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State Tax Cuts Take a Bite Out of Pennsylvania’s Budget Pie

9:36 am in Uncategorized by ThirdandState

By Chris Lilienthal, Third and State

Advocates delivered half a pie to every Pennsylvania legislator Tuesday. Why half a pie?

To remind them that a decade of large tax cuts for businesses has left schools, health care services, and local communities with a smaller share of the state budget pie.

Tax cuts enacted since 1999 have drained close to $3 billion this year alone from state coffers. The cost of the tax cuts has more than tripled since 2002, with little to show for it. Too often, these tax cuts are put in place with very little accountability or obligation for companies to create jobs. In fact, Pennsylvania ranked 27th in job growth in 1999-2000 but fell to 34th in 2011-12.

Budget cuts fueled by large business tax cuts also pass the buck to school districts and local governments – and onto local taxpayers.

Governor Corbett is now proposing a new round of tax cuts for 2015 and beyond that will cost as much as an additional $1 billion. The proposal includes no plan to close tax loopholes that allow companies to hide profits and avoid paying their share of taxes.

Pennsylvania needs a budget that returns to tried-and-true investments in education and the public infrastructure that promotes long-term economic growth. After a long economic downturn, that is the path to more jobs, stronger communities, and a brighter future for our children.

We can fund corporate tax cuts or we can fund our children’s schools, but increasingly we can’t do both. Giving larger slices of the pie to profitable corporations means less money in the classroom, fewer early childhood programs, and less support for local services.

Pennsylvania needs real tax reform that levels the playing field for businesses that play by the rules, and stops giving away dollars that are essential to helping our children and families succeed. Only then will we be able to invest in a world-class public education and the community assets that build a stronger economy.

Photo by Mr. T in DC released under Creative Commons License

ALEC Policies Sell ‘Snake Oil to the States’

2:11 pm in Uncategorized by ThirdandState

Would billionaires spend millions to influence your  vote if it had no value?

Would billionaires spend millions to influence your vote if it had no value

By Sharon Ward, Third and States

Three national organizations offered a scathing criticism of policies endorsed by the American Legislative Exchange Council, or ALEC, in a conference call with reporters last week. Their findings strike a stake in the heart of ALEC claims that its view of the world — lower taxes, fewer workplace protections, and diminished public investments — is good for the public.

Pennsylvania state lawmakers who look to ALEC for guidance on economic policy should stand up and take notice.

Iowa Policy Project research director Peter Fisher discussed a recent report he co-authored with researchers from Good Jobs First, concluding that the tax, budget, and economic prescriptions put forth by ALEC simply don’t work.

Selling Snake Oil to the States took a look at ALEC’s annual Rich States, Poor States report, which ranks states based on their “economic outlooks” as defined by ALEC. The factors should come as no surprise: states with low taxes and right-to-work laws rank high by ALEC; those with progressive taxes, corporate income taxes, and worker protections rank far behind.

Fisher compared the ALEC rankings with actual state performance on real economic indicators over a four-year period. Do ALEC’s policy prescriptions improve state economies? The answer is no.

Between 2007 and 2011, researchers found no relationship between a high ALEC ranking and employment. They did find a correlation on personal incomes and poverty rates among states ranked high by ALEC, but it was a negative one — the better a state fared on the ALEC scale, the worse it did in real life. As Fisher said during the conference call:

It should be hardly surprising that policies to keep wages low have the effect of lowering the state’s income. … The ALEC policy prescriptions for states will not lead to growth and prosperity but to further inequality and lower incomes.

The Center on Budget and Policy Priorities examined sweeping tax and budget policies that ALEC is currently lobbying for in the states. The policies largely encompass deep tax cuts for wealthy individuals, investors, and corporations that will leave middle- and lower-income families paying more.

Both reports note that the ALEC agenda promotes low wage growth for families, fewer workplace protections, and strategies to starve public investments in education, health care, and other priorities — all of which reputable economists agree are critical to job creation and economic growth.

