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Pennsylvania legislature

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By: Cheryl A. Davenport

 

PSECU, a Pennsylvania-based credit union created by 22 state workers over 80 years ago, was founded to support and secure the financial well-being of state workers when few existed. From these simple beginnings PSECU has grown to include over 400,000 members.  The not-for-profit member-owned institution provides many low or no- fee financial products to its members and 24/7 banking services while upholding the ethical integrity members have come to trust. This commitment to its members is just a part of the overall dedication to the community. PSECU promotes financial literacy, volunteer participation and engages in charitable contributions. Environmental community outreach includes sponsoring the Earth Day Festival and Shredding Event, the Walk 4 Clean Water and support of the Rotary’s Clean Water Projects. These events express the organization’s focus on taking a leadership role in environmental responsibility through clean water, recycling, sustainability and green practices.

As PSECU expanded, the institution resolved that it had outgrown its location at Credit Union Place in Harrisburg. This was an opportunity to magnify their community influence and environmental dedication. Discussions began about building a new facility which would be eco-friendly and sustainable while providing prospects for future growth over the next 50 years. A 47-acre site was chosen close by on Elmerton Avenue in Susquehanna Township. The site, with large open spaces, was ideal as the space provides for biodiversity and promotes local habitat. This site footage exceeds LEED open space requirements by 227 percent. After approximately 5 years of discussion, a $72 million budget and design was developed that would make the new building and surroundings save energy costs while benefitting the community, members and employees. PSECU moved into their new facility in January 2014 with extremely minimal downtime and impact on its member services.

The new PSECU building is operated by a natural gas powered turbine system, also known as cogeneration. The turbines generate heat, which is then used by a heat exchanger to produce heat for the building or an absorption chiller to cool the building. This system also heats the water for the facility. Other options were discussed such as windmill and solar power, but these were determined to have a larger footprint on the environment and the cogeneration system was better suited to meet the buildings current and expanding future needs. The 239,000 square-foot facility and site has the possibility for expansion up to 425,000 square feet.

The goal was to be LEED Gold Certified, which was obtained. Per the U.S. Green Building Council, LEED (Leadership in Energy and Environmental Design) certification points can be earned in many areas of building development, which address concerns related to sustainability. Four levels of LEED certification are awarded based on the number of points earned – Certified, Silver, Gold and Platinum. LEED certified buildings use less energy and water, reduce greenhouse gas emissions and save money. The facility received LEED points by achieving an energy cost savings of 38.1 percent due to cogeneration, and lighting methods. The capture and treatment of 90 percent of storm water runoff, water-conserving showers and toilets, and landscaping design which requires no irrigation all assist in saving water. The cost savings of LEED initiatives help to re-coup initial building investments. The cogeneration system will pay for itself within 5.5 years of initial installation. While producing cost efficient heating and cooling, the system also produces a surplus, which is sold back to the energy grid. Last year alone, $85,000 in excess energy was sold back.

It’s not just the final building product that is important when considering the environment and community. Seventy-five percent of the debris during construction was diverted from landfill into recycled materials, and 20 percent of the building components are made of recycled materials. LEED points were also awarded for the use of low-emitting sealants and adhesives. Building materials were brought in from local sources to reduce the ecological footprint by saving in transportation costs while at the same time supporting local businesses. Per PSECU’s vision, local businesses were sub-contracted to support the project. Also as a part of PSECU’s dedication to the community, a percentage of the building budget was dedicated to the hiring of minority and female workers.

The construction also provides for back-up energy. Supplemental absorption chillers, onsite stored water in case of interrupted water service, as well as a diesel-powered generator, which can power the entire building and its functions, all provide for complete back-up. Alan Brunner, Director of Facilities Operation and Organizational Support Services, a key planner and manager of the project emphasizes “We can’t be down, we have to be online 24/7 for our members.” This fits in to PSECU’s philosophy of ‘brick and mortar-less banking.’ As stated on the PSECU website, “We’re not about having a branch on every corner. We’re about giving members account access where it’s most convenient for them. Their living room. Their backyard. Their cell phone. By not spending money on branches, we can give members competitive rates for loans and savings, as well as a host of low or no-cost services.” Digital banking service is not just about customer convenience and cost savings but also reducing carbon footprint.

