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By Robb Hanrahan

It’s budget time in Pennsylvania and the usual questions are popping up. How late will it be? Or, will it be on time? Every year, the state legislature wrestles with how the Commonwealth will spend its money. Cuts are often considered “draconian” to those who like a program and “necessary” to those who don’t.

So every year around this time on my show “Face the State” the idea of zero base budgeting is tossed about. It’s the total opposite of how we currently decide how much and where the money will be spent in Pennsylvania.

The way we do it now

Currently we use incremental budgeting which always begins with the budget from last year. It’s not a bad way to budget and is used in many businesses and governments. The idea is to approach the coming budget year with the current budget’s numbers. If a department or agency needs more money for programs or services, it requests an increase. The increase must be justified. But here’s where many lawmakers have a problem with this practice. If a department doesn’t use all of the money in the previous budget year, they lose it.

It’s this “use it or lose it” philosophy that has many thinking the only way to go is up. More spending, which requires more revenue, which these days often means more taxes. Money isn’t pouring into the Commonwealth at this point. So to keep the budget balanced without an increase, departments and agencies often have to cut spending. That’s hardly a popular thing to do for one running a multi-million-dollar government agency.

So why not start at zero?

To remove the “use it or lose it” mentality, a process known as zero-base budgeting is floating out there. It’s far from new. A guy named Peter Pyhrr wrote an article about Texas Instruments use of it in 1970. Interest grew in its success. Then, Governor Jimmy Carter implemented ZBB into the state of Georgia’s budget. Carter brought it to Washington where it lasted all of four years until President Reagan killed it in 1980.

It’s a simple idea that gets complicated quickly. Zero based budgeting starts at zero. Sounds good, right?  Each department gathers every expense that it will incur during the next year. Every expense. Then they simply budget for that amount. There’s no “bagging” of last year’s budget and asking for more. The simple genius behind it is that there’s no incentive to spend all of the current year’s budget, and it requires proof of every expense needed. Here’s where it gets complicated. That’s a lot of detail. Detail that requires managers, department heads, even mid-level employees to be recording current expenditures and predicting next year’s. Governments that have used it often had to hire and train more people in order to get it up and running. In other words, it needs more work and is often not very popular with employees.

The reason many government agencies abandoned zero-base budgeting was because it requires time and understanding of its complexity. Units in every department have to justify spending, not only to meet minimal expectations but also to include predictions for providing higher levels of service. The analysis has to be handed up through several levels before finalization. In Pennsylvania, that would have to be done every year. Whew. That would include counting every pencil, paper clip and folder, not just major expenses.

Advantage: detail

ZBB is a great way to have a working knowledge of where every cent is being spent. It provides an efficient allocation of money and can improve cost effective spending on services. It also takes away the “entitlement” philosophy of spending the entire current budget.  ZBB can also weed out stale and outdated programs and departments.

Disadvantage: complexity

With Pennsylvania on a yearly budget cycle, implementing zero-base budgeting would require enormous preparation time and increase the cost of preparing the spending plan. Our state government is huge and complex in and of itself. ZBB requires a microscopic examination of everything that needs money. In my opinion it would probably need a year-round department of its own just to gather the information needed to produce a yearly zero-base budget.

So why all the talk about ZBB?

Because we’re looking at a possible $6-billion-dollar budget deficit by the end of next year if we don’t close the current $700 million deficit this year. Lawmakers are looking for money in every corner and ZBB appears to be an answer to wasteful government spending. In a recent appearance on CBS 21’s “Face the State,” House Appropriations Chair Stan Saylor talked about performance base budgeting. It’s a sort of hybrid off-shoot of ZBB which requires accountability and measurable objectives. PBB presents its own list of challenges but may be a possible road to explore as we face the state budget challenge every year.

According to the National Conference of State Legislatures, almost half the states use performance information but differ in when and where the information is used in the budget process. Basically all information is important in the budget process and performance information can provide background on the purposes of state-funded programs and the results they achieve.

Robb Hanrahan is host of CBS 21’s “Face the State.” The show can be seen every Sunday morning at 8:30 a.m.

 

 

 

 

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By Chris Comisac

Well, folks, Pennsylvania is going to get some more “pension reform.”

I know, the House of Representatives has yet to vote on Senate Bill 1, the latest lacking legislation held up by lawmakers as “reform,” but this is happening.

So what does that mean?

As someone recently said to me, with us “accomplishing pension reform,” we can move on to doing pension reform.

The actuarial note analyzing the legislation indicates there will be no pension system savings, and the risk-shifting within SB1 only matters should the systems incur significant investment shortfalls a couple decades from now. Those shortfalls, should they occur two to three decades from now, will still add more debt to our debt-ridden systems, it just won’t be quite as much added debt – the “historic” savings we’re told SB1 would deliver would come at a significant cost.

It’s pretty clear passing anything with the title “pension reform” has become the goal, not passing something that’s worth passing.