It is an article of faith among Pennsylvania lawmakers that ALEC policies are good for the economy. These reports provide clear and convincing evidence to the contrary: the arguments that the ALEC agenda are good for real people are nothing but snake oil. The policies are good for the businesses that pour millions into ALEC to promote this agenda.

Governor Tom Corbett has hidden large expensive new tax cuts to profitable corporations in his budget proposal released this month. This and other ALEC agenda items won’t create jobs, but they will lead to greater inequality, slower income growth, and continued starvation of our public schools, transit systems, and other priorities.
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Pennsylvania Tax Giveaways and an Island in the Sun

9:01 am in Uncategorized by ThirdandState

This is Oracle's headquarters.

By Jamar Thrasher, Third and State

A few weeks ago, the Pennsylvania General Assembly fast-tracked a bill in the waning days of the legislative session to allow certain private companies to keep most of the state income taxes of new employees. News reports to follow indicated the new tax giveaway was designed to lure California-based software firm Oracle to State College.

Well, it turns out the CEO of Oracle, which will benefit from the largess of Pennsylvania taxpayers, recently bought his very own Hawaiian island, as CNN reported back in June.

Oracle CEO Larry Ellison, the third richest man in the U.S., purchased about 98% of Lana’i, the sixth largest of the Hawaiian islands. Forbes reported that the deal was rumored to be worth $500 million.

As CNN tells us:

The island includes two luxury resorts, two golf courses, two club houses and 88,000 acres of land, according to a document filed with the Public Utilities Commission.

Which bring us back to Pennsylvania, where Governor Corbett recently signed House Bill 2626, allowing qualifying companies that create at least 250 new jobs within five years to pocket 95% of the personal income taxes paid by the new employees.

Legislative sources told The Philadelphia Inquirer that “the bill was designed to lure California-based Oracle, the world’s third-largest software maker with $37 billion in revenue last year, to open a facility in the Penn State region, which would provide a pool of highly educated job seekers.”

We’ve already blogged about why this bill is a bad deal for Pennsylvanians, but Larry Ellison’s island provides us with yet another reason.

Oracle should not be pocketing the withholding taxes of new employees in State College, especially at a time when the state is cutting investments in schools and underfunding infrastructure.

And especially when the boss is doing well enough to afford an island in the sun.

Photo by Alamagordo under Creative Commons license.

Not Exactly a Mahogany-paneled Corporate Boardroom

10:42 am in Uncategorized by ThirdandState

By Kate Atkins, Third and State

Montgomery County Budget ForumA hundred days after passage of the state budget, it is too soon to fully assess the impact of cuts to human services, Montgomery County’s administrator for behavioral health and developmental disabilities told a group of 50 consumers and social service providers at a budget forum last week.

Still, Administrator Eric Goldstein told the forum at the Norristown Recovery and Education Center that he has concerns about the state’s move toward block grants for human services funding. Unlike Bucks, Chester, and Delaware counties, Montgomery County did not apply to be part of this year’s new pilot block grant for the Human Services Development Fund.

Eric Goldstein was joined by speaker after speaker who testified to the importance of the modest dollars invested in prevention and community supports for people struggling with mental illness or substance abuse.

One speaker, Troy, a solidly built man with a confident manner and a winning smile, said people call him a “success story,” but he remembered the days when he struggled with drug addiction. He described how he would walk into the Norristown Center and feel a lift from the friendly and familiar faces of the staff, who would ask him how he was doing.

“I’m looking for a job,” he would tell them.

“Really?” they would reply.

“No,” he would admit. “Not really.”

Through the Center, which is run by the Mental Health Association of Southeastern Pennsylvania, Troy built up his self-esteem and was able to find work counseling others.

In the grand scheme of things, it doesn’t cost a lot of money to maintain a drop-in center in Norristown. Eric Goldstein, gesturing to the neatly-painted cinder block walls and freshly waxed linoleum floor, pointed out that it wasn’t exactly a mahogany-paneled corporate boardroom. But the cost of not having local community resources like this one would be enormous.

Another speaker began by saying she had not wanted to speak, but realized she had to. She was an elementary school teacher, she began, from a family of ministers, educators, and lawyers. In her late thirties, she went through a difficult period after the death of her mother and was diagnosed with bipolar disorder. She was not able to keep her job. Her family did not believe the diagnosis, she told us, and shut their doors to her.

“Strangers had to take me in,” she said, tears in her eyes. “Strangers.”

She is now living in the Halfway There shelter as she puts her life back together.

Eric Goldstein closed the evening by reminding the crowd that we are in this together. The line, he said, between people with mental illness and the rest of us is very thin.

Representative Matt Bradford also spoke, reminding us that the state is facing hard economic times but does have choices in how to respond to the challenging fiscal reality. He cited the Legislature’s decision to give up to $1.6 billion in tax credits to Shell Oil at the same time the state is cutting funding for human services.

Get more information on how you can advocate with Better Choices for Pennsylvania for supports for people struggling with mental illness and substance abuse.

Pa. Budget: Failing to Invest in a Stronger State Economy

7:38 am in Uncategorized by ThirdandState

By Chris Lilienthal, Third and State

Despite ending the 2011-12 fiscal year with a $649 million fund balance, Pennsylvania fails to make the investments essential to building a strong economy or to reverse a recent trend where job growth in the commonwealth has lagged behind other states.

So concludes the Pennsylvania Budget and Policy Center analysis of the enacted 2012-13 state budget, which was released Friday.

In the final budget, the General Assembly restores some of the cuts proposed by Governor Tom Corbett, while leaving intact a 10% cut to human services and deep cuts to public schools and higher education made in 2011. The budget continues to shift costs to local governments and taxpayers, while adding new tax breaks for businesses.

The spending plan, at $27.656 billion, is $517 million more than the Governor’s February proposal but remains below budgeted 2008-09 levels, despite four years of recession-driven increases in demand for services. The largest cut in this budget comes from the elimination of the General Assistance Program, which provides a temporary monthly benefit to 68,887 Pennsylvanians who are sick, disabled or escaping an abuser. It ends next month

Cuts to education enacted last year, meanwhile, have diminished the quality of instruction in our poorest school districts and resulted in the loss of 14,000 jobs in 2011.

The budget squeezes money out of human services, education and General Assistance at the same time it expands and creates new tax credits and continues the ongoing phase-out of the capital stock and franchise tax. This is part of a decade-long pattern that will see the commonwealth spending $2.4 billion on corporate tax breaks in the new budget. That amount has tripled over the last 10 years and does not count the hundreds of millions of dollars lost annually to corporate tax loopholes. Most of these tax breaks primarily benefit the largest corporations and come with no commitment to create jobs.

As the economy continues to recover, Pennsylvania will need to make public investments to build a strong economy and make Pennsylvania a place where families will want to live. This budget takes a small step in that direction, but falls well short of where we need to be.

Check out the center’s budget analysis for more.

PA Starts New Fiscal Year with $400 Million in the Bank

1:12 pm in Uncategorized by ThirdandState

By Michael Wood, Third and State

After a less than stellar May, General Fund tax collections bounced back strongly in June — exceeding estimate by $170 million, or 6.5%. This narrowed the 2011-12 revenue shortfall to $163 million, or less than 1% of total estimated collections for the year.

As a result, the state ended the year in a much better fiscal situation than projected back in February, when Governor Tom Corbett released his budget plan. Counting the dollars the state had in the bank, Pennsylvania actually started the fiscal year with a $400 million fund balance.

The recently enacted budget acknowledged this but only to a point. The Legislature increased General Fund spending in 2012-13 by $655 million from the Governor’s  proposal — restoring funding in a number of important areas: higher education, accountability block grants, and half of the 20% cut proposed for county services included in the now-rejected Human Services Development Block Grant. Lawmakers also found funding for another round of business tax breaks.

However, June collections indicate more could have been done — for General Assistance recipients, environmental programs, and child care. Lawmakers also passed on setting aside any of the additional revenue in the Rainy Day Fund.

Click here for the Tale of the Tape.