Saving energy and reducing ecological footprint also impacts employees, and PSECU believes that the LEED certified building reflects its culture. Employees were updated and engaged throughout the entire building process, and a workspace planning committee was established to help with the selection of office furniture. Adjustable height desks, using electricity generated on site, were chosen so the employee can stand and change position throughout the day. Work stations were made at a lower height to allow more natural light throughout the working space. Seventy-five percent of the lighting is natural daylight, brought in through efficient design to reduce cost, as well as provide health benefits to employees. Holistic business cultures enhance the total well-being of the employees – physically, financially and emotionally. This practice reduces stress and increases employee productivity. The campus encourages human interaction with the physical environment. Employee walking trails through the open green spaces are provided, as well as a rooftop garden patio area for lunch breaks, which has the added benefit of reducing cooling costs and storm water runoff. Other employee benefits to improve health and well-being include bike racks, on-site gym, the promotion of non-smoking, on-site daycare and involvement in the community through volunteering. Employees are also offered ride-sharing high-occupancy vehicle and fuel efficient vehicle parking, with electric car stations planned.

Each new employee is given a tour and orientation to the building and grounds to understand the scope of the entire initiative. Aside from environmental benefits, health benefits and cost-savings – the character of the building is modern and stunning. It is a professional inviting building, even under heavy security measures to protect their members – not what one might expect from a cost-efficient building.

The building of LEED certified projects and sustainability movements in Central Pennsylvania is growing, with PSECU serving as an inspiration. Phoenix Contact has also installed a cogeneration heating and cooling system; Messiah College has expanded sustainability initiatives to include an organic community garden, composting and recycling. Dickinson College offers on its website that 96 percent of the class of 2015 had taken at least one sustainability course.

As PSECU has evolved, its vision and mission encompasses not only the members but the community and environment in a relationship that is advantageous to all. Providing cost savings through energy efficiency and sustainability and ‘brick and mortar-less banking’ affords innumerable benefits.

 

For more information please visit https://www.youtube.com/watch?v=gfjkL3BU-3E

 

 

 

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By Senator John M. DiSanto

 

The General Assembly recently took action to maintain Pennsylvania citizens’ access to federal buildings and prevent the burden of needing a passport to fly within the U.S.

 

Lawmakers came together in a bipartisan fashion and approved compromise legislation to bring the Commonwealth into compliance with the federal REAL ID Act. Passed in the wake of the 9/11 terrorist attacks, this federal law established increased security standards for state-issued driver’s licenses and identification cards and prohibited federal agencies from accepting licenses and identification cards from states that did not meet these standards.

 

Concerned that that federal government sought to regulate what was previously under the domain of the states – driver’s licenses – the General Assembly overwhelmingly voted in 2012 to prohibit the Commonwealth from participating in REAL ID.

 

In addition to the issue of states’ rights and the Tenth Amendment, concerns about Pennsylvanians’ privacy rights as part of a nationwide driver license database prompted passage of the REAL ID Nonparticipation Act of 2012.

 

The National Conference of State Legislators estimated that REAL ID implementation costs nationwide could be as much as $11 billion. It is estimated the initial start-up costs to fully implement REAL ID in Pennsylvania would be $141 million, with $39 million in additional, annual operational costs. The federal government provided PennDOT with just $5.4 million in grants to assist with REAL ID requirements—yet another unfunded mandate from Washington D.C.

 

In addition, the federal law complicates the process of obtaining and renewing a driver’s license. Pennsylvanians will be required to visit a PennDOT facility upon their first renewal after REAL ID compliance, and to produce a certified, raised-seal birth certificate and proof of social security number and principal residence. Also, REAL ID requires a person to apply in person for the re-issuance of their driver’s license if he or she has a material change in his or her personally identifiable information (not including a change in address).

 

While these and other concerns were valid, not meeting the federal requirements comes at a cost to citizens. By June 6 of this year, Pennsylvanians would no longer have been able to gain access to secure federal buildings using their driver’s license. And, by January 2018, Pennsylvanians would need a passport to fly on commercial airlines within the U.S. A recent study determined Pennsylvanians would need to spend nearly $1 billion on passports if the state did not comply with REAL ID.

 

The General Assembly needed to prevent these unacceptable burdens from being placed on our citizens. That meant complying with the federal law while maintaining options for residents.

 

Pennsylvania had already taken 33 of the required 38 steps to enhance ID security as required by the REAL ID Act, such as using digital photos, issuance and expiration dates and a unique identification number on driver’s licenses.  Remaining mandates to be met include having a specific federally approved symbol that is designed to make tampering and forgery more difficult, and requiring a certified birth certificate to issue a driver’s license.

 

Meeting the last remaining federal requirements, while protecting Pennsylvania citizens and taxpayers, was the goal of a lengthy legislative process that featured compromise in the Senate and House of Representatives as well as input from PennDOT. The result was Senate Bill 133.