I’m reminded of about two years ago, when I wrote a column in which I argued – with regard to both property taxes and public pensions – doing something isn’t always better than doing nothing.

Carefully reviewing the analysis of this session’s version of “pension reform,” it appears as though lawmakers have found a way to do both: look like they’re doing something while doing nothing.

If this is the “politics of the possible,” we have hit another new low in the Pennsylvania State Capitol.

The comparison between current law and SB1 for both the State Employees’ Retirement System (SERS) and the Public School Employees’ Retirement System (PSERS) shows little-to-no difference regarding the impacts on employer contribution rates, pension funding ratios and the unfunded accrued liability going forward during the next three decades.

So if accomplishing that is the best we can do, then why vote SB1 in the first place?

We’re told by SB1 proponents it’s because the legislation is “transformative,” that it puts the pension systems on the path to future fiscal health because it reduces pension risk for state taxpayers.

It’s not exactly that, but the analysis of SB1 by actuarial firm Milliman notes a future shift in risk (although at least 30 percent of the state government workforce is exempted from this risk shift): “Over time, the bill also reduces future risk exposure because it transfers a portion of retirement benefits to a DC [defined contribution] plan in which the member assumes investment and longevity risks. The provisions of the bill apply only to new members, and the full reduction in risk exposure will be phased-in over several decades as new employees are hired, become vested and ultimately retire.”

But SB1 still maintains a defined benefit plan that is subject to the political and financial winds that blew up PSERS’ and SERS’ unfunded liability to a combined $76 billion. So while exposing state taxpayers to slightly less risk, there’s still plenty of risk for which current and future Pennsylvanians will be financially responsible (not to mention the $76 billion, and growing, debt already on the books).

It’s true that state taxpayers would continue to be exposed to risk even if the current defined benefit plans were closed, and even if they were fully funded today (they’re obviously not).

Because of the way defined benefit plans work (even after they’re closed), underfunding can occur if the systems’ investment returns come up short, the systems fail to meet the other assumptions built into the costs of the defined benefit plans or lawmakers decide they don’t wish to pay the contributions they need to pay. We’ve seen all three happen in Pennsylvania annually during the better part of the last two decades.

None of that occurs with a defined contribution plan.

So if the risk of a DB plan falling short is the top concern as we’re told by SB1 proponents, why choose a less-than-half-measure like Senate Bill 1 that continues the DB plan, albeit a slightly smaller DB plan?

If the upfront costs of SB1 – and there are greater costs associated with the bill’s changes (including the yet-to-be-discussed roughly $50 million cost to the pension systems to implement the incredibly complex three-tiered benefit plan proposal) – are worth the potential of only partial risk shifting in 20 to 30 years, then why not do the whole enchilada?

Pull the Band-Aid off in one quick rip, instead of what amounts to a slow, painful, centimeter-by-centimeter removal – with all of that pain borne and endured by Pennsylvania taxpayers – that doesn’t end up removing the Band-Aid; in Michigan (where their pension problems are smaller than ours), that state’s failed hybrid pension plan was recently referred to as “a Band-Aid on a bullet wound” by one of that state’s lawmakers.

Just put every new employee – no exemptions – into a standalone DC plan.

I know, I know – “We can’t get the votes for that” is the refrain from some legislative leaders who, if given their druthers, would drop SB1 in a second for something that accomplishes a real change, even if that change also comes two to three decades down the road.

In addition to making needed funding reforms – such as shorter amortization periods for both DB plans, as recommended by the actuary that produced the SB1 analysis – to reduce the risk of an underfunded DB plan, a standalone DC plan for everyone would eventually simplify the retirement systems as well as completely eliminate the risk borne by taxpayers, once the only active plan for SERS and PSERS is the DC plan (which would take several decades to occur).

That would be good public policy.

Obviously it’s important to get the votes to send legislation to a governor that’s willing to sign it, but when did that become the definition of good public policy?

If you’re willing to make no impact on employer contributions or the unfunded liability during the next two decades anyway – which describes SB1 – then why not keep pushing a few more years for legislation that puts SB1 to shame on risk transfer?

Sometimes you have to try – and, yes, fail once in a while – to accomplish your goals. Legislative Republicans would do well to remember the Fiscal Year 2015-16 state budget, if they’ve forgotten that lesson, or maybe Act 120 of 2010, the last “pension reform” which was supposed to fix the things lawmakers are once again trying to fix (and the current “fix” doesn’t look much different, actuarially speaking, than Act 120).

There’s been a lot of failure to accomplish the goal of pension reform the last several years – as evidenced by the continued growth of the pension systems’ unfunded liability – but most of those failures involved bills that were better (some only marginally so) than SB1.

Adopting SB1 would simply be another failure a future General Assembly will have to address.

Chris Comisac is Capitolwire Bureau Chief.

 

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By Tony May

 

Give Pennsylvania state government some credit.  It has put the Commonwealth on the cutting edge in recent years of some important trends that have slowed the slow slide into Rust Belt decay.

