Final Pa. Budget Fails to Make Up Lost Ground

By Sharon Ward, Third and State

The Pennsylvania Budget and Policy Center has released a full detailed analysis of the 2013-14 state budget plan spending $28.376 billion, roughly $645 million (or 2.3%) more than in the 2012-13 fiscal year.

Governor Tom Corbett signed the budget into law late in the evening of June 30, 2013. Overall, the plan is $64 million less than the Governor proposed in February, reflecting nearly $113 million in reduced spending for public school pensions and school employees’ Social Security payments along with a shift of $90 million in General Fund spending off budget to other funds.

2013-14 General Fund Summary

The plan includes a small increase to basic education funding, $122.5 million overall, with $30.2 million allocated to 21 school districts through a supplemental allocation, on top of the $90 million increase in the Governor’s proposal.

After many years of cuts, most programs received small increases in the Governor’s proposed budget, which remained in the final plan.

Changes to pension benefits for current employees, the cornerstone of the Governor’s original budget proposal, did not occur. The Legislature does not seem inclined to tamper with benefits for current employees. A proposal to move to a 401(k)-style retirement plan for new employees gained traction later in the session but was not adopted. This proposal may return in the fall.

Also abandoned was an $800 million education initiative to be funded through the sale of state liquor stores. While the privatization vs. modernization debate held center stage until the last week of the session, the school funding component was quickly abandoned and was not part of legislative proposals. Privatization is likely to be considered in the fall, as well.

For the first time in two years, there were no major cuts to services for vulnerable Pennsylvanians; however, a bill that would expand Medicaid coverage in 2014, a state option under the federal Affordable Care Act, was left undone. Legislation including the Medicaid expansion won bipartisan support in the Senate, but the House stripped out the expansion provision from the bill. When the bill returned to the Senate, a last ditch effort to restore the Medicaid expansion provision failed in a dramatic Senate committee vote on July 3.

Finally, a transportation funding package that would repair crumbling infrastructure and give a much needed shot in the arm to Pennsylvania’s flagging job growth failed to pass the House, despite overwhelming support in the Senate.

Get all the details from PBPC's budget analysis.

In the Bid to Privatize PA’s Lottery, One Is the Loneliest Number

By Stephen Herzenberg, Third and State

One is the loneliest number that you'll ever do …

Although I’m dating myself, some of you may recognize the Harry Nilsson song made famous by Three Dog Night. We recommend that Governor Tom Corbett download it to his iPod as he contemplates whether to accept a solitary bid from Camelot Global Services to take over the operation of the Pennsylvania Lottery. Whether privatizing state services or getting a new roof for your house, having a single lonely bidder is a red flag for a fleecing — for overpaying the contractor.

In its bid, Camelot promises 20 to 30 years of lottery profits that barely increase at the rate of inflation — even with the addition of new lottery games such as Keno and online gaming. The deal could produce big-time profits for Camelot with performance no better than the public system could produce. If the company maxes out its incentive-based compensation over the initial 20-year contract, it could receive $1.15 billion in today’s dollars; more when you count annual management fees.

A good deal for Camelot, but not for the Pennsylvania seniors who benefit from lottery proceeds, as the Keystone Research Center finds in a new report. The impact on seniors is critical since the lottery generates $1 billion a year for services that benefit area senior centers, low-cost prescription drugs, transportation for seniors, and property tax and rent rebates.

Experience from other states offers little to recommend this deal. Illinois is the only state to privatize its lottery, and it is now embroiled in litigation about how much the contractor owes the state because of poor performance. Indiana just privatized its lottery, so there’s no information yet on the results. Both states received more than one bid from private companies.

Pennsylvania’s move toward privatization is especially puzzling given the lottery’s good track record and record profits in the last two years. A recent Pennsylvania Treasury analysis found that administrative costs in the Pennsylvania Lottery were the second lowest, as a share of lottery system sales, of the 10 largest lotteries in the United States.