 

The legislation brings Pennsylvania into compliance with REAL ID, with safeguards for citizens.

 

Senate Bill 133 allows Pennsylvania residents to choose between getting a REAL ID-compliant identification card or a non-compliant card. Holders of standard-issued driver licenses will not be asked to subsidize or cover the cost to issue REAL IDs. Instead, the cost of compliance will be borne by those opting for the federally approved ID. PennDOT will also be required to report annually to the General Assembly regarding the cost to the state of REAL ID compliance.

 

Pennsylvania’s approach to REAL ID prohibits state government from compelling any individual to apply for a REAL ID, and it does not allow Pennsylvania to exclusively mandate a REAL ID for any reason. These are important protections to preserve individual choice for our citizens.

 

Without this legislation, Pennsylvania would have soon become one of only five states to remain noncompliant with REAL ID and without an extension.

 

Now that Governor Wolf has signed Senate Bill 133 into law, PennDOT will begin what is expected to be an 18 to 24 month process to fully implement REAL ID. Given Pennsylvania’s new law to enact REAL ID, it is expected the Department of Homeland Security will provide further extensions that will allow Pennsylvanians, with their Pennsylvania driver’s license or photo ID card, to continue flying commercially and visiting federal facilities in the interim.

 

Our Commonwealth should never blindly comply with every regulation handed down by the federal government, especially those that encroach on what is rightfully a state matter, such as driver licensing. By slowing down the process and creating alternatives, Pennsylvania is implementing REAL ID on its terms, not Washington’s.

 

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Senator John DiSanto represents most of Dauphin and all of Perry County. He was first elected in 2016.

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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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The power of the state attorney general to tackle public corruption would be greatly expanded under a legislative proposal stemming from a state investigation into the large public debt racked up through financing deals at Harrisburg’s trash incinerator.

A bipartisan group of lawmakers plan to introduce a bill giving the attorney general authority to investigate and prosecute county, city, and municipal officials and employees for public corruption. Under current law, the attorney general can only prosecute public corruption cases of state officials and employees under certain circumstances. This occurs when county district attorneys refer a case because they have a conflict of interest or lack adequate resources to pursue it.

A state grand jury issued a report last month wrapping up a state investigation of incinerator deals that led up to $300 million in debt during the tenure of former Harrisburg Mayor Stephen Reed. The investigation was launched followed a referral from Dauphin County District Attorney Ed Marsico.

The grand jury recommended no criminal charges in the incinerator case citing a statute of limitations that expired in 2015. However, the grand jury made recommendations to change state laws to help protect municipal taxpayers from excessive debt in the future. These include expanding the attorney general’s prosecuting power to include local officials and extending the statute of limitations to cover wrongdoing discovered after an official leaves office.

The referral system often causes “undesirable delay” in pursuing criminal charges, the grand jury said.

The grand jury report gave momentum to senators who have pushed to enact stronger municipal debt laws since 2013 in response to the incinerator controversy. They have now gained allies in the House who plan to introduce companion bills.

Under the powers bill, the attorney general could prosecute local officials when state laws are violated, said Sen. John Blake, D-Lackawanna, the sponsor. Federal prosecutors have jurisdiction to prosecute local officials for violations of federal laws in such areas as mail fraud and bribery and extortion.

The legislation to expand the attorney general’s power comes after the elective office weathered a series of controversies leading to the conviction of former Attorney General Kathleen Kane for leaking grand jury information to a reporter and lying about it to another grand jury and her resignation from office last summer.

Attorney General Josh Shapiro said this week he strongly supports having the additional prosecuting authority. He also noted he’s seeking a $500,000 increase to strengthen the office’s Public Corruption Unit in the fiscal 2017-18 state budget.

House Judiciary Committee Chairman Ron Marsico, R-Dauphin, said he would take a close look at what he described as giving the attorney general “super power” to investigate local officials.

The attorney general’s office would need a larger budget if that power was granted, said Harrisburg attorney Water Cohen, a one-time acting attorney general.

“The question here is whether the General Assembly, if it expands the jurisdiction of the OAG, will give the office the necessary resources to actually conduct such additional investigations and prosecutions, which can be very complicated and time-consuming,” wrote Cohen.

The Pennsylvania District Attorneys Association will probably take a position on the legislation.

 

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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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*College is expensive, and the costs continue to rise. For the 2016–17 academic year, the average cost of in-state tuition, fees, and room and board at a public university is $20,090. At a private school, the average cost is more than double at $45,370.1

Fortunately, the federal government offers tax benefits that can help ease the financial strain. These tax provisions apply to tuition and fees required for enrollment or attendance, but not for room and board expenses. You cannot take more than one education tax benefit for the same expense or for the same student during a tax year.