The state authorized casino gaming which has created thousands of new jobs and generated billions in state revenue.  It aided and abetted the birth and growth of the “tight gas” industry making Pennsylvania one of the largest producers of natural gas in the nation.  It countered the national anti-tax trend and authorized an overhaul of the state’s funding strategy for transportation funding.  In a time when Congress has failed in its responsibilities to write a new national transportation policy and fund it, Pennsylvania has turned the corner on replacing and upgrading obsolete bridges and restoring and expanding highways.  And it about to join the growing number of states legalizing cannabis to heal the sick, create jobs and add needed state tax revenues.

Yet Pennsylvania still lags behind other states in population growth, average and median family income, economic development and other vital signs of a thriving economy. So what one, single thing can the General Assembly and the Governor do to get ahead of the curve and increase the rate of economic growth and restore actual population growth to keep Pennsylvania competitive among the states?

The answer is: be more like California – the good aspects of California.  The “Golden State” is unafraid to see itself as an outlier, a trend-setter and innovator.  Pennsylvania is more inclined to avoid sticking out like a sore thumb.  It doesn’t mean that we need threaten to secede from the union, ala California Gov. Jerry Brown.  It means that we need to work harder to chart our own future independent of the largesse of the federal government – something that looks like it might go the way of the dodo bird anyway.

A good place to start would be to evaluate Pennsylvania’s unused capacity and find ways to increase utilization on existing resources.  One of the reasons Pennsylvania faces bitter annual state budget fights is because the decay of our existing economic engine is throwing off less and less cash.  The first factor to address here is population stagnation.

Outside of a few key, mostly suburban counties, Pennsylvania’s population is not growing.  While an increasing population would add to demand for services, it is likely that new residents would generate more in economic demand than they would consume in state and local services.  This would be true even of immigrants from war torn countries.

Another sector that is under-utilized is higher education, particularly our state-owned universities.  Attracting out-pf-state students (perhaps even international students) would help our state-owned schools operate more efficiently.  Because they are operating, for the most part, under capacity, increasing the number of higher-revenue non-resident students would not be denying access to qualified in-state students.  The bottom line would be an economic boost in 14 Pennsylvania non-urban communities.

Third on the list would be a state approach to increase demand for home ownership aimed primarily at third class cities and boroughs.  Pennsylvania’s towns and cities are being hollowed out.  The state should investigate strategies to attract new residents to small  towns where thousands of dwellings stand vacant and decaying.

The best part is that most Pennsylvanians would relish the challenge.  Every Pennsylvania community has local pride; it would be easy to transfer that enthusiasm to support for a state growth effort.

 

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Research from the George Washington University paints a clear picture as lawmakers consider legislation to modernize Pennsylvania’s outdated nurse practitioner law. Two new studies found that outdated nurse practitioner licensure laws do nothing to improve the quality of patient care, and that nurse practitioners deliver health care that is on par with physicians.

The first study compared nurse practitioner (NP) care quality in states where NPs have full practice authority versus sates like Pennsylvania with outdated laws.

If restrictions like Pennsylvania’s current law were beneficial to patients, researchers reasoned, NPs in states like PA would have better health care outcomes. But, “Findings from this study did not conform to this pattern. In fact, state independence had no statistically significant effect on any of the three quality indicators studied.”

Senate Bill 25 would modernize PA law by removing a mandate for NPs to secure business contracts, called collaborative agreements, with two physicians in order to practice.

The study found these contracts are not necessary to ensure that NPs collaborate with physicians. To the contrary, researchers found: “NP visits in states with practice independence had a higher odds of receiving physician referrals than those in restricted states.”

SB25 has been endorsed by AARP Pennsylvania, the Hospital and Healthsystems Association of PA, the PA Rural Health Association, and numerous other stakeholders.

The second study reiterated the quality of nurse practitioner-delivered health care in community health centers. “The researchers found that visits to nurse practitioners and physician assistants received similar quality, services and referrals as those made to physicians.”

“Findings from our study should be reassuring to patients who rely on community health centers for their care,” said Ellen Kurtzman, associate professor in the GW School of Nursing and lead author of the paper, in a press release. “We found that care is likely to be comparable regardless of whether patients are seen by a nurse practitioner, physician assistant or physician.”

The results mirror hundreds of other studies over the past decades. In fact, numerous researchers have documented improved patient health outcomes as a result of modern NP laws. The National Academy of Medicine and the Federal Trade Commission reviewed all available evidence and concluded that patients would benefit from modern NP laws.

“These studies make it clear: modernizing Pennsylvania’s nurse practitioner law would increase access to health care without giving up one iota of quality,” said Lorraine Bock, President of the Pennsylvania Coalition of Nurse Practitioners.

“Pennsylvania should stop leaving patients behind and join the 22 states that already give nurse practitioners full practice authority.”

About Full Practice Authority for Nurse Practitioners

Nurse practitioners (NPs), also called Certified Registered Nurse Practitioners (CRNPs) or Advanced Registered Nurse Practitioners (ARNPs), have graduate, advanced education, with master’s degrees or doctorates and are nationally certified in their specialty areas. Among their many services NPs order, perform and interpret diagnostic tests; diagnose and treat acute and chronic conditions such as diabetes, high blood pressure, infections and injuries; prescribe medications and other treatments; and manage a patient’s care. Over 100 studies have proven that NPs provide safe, high-quality health care.

Currently, in order to practice, a nurse practitioner must secure business contracts called collaborative agreements with two physicians. Researchers – including physicians and nurse practitioners alike – have proven that this mandate offers no patient health benefits. To the contrary, research shows that the mandate restricts access to care and correlates with worse patient health outcomes.

Currently, 22 states and the District of Columbia are already using full practice authority to expand access to care, especially for underserved rural areas and patients with Medicaid insurance.

 

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Even though Gov. Tom Wolf has signed legislation that will create statewide regulations governing transportation network companies, at least one lawmaker says the new act has Pennsylvania traveling into risky territory – and he’s potentially looking at suing to stop it.

“I’m not going to let this go; I’m adamant about declaring the [retroactive penalty] provision inappropriate and strip it,” said Senate Minority Leader Jay Costa, D-Allegheny. “What mechanism we use, I don’t know, but that’s what I’m looking to do.”  Sen. Costa also said he wouldn’t rule out filing a lawsuit.

While Act 164 of 2016, previously Senate Bill 984, is billed as ensuring the operations of ride-sharing companies, like Uber and Lyft, are properly regulated in Pennsylvania, there’s a lot more to the new law, and that’s what Costa said worries him.

“The thing that I most object to is the provision in the bill which, in my view, is special legislation for one entity, that undermines the rulemaking and enforcement of a quasi-judicial agency, the PUC [Public Utility Commission],” said Costa.

The provision in question states: “A person or entity which, as determined by the commission, operated as a transportation network company prior to the effective date of this section without proper authority from the commission shall be subject to a penalty not to exceed $1,000 per day or a maximum penalty not to exceed $250,000, notwithstanding the number of violations that occurred during the period in which the person or entity operated without authority.”

In April, the PUC voted 3-2 to adopt a joint motion ordering Uber to pay over $11 million in civil penalties for “unlawful operations” in violation of the PUC Code by “providing regulated passenger transportation service without a certificate of public convenience” from the PUC.

The penalty is currently under appeal in Commonwealth Court, and when the fine was issued, some Republican and Democratic elected officials – including Gov. Wolf himself – questioned the severity of the fine.

Costa argues the Pennsylvania Supreme Court employs a test regarding special legislation which depends on whether treating a particular class differently under the legislation is founded on real distinctions and not artificial differences used to evade the constitution. The court has held that “classification is per se unconstitutional when the class consists of one member and it is impossible or highly unlikely that another can join the class,” said Costa.

Costa said the PUC did also penalize another riding-sharing company – Lyft – which reached a $250,000 settlement in July 2015 with the PUC for, like Uber, unauthorized operations. Uber’s April 2016 penalty was $11 million, and appears to be the only one that would be affected by the new act.

Therefore, argues Costa, the retroactive section of SB984 violates Article III, Section 32 of the Pennsylvania Constitution, which prohibits the General Assembly from passing “local or special law in any case which has been or can be provided for by general law,” and, within the section’s specifications, forbids “remitting fines, penalties and forfeitures, or refunding moneys legally paid into the treasury.”

Costa’s argument runs into a bit of difficulty, according to other readers of Act 164’s language.

“Based on numerous conversations with legislative leaders throughout the process, it is our understanding that the language regarding fines is intended to address future actions,” said PUC press secretary Nils Hagen-Frederiksen.

Costa has said during committee meetings and floor debate the legislation establishes some dangerous precedents.

Costa again expressed Friday that if the Legislature can undo a fine imposed by a regulatory agency like the PUC, there would appear to be little to prevent a future General Assembly and compliant governor from undoing a fine imposed by the state Department of Environmental Protection or another government agency.

With this new law “you’re saying it’s okay to change that [an imposed fine] for a specific company, retroactively,” which undermines the ability of any governmental agency to ensure compliance with its regulations, said Costa.

Senate Republican leaders have said there is no intent by the Legislature with this act to affect the PUC penalty assessed to Uber. They have also explained, as Hagen-Frederiksen stated, the language is written to address penalties that have yet be ordered by the commission, not ones that have already been finalized.

Senate GOP spokeswoman Jenn Kocher reiterated that position. “We feel this does not affect the Uber situation, as that has been finalized by the PUC, and there’s no other action that can be taken by the PUC unless ordered by the court,” said Kocher.

Kocher also said it’s possible there are other PUC actions about which we have not yet been made aware, and for which no fine has yet been imposed, so there could be more than one matter affected by the Act 164 provision.

“It doesn’t matter what the intent is if the plain language is clear,” Costa said, noting that intent is only of interest to the courts when judges can’t clearly discern what a law does. “This plain language is clear.”

“Now that the governor has signed this, Uber doesn’t have to make the payment, and I don’t know if anyone is going to come back and say they have to – I’m mean, who’s gonna make them pay it now, when you read it and it says they don’t have to pay it?” said Costa. “It’s crazy.”

Costa made it clear he’s only focused on the retroactive penalty language within the bill.

“I’m very supportive of the underlying bill – I voted for it in the past,” he said. “I think it’s a good step in the right direction, a good beginning.”

He did note there are a few items on which he and Sen. Wayne Fontana, D-Allegheny, are working for next session to address “provisions that should be applied statewide” but are currently only available to Philadelphia.

However, while Costa approves of much of the legislation, some have noted Act 164 doesn’t contain a severability clause – which allows the rest of a law to remain in effect even if a particular portion of it is found to be unconstitutional.

If Costa should sue, and he should be successful, that could likely force the General Assembly to pass new ride-sharing legislation.

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Seasonal workers will once again be allowed to get unemployment compensation when their jobs end thanks to legislation signed into law on Nov. 3 by Gov. Tom Wolf.

“This is going to help ensure seasonal workers – those who need unemployment insurance – will have better and more efficient access to those funds. While there are many people who need unemployment insurance to get them through periods of unemployment or underemployment, our seasonal workers, in such industries as construction, use these funds to make it through the winter months … this is important to all of us,” said Gov. Wolf at the signing.

Proponents of Act 144 of 2016, formerly House Bill 319, say it’s intended to fix an unemployment compensation (UC) unintended consequence created by Act 60 of 2012.

Gov. Wolf, Rep. John Galloway, D-Bucks, and Sen. Lisa Baker, R-Luzerne, all praised the bi-partisan effort to accomplish the changes. Galloway and Baker, along with Reps. Lee James, R-Venango, Mauree Gingrich, R-Lebanon, Seth Grove, R-York, Marc Gergely, D-Allegheny, and Sens. Tina Tartaglione, D-Philadelphia, and John Gordner, R-Columbia, were credited with helping making Act 144 a reality.

Noting the difficulties of getting Act 60 passed, Baker said initially, “There was not much enthusiasm for going right back into it [Act 60] to tackle the unintended consequences and to jeopardize what had been accomplished to set the [UC] Fund to solvency.”

But she said “those who committed to finding this answer today” were to be credited for developing a “responsible remedy” that doesn’t disrupt Act 60’s path to UC Fund solvency but still ensures seasonal workers, who she said she likes to refer to as “cyclical workers,” are treated properly.

“I’m proud of our partnership on this issue, and on many issues; we’ve got some important things done – I don’t think there’s anything we’ve gotten done, working together, that’s more important than this,” said  Gov. Wolf.

Act 60 implemented measures to reduce approximately $4 billion in debt to the federal government and address the long-term solvency of Pennsylvania’s unemployment compensation system. Post-Act 60, approximately 44,000 seasonal workers were disqualified from collecting unemployment compensation. Seasonal workers who earned 50.5 percent of their annual income or more in one quarter of the year have been ineligible for benefits since the enactment of Act 60. Prior to Act 60, the limit was 63 percent.

“Act 60 really had unintended consequences, particularly for the construction industry, the pipeline industry, the nuclear industry, the power suppliers and even the highway industry,” said Frank Sirianni, president of the Pennsylvania State Building and Construction Trades Council, following the bill signing. “What you had is employees with a bulk of hours in one [employment] quarter, and you can’t get 50 percent of that in follow-up quarters.”

“This kinda levels that all off and neutralizes that problem so that the people that are doing are infrastructure, who are sometimes mandated by law – especially in the highway industry – that they’re not allowed to work at certain times of the year, that they will now be covered by benefits,” said Sirianni.

In addition to reducing from 49.5 percent to 37 percent the percentage of base-year wages earned by an employee outside their highest quarter of earnings (thereby restoring the percentage that existed prior to Act 60), the new act also:

  • Increases the reserve ratio factor for certain employers, increasing UC premiums for a limited number of employers with the very worst records of laying-off employees;
  • Adds anti-fraud and amnesty provisions to, according to bill supporters, ensure additional equity and fairness exists in the UC system;
  • Reduces benefits and caps the increase in benefits for employees at the upper end of the income/benefits scale; and
  • Implements triggers which would compare projected UC Fund solvency dates with actual solvency dates, and then institute cost-saving measures – reductions of unemployment benefits – if solvency was not being met as required by the Act 60 timetable.

Opponents of the legislation caution that Act 60’s path to solvency for the UC Fund (to occur by 2026 prior to Act 144) could be negatively affected by the addition of tens of thousands of seasonal workers, since they will add to the already higher-than-projected state unemployment rate.

Rep. Gordner, Act 60’s author, prior to the bill’s approval by the state Senate, noted Act 60’s solvency provisions assumed state unemployment rates closer to 5 percent, but Pennsylvania’s rate is currently 5.7 percent, and has been above 5 percent now for six-straight months.

While he noted concerns in the short term, Gordner acknowledged if the state can avoid another unemployment spike – similar to what occurred following the 2008-09 recession – during the next three or so years, Act 144‘s cost-saving measures to be implemented in 2020 will be beneficial to the UC Fund.

When asked about potential concerns about exposing the state to greater UC Fund insolvency risk in the short term, Gov. Wolf said the act contains “so many conditional elements that those possibilities, however remote they are, that the solvency of the fund is in good shape.”

“I think they have done a remarkable job of trying to take all the contingencies into account,” said Wolf of Act 144’s authors.

Sen. Lisa Baker, R-Luzerne, said the act includes several solvency “triggers” – which she said were “key to Senate passage” of the legislation – that “in the event that we hit one of those triggers, we will have savings and [benefit] reductions, beginning as early as 2017.”

In fact, Act 144 supporters claim those savings provisions will help to, potentially, bring the UC Fund to solvency, earlier than originally planned by Act 60 – maybe 2024 or 2025, instead of 2026.

To accomplish that, benefits will be reduced by 2 percent across the board starting next year, with the maximum weekly benefit declining from $573 to $561, and it would stay there through 2019. From 2020 through 2023, the growth of that maximum benefit would be capped at 2 percent, with that cap increased to 4 percent for 2024 and thereafter. The across-the-board 2-percent benefit reduction is expected to produce $44 million in annual savings, while the post-2024 4-percent cap is projected to deliver at least $400 million of savings annually, which is expected to grow each year thereafter.

Before Act 144, Act 60 reduced the rate of growth of the maximum weekly benefit, first freezing it at $573 through 2019, and then capping its growth at 8 percent from 2020 through 2023. After 2023, the pre-Act 60 environment would have returned with the maximum benefit being two-thirds of the average weekly wage.

In addition to three new solvency triggers – which reduce unemployment benefits for claimants if the UC Fund balance isn’t where it’s supposed to be – and the anti-fraud and “bad-actor” penalties for beneficiaries and employers, the changes are projected to save the UC Fund as much as $1.5 billion over six years while making more seasonal workers eligible for benefits, according to proponents.

The Senate voted 39-8 and the House voted 161-30 to send HB319 to Gov. Wolf’s desk for his signature.

That wasn’t the only UC bill to come up in discussions during and after the bill signing

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Despite the fact that no Republican presidential candidate had carried Pennsylvania in a

generation and no other Republican had won a statewide election in five years, Donald Trump

took  the Keystone State, beating Hillary Clinton by 50,000 votes.  Mrs. Clinton managed to carry only 11 counties in the state, several by razor-thin margins.

Adding to that electoral success was the victory of U.S. Senator Pat Toomey who bested Katie McGinty by almost 90,000  The race was the most expensive and closely watched in the country.

Although they lost the three statewide “row offices,” Republicans also managed to pad their already substantial majorities in both legislative chambers.  In the Senate Republicans now have a super-majority 34 seats and in the House Republicans boosted their advantage to at least 122. And any notions about the “inevitability” of Senator Bob Casey’s re-election should be put to rest.

Change beat anything else

Many Democrats believed that a significant demographic advantage would propel Hillary

Clinton into the history books as the first woman president.  They didn’t take into account the

“mood” advantage that the Republicans had going for them.  Every survey showed that voters

were in a foul mood, angry and clamoring for change. Nearly 70 percent said they thought the country was headed in the wrong direction.   That didn’t bode well for a woman seeking to be the third term of the incumbent president.  She shopped her extensive resume at a time when voters

wanted anything but.  Trump was the outsider.  She was the “incumbent.”  He won. She lost.

Republicans came home. Democrats stayed home.

In a contest between the two least liked candidates in the era of modern polling, Donald Trump ultimately prevailed because his base turned out while Hillary’s did not.  Trump had tremendous senthusiasm going for him.  All you needed to do was drive down one of Pennsylvania’s back roads and see the handmade signs boldly proclaiming “Trump.”  Meanwhile there was a distinct aura of apathy among Clinton’s base.  They didn’t like Trump, but they weren’t so thrilled with her, either.

​            Donald Trump needed to garner 90 percentof the Republican vote, something no winning GOP candidate had ever failed to do.  For much of the campaign he languished in the 70’s, below the level Barry Goldwater received in the 1964 landslide.  By mid-October he was in the mid 80’s.  On election night he hit 90.  Meanwhile Hillary Clinton underperformed among just about every key demographic.

Television advertising doesn’t buy as much these days

Hillary Clinton outspent Donald Trump by nearly 4:1 in television advertising.  She hammered away at his main vulnerability–his “temperament.” Her message was ubiquitous.  It didn’t work.

It was partially because voters wanted more than simply anti-Trump rhetoric.  It was also an indication of the shifts in how Americans receive information and make decisions.  Donald

Trump’s 15 million Twitter followers were as big an advantage as Hillary Clinton’s millions of

dollars in  advertising.

“Tax and Spend” is a losing message with working families

The Trump and Toomey victories, coupled with the gains Republicans made in the General Assembly here and across America were a clear repudiation of the policies of the last eight years. Obama may be personally popular for the time being, but his policies are not.  Nor are those of his political acolytes like Tom Wolf.  Although I know they aren’t taking my advice,

another budget containing big government spending and additional high taxes on working

families is a big loser.

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The Pennsylvania Senate is evaluating the future of a unique Pennsylvania industry which has generated up to 10 percent of the state’s electric power needs over the past three decades while cleaning up acid mine drainage and pollution along 1,200 miles of streams in the state and reduced air pollution from wild fires, all while recycling 200 million tons of coal waste and reclaiming 7,000 acres of abandoned coal mine land.

Beginning in the 1980s, independent electric power producers erected 14 state-of-the-art power plants across the Anthracite and bituminous coal fields of the state using high-efficiency fluidized bed boilers to generate electricity and take advantage of special, guaranteed power rates then available under state law.  Over the years, the preferential power rates expired as the electric generating industry moved to a demand-driven market model.  To keep the coal refuse industry competitive and able to continue its privately funded environmental cleanup model, the Commonwealth instituted a tax credit program of $4 a ton to incentivize utilization of coal wastes.  The total annual tax credit was capped at $7.5 million a year and is scheduled to increase to $10 million a year in 2017.

In preparation for a progress report to the Senate Environmental Protection Committee this month, ARIPPA, a coal waste industry trade association, commissioned an environmental and economic impact report from Econsult Solutions, a Philadelphia research firm.

Econsult looked at the yearly and total benchmarks achieved by the waste coal cleanup effort and projected out expected benefits for the next 20 years if the program continues to perform at or near current capacity.

The study found that:

  • 200 million tons of coal refuse had been recovered and recycled into fuel.
  • 7,000 acres of abandoned coal lands and refuse piles had been re-contoured for new, productive uses.
  • Acid mine drainage and other pollution of 1,200 miles of streams have been remediated.
  • At peak capacity, the 14 power plants were generating 1.4 megawatts of electricity, sufficient to supply one million homes.
  • The industry directly employed more than 1,500 skilled workers earning an average of $70,000 a year and indirectly supported another 3,000 jobs in nearby communities.
  • The total economic impact of the coal waste industry in Pennsylvania is about $740 million a year.
  • The total value of the environmental cleanup to be provided to the Commonwealth at no cost to the taxpayer over the next 20 years is estimated at more than $500 million.

“The coal refuse recycling incentive is unique to Pennsylvania among the mining states,” George Ellis, ARIPPA executive director, noted. “Our members are providing a valuable service to future generations of Pennsylvanians by cleaning up the historic scars of more than two centuries of mining, at no cost to taxpayers.  At the same time, we generate clean electricity.  It’s been a hugely successful partnership.”

Ellis presented the Econsult report at a recent hearing conducted by the state Senate Environmental Resources & Energy Committee held in Jim Thorpe, in the heart of the anthracite field.

“We’ve made steady progress over the last two decades in removing coal refuse and turning it into energy, along with beneficial ash that can be recycled and used to remediate mining sites and in products such as concrete and asphalt.  We generate electricity in order to pay for our environmental activities – the removal of abandoned coal refuse piles and the remediation and restoration of coal refuse affected sites.  If our industry does not survive, the cleanup becomes the responsibility of the commonwealth and its taxpayers,” Ellis told the committee.

Ellis urged the committee to preserve the recently adopted tax credit measure and to explore other opportunities for economic support and regulatory relief that would help to keep the plants operating.

# # #

(The complete Econsult report is available at www.arippa.org)

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Feeling Confident: Steps to Saving More

*In 2016, 21% of U.S. workers said they were very confident they would have enough money for a comfortable retirement. This was about the same percentage as in 2015, but both years showed a big increase in confidence from the 13% level in 2013, when many Americans were still struggling to recover from the Great Recession.1

When it comes to your own retirement, of course, trends don’t really matter. The question is, do you feel very confident that you will have enough money to enjoy the kind of retirement you envision? Even if you do, it’s smart to save more, and it may not be as difficult as you think.

Take the Match                                                
If you participate in a workplace retirement plan such as a 401(k), 403(b), or 457 plan, you can choose to contribute a specific percentage of your salary, up to annual contribution limits. That’s why they are formally called defined-contribution plans. More than half of workplace plans automatically enroll new workers at a 4% rate.2 However, a common guideline suggests that workers should save about 15% of their salaries, and you may need to save more if you get a late start.

One of the best ways to boost your savings is to take advantage of any matching funds offered by your employer. For example, if your employer will match 50% of your contributions up to 6% of your salary, saving 6% on your part would result in saving 9% of your salary (6% from you and 3% from your employer).

Increase by Increments
How can you save even more? You might try increasing your contributions by 1% each year. Some employers may increase your contributions automatically (unless you opt out), but you can choose to do so on your own, whether you participate in a plan or save outside of the workplace. A 1% increase may not sound like much, but it could make a big difference over the course of your career (see chart).

Here are three other ways to save without making a big sacrifice in your cash flow.

Save your raise. When you receive a raise, it’s tempting to increase your spending, but this is a great opportunity to boost your retirement savings by diverting a portion of the raise into your retirement account. And when you contribute on a pre-tax basis, the difference in your take-home pay may not be significant.

Make payments toward your future. If you pay off the balance on a car loan, student loan, or credit card, consider making the same monthly payments directly to your retirement account. Because the payment is already part of your monthly budget, you could increase your savings without reducing the amount available for other expenses.

Limit the treats. You deserve an occasional reward, but spending on “little things” can add up over time. For example, if you stop for a $4 latte each day on your way to work and have another one in the afternoon, you would spend about $175 each month. If the same amount was instead invested monthly in an account earning a 6% annual return, you could accumulate more than $100,000 after 25 years.3

Happy Investing!

Scott C. Weaver.

1) Employee Benefit Research Institute, 2016
2) Aon, 2016
3) This hypothetical example is used for illustrative purposes only and does not represent the performance of any specific investment. Fees, expenses, and taxes are not considered and would reduce the performance described if they were included. Actual results will vary.
The information in this article is not intended as tax or legal advice, and it may not be relied on for the purpose of avoiding any federal tax penalties. You are encouraged to seek tax or legal advice from an independent professional advisor. The content is derived from sources believed to be accurate. Neither the information presented nor any opinion expressed constitutes a solicitation for the purchase or sale of any security. This material was written and prepared by Emerald. Copyright 2016 Emerald Connect, LLC.

 

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No.

 

By Charlie Gerow

 

There are certainly valid arguments for reducing the number of school districts in Pennsylvania.  “A European Union for education” and a reversion to thoroughly discredited “outcomes-based education” are not among them.

 

When Governor Pinchot was in office Pennsylvania didn’t have 500 school districts.  There were more than 2,500 in those days.  The 500 we now have represents dramatic consolidations, both legislatively and judicially mandated, in the 50’s, 60’s and 70’s.

 

There are, no doubt, some districts that may want or need to merge with adjacent districts.  The main reasons cited for such mergers is the potential cost savings and an improved educational product and student achievement.

 

Local school district choice, not mandates from the legislature or the courts, should determine whether or not there are such mergers.

 

School districts along the Mason Dixon Line have bandied about the concept of consolidation for years, looking below the border to Maryland which, like neighboring Virginia, has county-wide school districts.

 

Yet when the Independent Fiscal Office did a study of the 15 school districts in York County, they determined that merging those districts into a single county-wide district would not save the taxpayers any money.  It suggested that such a move would both result in higher taxes for middle-income earners but would also produce only minimal savings in administrative costs.

 

Administrative costs have been a growing concern for taxpayers across the state.  With superintendents and top administrators typically making deep into six figure salaries, those paying the bills have long wondered if there aren’t ways to economize.

 

However, the consolidations that have occurred have not produced the promised or hoped for savings.  There are a variety of factors not related to the consolidations that account for this, but it is safe to say that consolidation isn’t necessarily a financial panacea.

 

Ultimately, whether or not mergers produce substantial savings hinges on whether or not the consolidated districts will do what’s necessary to curtail administrative expenses and reduce per-pupil costs.

 

Mergers  and consolidations have not  always produced higher quality education or improved student performance.  Some studies suggest the opposite has been the case.

 

Additionally there have been other impacts that were not intended consequences of these mergers.  Consolidations have often produced a sense of loss of community.  This has been especially seen in sports, band and other extracurricular activities and opportunities for kids.

 

In Arkansas, where more than a third of their districts merged in the past dozen years, businesses closed and kids’ school bus rides got a lot longer.  One superintendent called it “the disenfranchisement of communities.”  He added, “I haven’t seen an increase in academic progress that I think we would have seen.”

 

Yet as communities struggle with skyrocketing pension obligations and administrative costs they’re looking for any reasonable solution.

 

They should certainly be able to merge, consolidate or merely cooperate with neighboring districts.  To require them to merge would be a public policy mistake.  Because of the impact on individual students and their local communities, local choice must be the by-word for any consideration of school district mergers.

 

Let’s not forget that we already have one county-wide school system.  It’s the School District of Philadelphia.  You can judge for yourself how that’s working for cost-saving and student achievement.