the campaign.  One of the first things Christie did was cut education funding by $1 billion.

Corbett’s cuts to education are severe.  It means tuition for state and state related universities rising about a third.  This will force thousands of students back into a workforce which he does nothing to stimulate.  In fact his budget slashed funds for economic development.  Welfare gets serious cuts also along with Medicaid and hospitals.  Over 1200 employees at DPW will be let go.  Processing paperwork there and preventing fraud will now be far more difficult.

The cuts to health care, on top of eliminating Adult Basic mean poor people are limited to six prescriptions at a time, dental cleanings are one/year, hospital visits rationed, and reimbursements cut.

I keep hearing this meme that “spending cuts are necessary and unavoidable.”  That’s hogwash.  The ARRA funded our state government to the tune of over $3 billion.  This saved thousands of jobs (the 1550 cut in this budget is proof), created many well paying infrastructure jobs, funded the energy innovation hub at Penn State and the old Philadelphia Navy Yard, financed new labs for entrepreneurs in the Lehigh Valley at Ben Franklin Partners along with other worthy projects.  That money is gone thanks to extremist Republicans.  Combine a robust and longer stimulus with proper and responsible legislation from Harrisburg and NO cuts would be necessary.

While the Pennsylvania economy is rebounding with unemployment at 8.2%, income and sales tax revenues increasing this is no time to derail progress and send us back into recession.  Significant prison reform would save billions.  All these right wing extremists wanted tough “law and order” laws such as “3 strikes” and mandatory minimums but now are refusing to pay their cost.  We’ve gone from 18,000 inmates to 54,000 at a  cost of $32,000/inmate/year.  We have 27 prisons and are building three more.  Spending for prisons goes up over $180 million in this budget.

Combine prison reform with serious health care reform and another billion could be saved.  A single payer system wipes out the insane amount being spent on premiums and excess costs.  Throw in closing the Delaware Loophole(600M), an extraction tax on Marcellus shale ($600M), a smokeless tobacco tax ($42M), the Bush tax cuts ($330M), bonus depreciation ($235M)and ending the corporate stock and franchise tax ($90M)and you have a total of $1.89 billion.  We’ve already lost $159 million in gas taxes and the prison/hcr reforms would balance the state budget and allow for increases in critical areas.

Instead job training and early childhood intervention funds are being cut in the proposed federal budget along with family planning and women’s health services.  Trauma and burn centers lose funding in Corbett’s budgets.  Medicaid is currently paying for half of all births in the Commonwealth.  In some rural areas it is 65%.  When he ran on creating jobs Corbett’s budget will result in 8,000 jobs lost either directly or indirectly from hospital cuts.

Where are the jobs Gov. Corbett?  He didn’t run on cutting jobs he ran on creating them.  This budget reflects tens of thousands of new unemployed Pennsylvanians.  1550 state workers, 4,000 hospital jobs, another 4,000 hospital related jobs along with teachers, college professors, staffs at those institutions and the ripple effect these will have on everyone else.  Every dollar the state gives Penn State, for example, creates $1.91 in overall economic activity.  Every dollar the state spends stimulates $1.42.  Cutting the state budget means cutting the Pennsylvania economy when it can least afford to lose ground.



Keystone Research Center: China Trade Cost PA 95,700 Jobs

Trade with China has now cost Pennsylvania 95,700 jobs according to a study done by the Keystone Research Center:

Since 2001, the U.S. trade deficit with China has increased by 274%, a trend that has eliminated an estimated 95,700 jobs in Pennsylvania, the Keystone Research Center reported today, based on a new study by the Economic Policy Institute (EPI) in Washington DC.

“A major factor in the growth in our trade deficit is China’s manipulation of the value of its currency to gain an advantage in our trading relationship,” said Stephen Herzenberg, PhD, Keystone Research Center Economist and Executive Director. “With U.S. unemployment rates not yet on the downswing, continued currency manipulation by the Chinese threatens to further delay and dampen our recovery.”

Under normal conditions, rising Chinese exports would lead to a rise in the value of its currency, but since 2001 the Chinese have prevented this market adjustment by acquiring more than two trillion dollars in foreign exchange reserves.

The currency manipulation is a very serious issue between our nations because it continues to cost us manufacturing jobs in an already poor economic climate.  The Chinese foreign exchange reserves are largely in U.S. dollars as they purchase Treasury bonds.  China has been financing our annual budget deficits and now they are coming home to roost.  VP Dick Cheney famously said “deficits don’t matter.”  They do.  Beginning in 1981 Ronald Reagan began a Republican effort to starve the federal government through massive deficit spending.  The theory was that as the debt grew more and more federal dollars would be forced to go to paying interest on our debt leaving less and less for social programs.  The debt at that time was around $2 trillion.  Now, after eight years of Reaganomics, four under George H.W. Bush and eight of George W. Bush our debt load hit $12 trillion.  China, Japan and the oil cartel countries own most of that debt.  China has a nice cushion now against which it can expand its economy and contract ours because they refuse to revalue their currency.  

The chickens have come home to roost and Pennsylvania voters must realize the folly of their past votes.  Elections do have consequences, especially when people vote against their own economic interests.  Gay marriage, terrorists and atheists are not the threat to the American way of life, voting Republican is.

Stimulus Plan is Saving Pennsylvania Jobs

Gov. Rendell cut the state budget by another $161 million last week and each job lost to these cuts costs Pennsylvanians in other sectors.  62% of jobs lost to state budget cuts are in the private sector according to economists speaking Friday at The Keystone Research Center’s seminar on the ARRA.  The American Recovery and Reinvestment Act has pumped $26 billion into our Commonwealth over the past year and those working in non profit organizations and state agencies administering these funds say it isn’t enough.  Only 18% of grant applications are being approved and many good and worthy projects are missing out due to the expediency of needing to get “bang for the buck” from every dollar spent.

The economy was in such critical condition a year ago we easily forget how dire things were.  The top 1% of the people (in terms of wealth) received 50% of all economic growth since 1993.  The real income of many Americans actually shrank due to inflation.  

Of the $26 billion coming into Pennsylvania Chief Implementation Officer James Creedon says only $13 billion has state responsibility.  The remainder goes directly to organizations.   Of the $11 passing through state hands $4 billion is for Medicaid reimbursements and $2 billion for state budget fiscal relief.  Another $2 billion is designated for education.  PennDOT also got $1.7 billion for infrastructure projects.  Gov. Rendell charged Sec. Creedon with three goals for the funds:  get the spending moving, do it quickly and efficiently and do it with transparency.

How bad were things a year ago?  Lest we forget the Pennsylvania Budget and Policy Center, part of Keystone Research Center, put together some slides.  The graphics tell the story.

The disproportionate growth in economic activity:

How the government action saved the day:

Job losses in Pennsylvania:

Pennsylvania has fared better than most states:

Here’s what happened in real GDP (gross domestic product) growth:

There’s a great clamor about these days, fomented by ignorant Tea Partiers, that deficit spending to address dire economic needs is bad.  We’ve been here before however so we know the danger of backing off these deficits during a serious downturn.  During the Great Depression similar shouts came from the Right and the result was a double dip.  Economists are warning that a slackening of government spending to revive the economy could do what happened before:

Sec. Creedon spoke to the gathering before heading to the Farm Show to milk cows: