Corbett’s Budget Policies Fail…Again

Gov. Corbett signed an incomplete budget into law last night raising spending by over $700 million over the last fiscal year.  It also includes yet another round of tax cuts for businesses ($300 million) while cutting services and programs for the poor.  We continue prioritizing prisons over schools so twenty years down the road we won’t have an educated workforce to keep businesses in the state and our young people will be forced into burglary and prostitution for existence.  Those prisons will come in handy then.

Though the Senate passed both a transportation bill and Medicaid expansion the House refused to go along with those priorities.  They are expected to strip the Medicaid expansion out and so there really, actually is NOT a budget as yet.  The Governor’s promise of a balanced, on time budget was not kept.  That actually requires agreement between the House and Senate, something still being worked on today July 1st.

Republicans in Harrisburg kept school board members quite busy all June attempting to hammer out austerity budgets for schools in the face of $2 billion in lost revenues from the Commonwealth.  When you add the billion Corbett and his cohorts in the legislature cut and the billion they’ve siphoned for failing charter schools we see teachers, support staff and curriculums being cut statewide while local property taxes rise at the maximum rate.  You’re paying more for less and those conservatives you keep electing because they want to end your property taxes are the ones sending them through the roof.  Stupid is as stupid does and stupid is continuing to vote for these idiots.  They won’t pass any tax increase because then they can’t campaign on continuously cutting taxes.  

News flash:  taxes are the price we pay to live in a civilized society.  Civilized societies don’t sacrifice their children’s futures on an altar of personal greed.

Meanwhile all of Corbett’s major initiatives for this budget failed:  liquor privatization, gutting public pensions and selling off the lottery.  A Republican Governor with a GOP controlled legislature, again, could not get his agenda passed.

Another Day Older and Deeper in Debt

By Mark Price, Third and State

Last week, the Pennsylvania Senate Banking and Insurance Committee in a narrow vote approved Senate Bill 975, opening the door to thousands of predatory payday lenders to come to Pennsylvania and charge fees on short-term loans that equal an annual interest rate of over 300% on a typical two-week payday loan.

In April, the Consumer Financial Protection Bureau (CFPB), the federal agency charged with reining in the abusive financial practices, released a white paper that examines payday lending. Based on data collected from payday lenders in 33 states, the paper provides a very basic picture of the key characteristics of the people using these products. As Figure 1 below illustrates, the CFPB found that the overwhelming majority (84%) of borrowers have incomes of less than $40,000.  

Figure 1. Income of Payday Loan Applicants 

With incomes this low, the typical customer actually falls farther behind in their bills after using a payday loan – a point we argued last year using data from the Bureau of Labor Statistics’ Consumer Expenditures Survey (CES).

Table 1 shows conservative two-week spending patterns for an average household making $25,000, $35,000, or $45,000 per year. These three family budgets are based on surveys of actual family spending patterns (drawn from the CES) and include expenses such as food, housing, utilities, transportation, and basic health care. They do not include additional costs such as child care, clothing, and previous debts, including credit cards or car loans. 

A borrower who takes out a $300 payday loan in one two-week period must repay the $300 in principal plus $38.22 in interest and fees during that same period. Based on the CES, families earning $25,000 or $35,000 would be unable to make up the cost of the payday loan and meet other basic expenses. These examples demonstrate why the majority of borrowers are repeat borrowers, taking out loan after loan as fees force them to fall further and further behind.

Table 1. Family Budgets and Payday Loans

The Consumer Financial Protection Bureau came to the same conclusion after examining data provided to them by the payday lenders:

However, these products may become harmful for consumers when they are used to make up for chronic cash flow shortages. We find that a sizable share of payday loan and deposit advance users conduct transactions on a long-term basis, suggesting that they are unable to fully repay the loan and pay other expenses without taking out a new loan shortly thereafter. Two-thirds of payday borrowers in our sample had 7 or more loans in a year. Most of the transactions conducted by consumers with 7 or more loans were taken within 14 days of a previous loan being paid back – frequently, the same day as a previous loan was repaid.

Supporters of SB 975 will argue that it establishes a limit of eight “consecutive short-term” loans, which is an acknowledgment that rapid, repeat borrowing is at the core of the payday loan product. But this limitation is effectively meaningless because the bill allows a borrower to simply wait three business days to borrow again, so the eight-loan limit would never really apply.

As the CFPB data make clear in states with laws like SB 975, the typical borrower of what is supposed to be a 14-day loan is indebted for more than half the year. In other words, the typical consumer borrows $350 and ends up paying $457 in just interest and fees in places where these types of products are legal.

High interest and fees plus repeat borrowing are the keys to payday lender profitability and why this product is ultimately harmful to consumers driving some into bankruptcy. 

To paraphrase that old song made famous by Tennessee Ernie Ford

You borrow over and over, and what do you get? Another day older and deeper in debt. 

Orie Melvin Resigns

Pennsylvania Supreme Court Justice Joan Orie Melvin has finally resigned in advance of her sentencing in early May.  She and two sisters were convicted in the past year of using their state offices, resources and staffs to run Orie Melvin’s two Supreme Court campaigns.  Former State Senator Jane Orie is already in prison.  Janine Orie was convicted with Orie Melvin in February.  The House Judiciary Committee was already advancing impeachment proceedings when the resignation was announced this week.

This leaves the Supreme Court divided 3-3 on partisan lines so any deadlocks will uphold whatever Superior and Commonwealth Court cases wind up in tie votes.  Gov. Corbett must now appoint someone to resume the eight years of the ten year term now vacated by Justice Orie Melvin.  The State Senate must approve that nominee by two thirds vote meaning the 27-23 GOP majority must gain bipartisan support to approve the Governor’s choice.  This means that person must be a moderate, at least.

Superior Court Judge Jack Panella of Bethlehem ran against Orie Melvin but was handicapped by her illegal use of state employees on her campaign.  He should be the obvious choice since he was the only candidate for the seat who ran a clean, legal campaign.

Changing the Subject Doesn’t Make Payday Lending in PA a Better Idea

By Mark Price, Third and State

In legislative hearings last month, proponents of a bill to legalize high-interest payday loans tried to change the subject and questioned the motives of some of their constituents. But these attempts don’t alter the fact that allowing payday lending is a bad idea. 

As we’ve explained before – and as the U.S. military, U.S. Congress, and former President George W. Bush have all agreed – payday loans are a debt trap that further impoverishes low-income families, driving more of them into bankruptcy. Pennsylvania should leave in place the strong regulations that make use of payday loans much less common here than nationally.

Here is a bit more detail on what happened at the September 19 Senate Banking and Insurance Committee hearing on House Bill 2191. Chairman Don White raised the issue of credit cards and alleged that the AARP’s opposition to payday lending was motivated by the organization’s desire to protect a credit card product it offers. At another point, Representative Chris Ross, the sponsor of the bill, warned that payday lenders currently selling a limited number of online payday loans illegally may be stealing the identities of consumers. 

Even if this were true, why does it mean we should legalize storefront payday lenders to locate in local communities throughout Pennsylvania and charge 369% annual interest rates on short-term loans? It doesn’t. 

While the strategy of House Bill 2191’s supporters was to talk as little as possible about the dangers payday lending poses for consumers, more telling was who attended the hearings. The hearing room was full of people who had driven in from around the state – Pittsburgh, Allentown, Philadelphia. Pastors, credit counselors and affordable housing groups showed up in opposition to the bill, even though they weren’t testifying.  

Their presence didn’t stop some committee members from questioning the motives of an AARP volunteer and rushing the testimony of a pastor of a social service ministry and a military veteran. The only supporters of the bill were the out-of-state companies that stand to benefit financially from these 369% APR loans.

The will of the people – and the editorial boards – on payday lending is clear. Don’t legalize it. Let’s hope that the will of the people outweighs the dollars of the payday lenders in this year’s end game on this issue.

Senate Passes Voter ID

The State Senate passed an unconstitutional restriction on voting rights yesterday 26-23.  The Voter ID Act is already disenfranchising voters across the country as the primary season progresses.  A former Congressman in Tennessee and his wife were turned away from the polls on Super Tuesday.   Lincoln Davis served two terms in Congress but now cannot vote.  In Ohio an 86 year old  WW II veteran was denied his right to vote because his VA ID was deemed insufficient.  “I went to war for this country, but now I can’t vote in this country.”

Truly, it is a sad day for America when war veterans are not allowed to vote.  It is pathetic and an infringement of all those “rights” and “freedoms,” that “liberty” the Tea baggers are always claiming.  Trouble is is it’s only their rights, freedoms and liberties they’re concerned with.  Fringe legislative lunatics like Daryl Metcalfe and Mike Turzai are pushing a radical agenda through Harrisburg and Gov. gasbag is signing everything.  The only things they’ve done regarding jobs is to slash them.  Your rights, freedoms and liberty mean nothing.

This is simply going to cost the taxpayers money in legal fees.  Any voter denied their constitutional right to vote can sue the Commonwealth and win.  Like the infamous anti-abortion bill passed late last year one thing Republicans have accomplished is a welfare system for trial lawyers.  They’ll be feeding off the litigation arising from the Corbett agenda for years at your expense.  Meanwhile they’ll turn around and continue cutting vital safety net programs to fund the defense of these lawsuits.

Elections do have consequences.  So will this bill.

11 Things to Hate about the Senate Drilling Fee Bill

A blog post from Sharon Ward, originally published on Third and State.

Last week, the state Senate Environmental Resources and Energy Committee amended legislation to create a Marcellus Shale drilling impact fee in Pennsylvania. The full Senate could vote on it as soon as this week.

To channel my inner David Letterman, I have here a copy of the top 11 things to hate about this plan. (There was so much to hate about it, we couldn’t even fit it into a top 10 list.)

  1. Drilling companies get a great deal. The 1% effective tax rate is one of the lowest in the country, much lower than West Virginia, Texas, Wyoming, New Mexico, Louisiana or Alaska.
  2. The bill provides no funding for statewide drilling impacts, but it gives drilling impact money to communities that have no drilling at all. A town miles away from an active well can still get a fat check every year.
  3. The bill strips criminal penalties for drillers who fail to pay the tax or fail to submit reports on their drilling activity. Welcome to Pennsylvania, feel free to flout the law.
  4. Despite raising hundreds of millions of dollars, the fee doesn’t put one penny toward enforcement of state environmental laws, pipeline inspections or groundwater testing. Taxpayers in Allentown and Chester get to pay for that – and may get contaminated water to boot.
  5. The bill allows local governments to use drilling impact funds to reduce local property taxes. A community that can reduce its property taxes must have no drilling impact. So why get money from an impact fee?
  6. There’s a hitch. For communities to collect their impact fee they have to adopt a state-approved zoning ordinance. Try to protect your citizens from the drillers with stricter rules on noise, light or hours of operation – no soup for you. So much for local control.
  7. Companies would pay no fee for 75% of the well’s active life. Better have those accidents early on – or taxpayers will have to pick up the tab.
  8. Deadbeat drillers get a free pass. Walk away from your well when the gas runs dry and the state will come in and cap it for you. So much for corporate responsibility.
  9. The rest of us send our taxes to Harrisburg to pay for libraries, schools, hospitals, nursing homes, roads, bridges, and colleges throughout the state. The drilling communities get to keep drilling revenue and benefit from statewide tax dollars too. Sweet deal.
  10. Funding for Grower Greener, open space preservation, clean energy, recreation trails, or conservation programs? Fuggetaboutit.
  11. For one moment, there was a chance for politicians from across the state to come together, make a clear-eyed assessment of the expected benefits and certain costs of gas drilling, and enact a responsible plan. A plan to protect the environment, compensate local governments for drilling-related costs, and provide resources to promote learning, spur innovation and improve the quality of life of all Pennsylvanians. And they missed it.

Third and State Week in Review: Unemployment Benefits, Drilling Fee Bill and the Latest Jobs Report

Last week, we blogged about a drilling fee bill moving in the Pennsylvania Senate, a resolution to the legislative standoff over extended unemployment benefits, an update on the May jobs report and more.