The Keystone report also raises questions about financial ties between Camelot and Greenhill & Co., the private consultant retained by the Corbett administration to manage the bidding process. Greenhill worked on the $576 million sale of Camelot to its current owner, and would receive millions if the privatization deal goes through. 

When you add up all the questions about this deal — starting but not ending with the lack of multiple bidders, the lack of transparency, the low revenue commitments, and an apparent conflict of interest that could motivate Greenhill to push for privatization — it seems like a game of tee-ball for seven-year olds: as in, "eight strikes and you’re out."

Based on all the questions raised by Keystone and others, at the very minimum the Corbett administration should slow down and undertake in partnership with the Legislature a transparent and comprehensive review of lottery privatization before locking the commonwealth into a bad deal for a generation.


Let the Facts Get in the Way of a Good Story: Private School Bus Services in PA Cost More

A blog post by Stephen Herzenberg, originally published at Third and State.

The standard conservative narrative is that private delivery of services and goods trumps government delivery. In Harrisburg, for example, Governor Corbett’s Council on Privatization and Innovation often presents its goal as privatization, taking for granted that this will be more efficient and cost-effective.

In fact, the record on privatization shows that in many cases privatization fails to deliver promised savings and can undercut service quality. That’s part of why Cornell Professor Mildred Warner has found that local governments often bring work back in house.

Earlier this week we released a report, Runaway Spending, which underscores that you can’t simply assume private is better. The report documents that private school bus transportation services in Pennsylvania cost more than when districts provide their own transportation. Even so, the Pennsylvania trend over time is towards slightly more privatization, from 64% in 1986 to 72% in 2008.

Why? One reason in Pennsylvania is that the state reimburses school transportation services more generously when districts contract than when they self provide. Districts may also be attracted by the upfront fee they receive for selling their bus fleet. The downside of that sale, however, is that contractors have more leverage when negotiating terms for unanticipated additional services (e.g., for school sports teams that make the playoffs) or for a new contract.

The factors that make private services more expensive in the case of school buses are also at play in many other cases of privatization. These factors include limited competition in the private sector, the transition costs associated with any change in contractor or switch back to public provision, higher private-sector manager and executive salaries, the need to charge enough to make a profit, and the costs of monitoring private contractors.

Bottom line: the state and local government – and the Governor’s Privatization and Innovation Council – need to do their homework when considering alternative options for delivering publicly funded services. That’s actually a message that former Indianapolis Mayor Stephen Goldsmith brought to the council when he addressed its first meeting.

We’ll know that the Council has shed its ideological beginnings when it asks Matt Brouillette to give in his resig…I mean, when its recommendations include a balance of recommendations for in-sourcing, for contracting out, and for mixed public-private delivery – recommendations grounded in analysis of data, the dynamics of particular markets, and the value-added contractors provide compared to cost increases. And, oh yes, we do think that the quality of workers’ jobs with public versus private delivery should be a consideration.

We look forward to the Council inviting us to present the findings of our study. We also look forward to being invited to join the Council – even if Matt hasn’t left yet.

PA Liquor Privatization Findings Too Good to Be True

A blog post by Stephen Herzenberg, originally published at Third and State.

The privatization of Pennsylvania’s wine and spirits shops will not do much for state revenues but will usher in alcohol-related social problems.

Those were the key takeaways offered by researchers working with the Keystone Research Center at hearings of the Pennsylvania House Liquor Control Committee last week in Philadelphia.

University of Michigan researcher Roland Zullo, who has worked with Keystone on privatization issues, presented the results of his analysis of a pro-privatization study commissioned by Governor Tom Corbett’s Budget Office. As Zullo’s written testimony shows, the study, performed by Public Finance Management  (PFM), was very open about its assignment: show how privatization will maintain annual wine and spirits revenue for the state, while maximizing upfront fees from privatizing.

As Roland shows, this is an impossible assignment. Consequently, PFM was forced to make implausible and incompatible assumptions. To maintain revenue neutrality, PFM assumed very high taxes on wine and spirits, a high annual fee from franchisees, and low price markups by private wholesalers and retailers.

These same assumptions, however, would make wine and spirits franchises a dud as a business opportunity – companies would make low profits or lose money, and they sure won’t give the state a big upfront check for the right to lose money. As Roland said, “I can’t square this circle.”

Keystone Labor Economist Mark Price reviewed the likely negative social impacts of privatization at the hearings last week.

He also showed that researchers for the Commonwealth Foundation left key variables out of their analysis of state differences in alcohol-related traffic fatalities, which they have used to argue that traffic fatalities are the same or lower in states with privatized alcohol distribution systems.

One of the missing variables was average miles traveled. Surprise! When people drive further they have a greater chance of an accident and a traffic fatality. Put the missing variables into the statistical analysis and you find that alcohol-related traffic fatalities are higher in privatized states than “heavy control” states such as Pennsylvania.

News & Notes November 17, 2011

The Mayor of Oakland let it slip to the BBC that she was on a national conference call with 18 other Mayors discussing the Occupy movement.  Coincidentally all of these Occupy camps were raided and cleared by police.  Pure coincidence though, move on, there’s nothing to see here.

The timing is interesting with the Poliburo report on deficit reduction due next week.  The level of police brutality required to protect the 1% is increasing:

As usual Keith Olbermann hit the nail on the head once again:

One of the many evils of privatization is the lack of accountability to the public.  In New Mexico they’re having some issues with their four privatized prisons.

A man was arrested in Indiana, PA yesterday for last week’s shooting at the White House.

Former star Nittany Lion Dave Joyner has been appointed as Penn State’s Acting Athletic Director.  He takes a leave from his role as a Trustee to step in.

The State Senate passed a very weak Marcellus shale impact fee bill.  The legislation reverses democracy by outlawing the passage of local zoning laws and ordinances.  Why have any municipalities at all now that we’ll have this and ACRE?

The Sunday New York Times reminded us of the crazy days of the 80’s when private equity firms headed by vultures named Mitt Romney exploited capitalism and destroyed entire towns while gutting local companies and raiding pension plans.

Republicans cannot decide on a candidate because they’ve become so extreme that none can seriously challenge in a national election any longer.  This article on Ron Paul doesn’t even mention his past as a white supremacist for example.

The latest flavor of the moment is disgraced former Speaker Newt Gingrich.  Ousted on ethics charges he has essentially (like Herman Cain) been conducting a book tour disguised as a presidential campaign.  His entire staff walked out once because he was more concerned with selling books than winning.  Now on his third wife he is a serial adulterer.

Newt’s problem of the moment is the $300,000 he took from Freddie Mac for lobbying for the outfit.  Conservatives have been blaming Fannie and Freddie for the economic crash because they need scapegoats which aren’t Wall Street banks.

An Oklahoma City pastor says half of all murders in cities are done by homosexuals.  Wow, no wonder prisons are such fun places!  Tom Vineyard of the Windsor Hills (not Westboro) Baptist Church is spreading hate and fear unnecessarily through lies and smears.  Is it time to begin taxing churches?  This isn’t christian so what, exactly, is it?  I’d love to watch him have to prove this one.

Corbett Announces Education Plan

Gov. Corbett traveled to York this afternoon to roll out his plan for education at a charter school which is a failure itself.  Charter schools are a privatization of our public system of education.  This means higher costs to parents and taxpayers, accountability to no one and corruption.  Students attending charter schools are not learning any better than those in public schools even as public schools are forced to accept those who are disabled, mentally challenged, developmentally disabled and who have learning disabilities.

Charter schools have failed.  They are not subject to standardized testing and when they are tested they are no better.  Yes, dropout rates are troubling but these numbers reflect both a lack of commitment by parents and an economy which is so hurting people they see no point in getting an education.  When young people are graduating from college unable to find a job what is the incentive to stay ion school at all?

Too many parents don’t value an education and do not instill a love of learning in their children.  Many homes exist in which no books reside.  When in school their children wind up disrupting classes for those who wish to learn, bully others, and create violence.  In my opinion if they don’t want to be there they, and we, are better off allowing them to leave.

Let us address the underlying issues, parenting and economic depression, instead of attacking dedicated teachers and administrators.  Gov. Corbett slashed funding for public schools and higher education this year.  Though state revenue increases allowed him to restore that funding he chose not to do so.  His priority is privatizing education to profit his political donors instead of insuring those children who want a quality education receive one.

Attacking teachers is not the answer.  The Governor only admits that “many” teachers are excellent.  He needs to spend time in our public schools to learn a few things himself.  Attacking administrators is easy but every successful organization requires management and, frankly, the management to worker ratio in public schools is probably less than most businesses.  

Failing school districts are failing because they don’t have enough money.  Dependence on property taxes isn’t fair and wealthy districts with enough money are producing quality educations.  Failing districts are almost always in poor urban areas which have lower property values.  Compare Philadelphia and Lower Merion for example.  One solution is to pool all school taxes and distribute the funds equally to school districts according tot he number of students.  This would raise many failing districts to acceptable standards.  Then we need to provide security in urban schools so children feel safe, avoid being bullied, and have books and supplies sufficient for a successful education.

Sen. Pat Browne just embarrassed himself by citing GE as a company which outsourced jobs because the American workforce isn’t properly educated.  That’s hogwash.  GE and other corporations outsourced jobs to exploit cheap labor markets in Asia.  They moved those jobs not because we are educated enough, but because workers in Vietnam, Thailand, Indonesia, Malaysia and elsewhere, totally uneducated work forces, will work for a quarter an hour.  If Sen. Browne thinks greed and profits wasn’t the motivation for Jeffrey Immelt he needs to stop being delusional.

Public Health Experts Advise Against Further Privatization of Alcohol Sales

A blog post from Stephen Herzenberg, originally published on Third and State.

Back in April, a group of public health experts put out a statement with little fanfare recommending against the further privatization of alcohol sales.

This recommendation is based on evidence that privatization would increase excessive alcohol consumption and related health and social problems. It was released in an April statement from the Task Force on Community Preventive Services, an independent, volunteer body of public health experts created in 1996 by the U.S. Department of Health and Human Services.

The debate over privatizing Pennsylvania’s wine and spirits shops may be taking a backseat to the state budget these days, but as the conversation returns to privatization in the fall, lawmakers and journalists should read the Task Force’s findings. It is the most definitive statement on retail alcohol privatization issued to date by U.S. public health researchers.

To help, the Keystone Research Center has put together a policy brief explaining how the Task Force makes recommendations and the basis for its findings on alcohol privatization.

In a nutshell, the recommendation is based on the best available evidence, drawn from research on “natural experiments” with actual privatizations. After reviewing 12 studies of a total of 21 privatization cases, the Task Force found enough evidence to conclude that privatization results in an increase in “per capita alcohol consumption, a well-established proxy for excessive consumption.”

In other words, the Task Force found consensus in the scientific and public health communities that privatization will increase alcohol consumption and is likely, therefore, to increase problems associated with excessive consumption.

In addition to reviewing studies of “natural experiments” with privatization, the Task Force also found 16 other high-quality studies that examined the impact of private retail distribution on health and other social problems across different jurisdictions (some with private retail distribution and some without). The preponderance of this “secondary evidence” showed an increase in health and other social problems from private alcohol distribution.

The debate over privatizing alcohol sales is far from over. As lawmakers continue to consider this concept, the findings and recommendation from the Task Force deserve careful consideration as the definitive statement of the public health and scholarly research communities.

In Case You Missed It: Third and State Blog for Week of March 14

This week on Third and State,  we blogged about the state budget, privatization, fruit salad (really?), and much more!

In case you missed it:

  • On the state budget, Sharon Ward shared resources from the Pennsylvania Budget Summit this week and wrote about priorities in the budget. Chris Lilienthal, meanwhile, highlighted a United Way of Pennsylvania survey documenting just how much budget cuts and the recession have taken a toll on vulnerable Pennsylvanians and the organizations that help them.
  • On privatization, Michael Wood took a closer look at the real costs of privatization, with highlights from a Budget Summit session on the topic.
  • In debunking claims about public- versus private-sector wages in Governor Corbett’s budget speech, Mark Price suggested that the Governor’s speech writers are fond of fruit salad – or at least apple-to-pears comparisons.
  • Finally, Mark has this week’s “Dark Humor” Friday Funny: an article from The Onion explaining why March Madness has office employees in Columbus, Ohio thinking about how many of their co-workers were laid off in the wake of the recession.

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

Privatize Social Security???

One of the central tenets of Republican economic policy is the privatization of government.  Such action by Reagan privatizing Freddie Mac and Fanny Mae helped cause the current crisis.  They began as federal agencies and sold off to private investors.  Their CEO’s made multiple millions and walked away from their disastrous decisions rich men.

George W. Bush, John McCain and the GOP want to privatize Social Security and turn your retirement over to major Wall Street investment banks.  Three of the five major firms are now history.  

Do you really trust your retirement to these Wall Street executives?  Voting for John McCain could cause your golden years to be golden only for the ravenous Wall Street CEO’s and their golden parachutes.  You’ll be left begging for food on the streets.

Lawsuit Targets Corbett

Republicans believe in privatization because it feeds their campaign coffers.  By turning public service into private profit for their friends through no bid contracts they force tax payers to pay more for government services and enrich their corporate friends.  Their corporate friends then return the favor with lavish campaign contributions.

Its a rather nice gravy train and who cares if the citizens get short changed?  Well Tom Corbett, the Pennsylvania Attorney General has gotten his hand caught in the cookie jar.  After charging House Democrats with the improper use of taxpayer funds he has now been accused of the same by a former prosecutor.

Thomas D. Kimmett has sued Corbett for firing him after trying to blow the whistle on the operation.  Kimmitt accuses Corbett of privatizing a program to collect delinquent taxes and giving a company 40% of the recovered proceeds in a no bid contract.  Settlements with taxpayers were sent to the collection agency in spite of the fact settlements had been reached.  Once you reach a settlement there is no need for collection.

This was a blatant attempt at making kickbacks to the collectiona gency in my opinion.  Corbett is no better than Mike Veon and Bill DeWeese in his conduct.

“The private collection agency, chosen without any bidding process by the attorney general’s office, would then collect a fat commission after having done little or nothing to earn it,” Kimmett said in his lawsuit filed in U.S. District Court in Harrisburg. The defendants include officials in the attorney general’s office and the state Revenue Department, which collects state taxes.

Of course Tom Corbett is owned, lock, stock and barrell, by Bob Asher, the Montgomery County candy maker and convicted felon (for political corruption).  It is an outrage that our Attorney General would allow himself to be associated with the likes of Asher who was convicted of extorting a $300,000 contribution to the PA Republican Party through his cohort Bud Dwyer, the State Treasurer at the time.  This was also about a no bid contract.  Dwyer committed suicide rather than face prison.  Asher went to federal prison for a year.  Now he is the single largest financial benefactor for Pennsylvania Republicans.

Why do supposed prosecutors like Todd Stephens of Montgomery County associate themselves with someone convicted of political corruption?  Perhaps the same lack of ethics that allows Stephens to accept campaign contributions from the lawyers for people he is prosecuting is at work here.  

After all, in Todd Stephens’mind, once you accept money from a crook like Asher why not sell the DA’s office to the defense lawyers too?  Is this the sort of person we want representing us in Harrisburg?  I know Rick Taylor and Taylor’s ethics would never permit such an appearance of corruption.