The revenue surplus in June was led by corporate tax collections — coming in $180 million higher than the monthly target, or 38%. After falling short of estimates for seven of the first eight months of the fiscal year, corporate taxes ended June with a small surplus of $39 million, or 0.8%.

Personal income tax collections were also surpassed estimate in June by $26 million, or 2.7%. For the fiscal year, PIT collections were $199 million, or 1.8%, below expectations — not a surprise given the slower-than-expected decrease in the unemployment rate and general sluggishness in the economy.

Sales tax receipts were $46 million, or 5.5%, lower than expected in June. This pushed yearly sales tax collections slightly below estimate ($16 million, or 0.2%).

All major categories of taxes grew in 2011-12. In total, they exceeded 2010-11 levels by $688 million, or 2.6%.

The Human Cost of Eliminating General Assistance in Pennsylvania

1:37 pm in Uncategorized by ThirdandState

By Kate Atkins, Third and State

Since the Great Depression, Pennsylvania has had a General Assistance (GA) program — a small cash benefit that serves as a bridge to self-sufficiency for the temporarily disabled and for victims of domestic violence and addicts seeking help to turn their lives around.

A dollar bill cut in half.

Photo: Images of Money / Flickr

Since the Great Depression. Until late last month when state lawmakers adopted a new budget.

That budget will end Pennsylvania’s modest benefit for 68,000 people, effective August 1. At $205 per month, nobody was getting rich from the program. Here is a sample of who is using General Assistance and why:

* A disabled military veteran in Lancaster County, who applied for General Assistance to get him through until his Social Security disability benefits were approved.

A waitress in her 50s who was diagnosed with breast cancer and used General Assistance when she could not work as she was receiving chemotherapy and radiation treatment. After about nine months, she was able to return to work.

Good Samaritans who are caring for children not related to them — perhaps children of a close friend of neighbor. Many of these children are now likely to end up in the foster care system.

A very focused group of young women I saw at a recent rally in Delaware County, who chanted: “Pennsylvania, we need GA. We’re in treatment, we need to stay!”

A former addict whose recovery was aided by General Assistance who is now employed in a job that allows him to pay taxes, support his daughter, and help others struggling with addiction.

“I didn’t need a couple days of rehab; I needed long-term care,” recalled Jake Fleming, care manager for NorthEast Treatment Centers and a former addict. “General assistance saved my life.”

The state ended the year with a $649 million surplus, more than enough to preserve the General Assistance program. Instead, the legislature chose to end the program, likely increasing the state’s overall spending as people facing very challenging life circumstances end up in emergency rooms, prisons, and inpatient mental health facilities.

As the changes go into effect August 1, this promises to be a hard summer for tens of thousands of people.

Piecing Together the PA Budget Framework

2:26 pm in Uncategorized by ThirdandState

(photo: Dbenbenn / wikimedia)

By Chris Lilienthal, Third and State

Some details emerged Thursday about the state budget framework unveiled midweek by Governor Tom Corbett and legislative leaders, but questions still remain. More details may be available later today when budget spreadsheets are released.

Funding for county human services is one area that appears to be in flux, as some House Republicans continue to voice concerns about a plan to block grant and cut that funding.

A number of GOP House lawmakers want to add more dollars for the mental health and mental disability programs in that mix, said [Rep. Mario] Scavello.

A Senate-approved bill restores half of the $168 million spending cut for the human services programs initially proposed by Mr. Corbett. House members would like to restore even more money but have to balance that with cuts elsewhere, he added.

Although the statewide association representing county commissioners recently agreed to a two-year phase-in for the block grant, Rep. Gene DiGirolamo, R-18, Bensalem, chairman of the House Human Services Committee, said he’s trying to stop the block grant altogether and substitute a pilot program for several counties instead …

The seven programs considered for a block grant include community mental health and mental disability services, the human services development fund, homeless assistance, child welfare grants, the Behavorial Health Services Initiative and Act 152 drug and alcohol treatment programs.

While there is some hope for restoring more funds to county human services, one area that appeared not to make the cut is the state’s General Assistance Program. The governor proposed — and legislative leaders appear to have agreed to — eliminating this modest benefit for temporarily disabled adults, which will have a devastating on nearly 70,000 Pennsylvanians striving to avoid homelessness and build a better life for themselves.

One item unlikely to survive, despite protests from church groups and advocates for the poor, is the so-called general assistance program that provides cash benefits to nearly 70,000 temporarily disabled adults. Corbett proposed eliminating the funding, and legislative leaders did not seek to restore it.

Brenda Freeman of West Philadelphia, who has peripheral edema, which swells tissues in her arms and legs, said that program had been “my only income.” Freeman, 38, whose condition makes it very difficult to stand or sit for long periods and who telephoned The Inquirer to protest the cut, said: “What am I going to have to do — eat out of a trash can?”

“There still is a chance to do something,” she said. “I’m hoping that they do the right thing.”

Pennsylvania’s public schools and universities are likely to see no change in their funding, after sustaining deep cuts in the budget enacted last year.

On Thursday afternoon, the House Appropriations Committee approved funding bills for the four state-related universities as well as the Veterinary School at the University of Pennsylvania.

Though he stopped short of confirming that the schools — Penn State, Temple and Lincoln universities and the University of Pittsburgh — would be flat-funded at current levels, “we are working toward that idea,” said Drew Crompton, the chief of staff to Senate President Pro Tempore Joe Scarnati, R-Jefferson.

The four schools were targeted for 30 percent cuts in Corbett’s $27.14 billion budget proposal unveiled in February. An amended version of the budget approved by the Senate this spring would fund at current levels: Penn State at $227 million; Temple at $139 million; Lincoln at $11 million and the University of Pittsburgh at $136 million.

Crompton said budget negotiators are moving in a similar direction with the state system schools … The schools would be maintained at their current level of $412 million.

Finally, multiple newspapers are reporting that Accountability Block Grants, which support full-day kindergarten and other early childhood programs, will be restored to $100 million after the governor proposed eliminating them. More funding will likely be approved for distressed schools and to expand the state Educational Improvement Tax Credit Program, which allows businesses to donate to private school scholarships and recover most, if not all, of their contribution through tax benefits.

Rep. Mike Vereb, R-Montgomery, said negotiators told him the tentative agreement includes $25 million to expand the current Educational Improvement Tax Credit program, which is currently funded at $75 million. An additional $50 million would be available to students who attend a school among the state’s lowest-achieving 15 percent.

The Myths Behind Governor Corbett’s PA Budget Myths

7:48 am in Uncategorized by ThirdandState

By Sharon Ward, Third and State

Governor Tom Corbett’s May 21 newsletter offered up responses to five “myths” the administration claims are circulating about his proposed budget for next year. The Pennsylvania Budget and Policy Center examined these myths and the myths behind the myths to give you a clear picture about what is fact and what is fiction in Harrisburg.

Governor’s Myth #1: Pennsylvania spends more money building prisons than building schools.

We’re not sure where this one came from, but we will give it a whirl.

Fact: The Corbett administration’s budget includes a moratorium on new school construction projections, and NO FUNDING for school district projects in the pipeline.

Fact: If the Governor’s proposed plan for higher education is adopted, Pennsylvania will spend twice as much on prisons as it does on colleges. In 2009-10, the state’s corrections budget was $1.8 billion and college funding was $1.5 billion. If the Governor had his way, Pennsylvania would spend $1.9 billion on corrections and $980 million on colleges in 2012-13.

Fact: It costs the state much more to house prisoners than it does to educate a child. In 2011-12, Pennsylvania will house 49,000 inmates at a cost of $35,188 per inmate and spend $9.3 billion to educate 1.8 million students at a cost in state dollars of $5,305 per child.

Fact: It is better to build schools than to build prisons.

Governor’s Myth #2: The reductions in higher education funding will cause universities to raise tuition.

Well, cutting college funding is certainly not going to help keep tuition down.

Fact: Public subsidies keep college tuition more affordable. In 2009-10, the average cost (nationally) of a public four-year college education was $15,014, while the average cost of a four-year private college was more than double at $32,790.