IN CASE YOU MISSED IT

  • On Marcellus Shale, Michael Wood writes about changes to Senator Joseph Scarnati’s drilling impact fee plan that makes an already weak bill a lot weaker.
  • On the state budget, Kate Atkins blogs about a budget rally last week that featured umbrellas on a sunny day and a message to lawmakers that fiscally and economically it is still raining in Pennsylvania.
  • On unemployment, Mark Price highlights the passage of state legislation that preserves extended federal unemployment benefits for 45,000 Pennsylvanians but comes at a cost for future unemployed workers.
  • Finally, on jobs and the economy, Mark writes that Pennsylvania’s May jobs report provides some cause for concern.

More blog posts this week. Keep us bookmarked and join the conversation!

Pa. Senate Drilling Fee Moves Forward, with Changes that Further Weaken Bill

A blog post from Michael Wood, originally published on Third and State.

Pennsylvania state Senator Joe Scarnati’s legislation to enact a Marcellus Shale gas drilling fee was amended and voted out of the Senate Environmental Resources and Energy Committee by unanimous votes Tuesday.

Unfortunately, the amendment offered by committee chair, state Senator Mary Jo White (R-Venango), makes an already weak bill a lot weaker.

The revised bill significantly reduces the fee paid by wells from what was proposed by Senator Scarnati (R-Jefferson) and limits the assessments to the first 10 years of well production.

Our initial analysis indicates the bill would set the effective rate of the fee over the 40-year life of a well to about 1%. This is significantly lower than any other drilling tax or fee plans in the General Assembly. Senator Scarnati’s original fee structure carried an effective rate of 3.1%.

The bill lets the drillers off the hook, with a tiny tax that provides no funding for schools, colleges, health care or human services. It provides little to no funding for the state to finance responsible oversight of well drilling, let alone funding for clean air and water.

Meanwhile, the General Assembly is poised to adopt a budget that will make large cuts to education, continue underfunding human services, raise college tuition costs and reduce services for people who are vulnerable.

The revised bill narrowly defines the types of environmental and conservation investments that can be made. Senator White’s amendment specifically prohibits local governments from using fee revenue for environmental programs, trails, parks, open space, flood plain management, conservation districts, and agricultural preservation.

A drilling tax should help to compensate local governments for drilling-related costs, but the revised bill keeps a provision in the original plan permitting funds to be used for property tax reductions in drilling counties, including communities that don’t have a single active well. The revised bill also keeps a provision that holds local governments hostage by requiring them to adopt a standard zoning ordinance in order to access funding.

The good news is that the bill will now move to the floor of the Senate, where it can be improved with further amendments. As Jan Jarrett writes at the PennFuture blog, several Environmental Resources and Energy Committee members, including state Senators Ted Erickson (R-Delaware), Lisa Baker (R-Luzerne), John Yudichak (D-Luzerne) and Andy Dinniman (D-Chester), voted to move the bill forward but had serious concerns about it and promised to introduce amendments on the Senate floor.

“Their concerns covered the amount of revenue that would be raised, the lack of support for Growing Greener, restrictive model ordinance language and the failure to address statewide impacts of drilling,” Jan wrote. “The floor debate should be interesting.”

With little benefit from this fee going to parts of the state outside the Marcellus Shale, it will be particularly interesting to see what position senators in non-drilling communities take. Stay tuned.

Legislature Meets Through Weekend Working on Budget

Our state legislators are working overtime this weekend along with an army of lobbyists feverishly working the hallways trying to influence budget compromises.  The fiscal year for Pennsylvania ends at midnight Monday night.  Failure, once again, to pass a budget by then will, again, result in furloughs of state employees.

This has become a bad habit as Republicans continue stonewalling Ed Rendell’s budgets.  This year the argument is primarily over a 6% increase in state funding for schools.  State funding for both K-12 and college have been repeatedly cut in Harrisburg, especially as new mandates are ordered and as a percentage of costs.  A 6% increase is a small first step in reversing this trend and alleviating property tax burdens on home owners and renters.  

The other sticking point is additional investment.  Republicans who display large anti-debt posters on their office windows are perverse to the accumulation of any state debt for economic expansion and capital projects.  Unless we are willing to invest in our communities through state funding we will suffer economically.

Update:  Republicans walked out on negotiations Friday.  I suppose they felt having a stormy weekend off to go to the beach was more important than coming to an agreement on the budget.