Fact: From 1999 to 2011, Pennsylvania’s state funding for higher education fell by 12%.

Fact: The Governor and General Assembly cut public colleges by 20% last year, and the Governor proposed to cut 30% more this year.

Fact: Pennsylvania ranked 46th in public college funding as a share of personal income in 2011-12.

Fact: Our economy can’t grow if our children don’t have a college education.

Governor’s Myth #3: The proposed budget reduces funding for K-12 education and will force school districts to raise property taxes.

That’s no myth, that’s a fact.

Fact: The budget proposed by Governor Corbett and enacted by the General Assembly in June 2011 gave school districts $860 million less than they received the previous year. That included a reduction of 7%, or $421 million, in the basic education subsidy.

Fact: The Governor’s cuts killed jobs. School districts cut programs, raised taxes and eliminated positions. In 2011, the state lost 14,000 jobs in public schools and universities.

Governor’s Myth #4: The elimination of cash assistance will mainly hurt children and victims of domestic violence.

Fact: In February, the Governor proposed eliminating the General Assistance program. The Governor is right: most of those affected are people with a permanent disability waiting for approval for Social Security disability benefits, or those who have an addiction and are eligible to receive the $200 monthly grant for seven months, in their lifetime.

Fact: Women and children lost their health care, not cash assistance, when the Department of Public Welfare did a quick and dirty eligibility review and threw 88,000 kids out of state health insurance programs. Moms, seniors and people with disabilities (the only ones who can get health care coverage through Medical Assistance) lost their coverage too.

Fact: The budget cuts vulnerable adults as well as children. Do you feel better now?

Governor’s Myth #5: The proposed budget reduces funding for the arts.

Fact: The Governor has level-funded grants for the arts for two years. What has gone by the wayside is arts and music education that have been slashed by school districts as a result of the cuts to education (see Myth #2).

Pennsylvania Hunger Games Diet: Cash for Corporations, Cuts for Kids

2:21 pm in Uncategorized by ThirdandState

By Mark Price, Third and State

On Tuesday Marty Moss-Coane, the host of WHYY’s Radio Times, moderated a question-and-answer session with Governor Tom Corbett at an event sponsored by the Greater Philadelphia Chamber of Commerce. The Governor ran wild with analogies.

Corbett repeated a folksy analogy to the business suit-and-tie audience, saying that state revenue amounted to an eight-inch pizza pie before the 2008 financial crisis. Now, he said, it’s a six-inch pie “but with the same mouths to feed.”

Moss-Coane noted near the end of the hour-long conversation that Corbett could hear demonstrators beating drums and chanting slogans outside. What would he say to them, she asked.

“I understand that you’re upset because we’ve had to put the state on a diet, for want of a better description,” Corbett said. “I haven’t met anybody who likes to go on diets. It is not easy. It is not what we want to do.”

Of course, if you really wanted to grow the pie, you could start by closing corporate tax loopholes and not creating new ones.

While the Corbett diet is high in corporate tax breaks, it is low in investments in human capital. Take, for example, the Harrisburg School District, which thanks in part to state budget cuts is considering eliminating kindergarten.

Duane O’Neal-Sloane longingly watches his older siblings pack their school lunches, wishing he was doing the same and heading off to school each morning.

After perfectly reciting his ABCs, O’Neal-Sloane said next year he even will be able to write, take gym class and eat in the lunch room at Camp Curtin School.

But with the Harrisburg School District facing a $15.8 million budget deficit next year, Duane’s hopes of attending kindergarten at Camp Curtin next fall could be dashed.

To help close next year’s budget gap, school officials are looking to cut Harrisburg’s kindergarten program and other programs the district is not lawfully required to provide…

Harrisburg isn’t the only Pennsylvania school district looking to drop kindergarten due to looming deficits, said Wythe Keever, spokesman for the Pennsylvania State Education Association, which represents teacher unions across much of the state.

York City School District and the Woodland Hills School District in Allegheny County are at least two others considering the same thing, Keever said.