Qualified expenses may be paid by the parents, the student, or even a third party. In order for parents to claim the expenses on their federal tax return, the student must be claimed as an eligible dependent. If the student is not claimed as an eligible dependent on anyone else’s return, the student may claim the expenses. A credit reduces your tax liability dollar for dollar, whereas a deduction only reduces your taxable income.

Education Credits and Deductions

 

American Opportunity Tax Credit — a maximum annual credit of $2,500 for each eligible student’s first four years of undergraduate education. It is calculated as 100% of the first $2,000 of qualified expenses plus up to 25% of the next $2,000 of such expenses. In addition to tuition and fees, the credit may be applied toward expenses for books, supplies, and equipment required for attendance. The student must be pursuing a degree and enrolled at least half-time for one academic period during the tax year. If the credit reduces tax liability to zero, up to 40% of the credit ($1,000) is refundable.

Lifetime Learning Credit — a nonrefundable credit limited to $2,000 per year (20% of the first $10,000 of qualified tuition and fees), per tax return, even if you have multiple students in the household. It applies to all years of post-secondary education, so the credit can be used for graduate school or for undergraduate education after the student uses all four years of the American Opportunity Tax Credit. It also applies to job-development courses even if the student is not pursuing a degree.

Tuition and Fees Deduction — an “above-the-line” tax deduction of up to $4,000 for qualified tuition and fees (scheduled to expire at the end of 2016 unless Congress takes action). The deduction is typically used for a student who is not eligible for an education tax credit.

Determining Qualified Expenses

If you paid tuition and fees during a tax year, you should receive Form 1098-T, Tuition Statement, by January 31 of the following year. Generally, you must reduce the amount of qualified expenses shown as paid or billed on the form by the amount of tax-free educational assistance, such as grants or scholarships. However, if scholarships or grants are reported as income on the student’s return and the funds may be used for nonqualified expenses (such as room and board), they do not have to be subtracted from qualified expenses on the parents’ return.

Education credits and deductions are subject to income limits (see chart). If you have questions about the appropriate treatment of educational expenses on your return, be sure to seek advice from a tax professional.

  • College Board, 2016

Happy Investing!

Scott C. Weaver

 

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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Rob Teplitz

 

Rob Teplitz may have been born in Miami, but he’s become a Pennsylvanian through-and-through.  His family moved to the Commonwealth when he was still a toddler, and made the midstate their home.  Today, Teplitz is following in his parents’ footsteps, working with his wife to raise their sons in what he feels is a great place to grow up.

Though politics wasn’t a mainstay of dinner conversation in his own household, he was still driven toward a career that would help him serve the public.  Thus, he attended Franklin & Marshall College, earning his undergraduate degree, and went on to graduate from Cornell Law School.  “It seemed that a law license would be an asset regardless of what I ultimately did,” he says.

His hunch proved correct.  A few years after he started practicing, he landed a job working for Bob Casey, Jr.  He advised Casey and his team for five years, and then went on to the position of chief counsel and policy director at the Pennsylvania Department of the Auditor General under Jack Wagner, for about a decade.  At the end of Wagner’s second term, Teplitz was faced with the reality that although he had never considered running for an elected position, he was in an excellent position.

“It was 2010,” he recalls.  “I realized I could be in the job where I could serve the community.  It was the right time.”

With the support of his wife, also an attorney, albeit in a non-traditional law career, he threw his hat into a ring that he was familiar with, having been through half-a-dozen other statewide campaigns and local races.  Still, having never served as the candidate before, he didn’t know what to expect from the eyes of the principle.  “Exciting is one word,” he notes when talking about his run for Senate.  “It’s exciting… but it’s also exhausting.  Campaigns are very challenging.  The dynamic is unique; some things you have control over, and some you don’t.  The personal stakes are higher.”

In November 2012, he was rewarded for his perseverance and determination by being elected to the 15th District.  It was the beginning of what he considers to be one of his greatest responsibilities.  His geographic territory, like many other Senators’, is incredibly diverse despite spanning only two counties.  “It’s been a great opportunity for me to see and do things, and meet people, I wouldn’t have met otherwise,” he explains.  “It’s urban and suburban; there are rural farmers and people who live in the urban city.  There are strong – and challenged – schools.  It’s a microcosm of the state.”

To serve such a varied constituency, Teplitz utilizes his ability to listen and communicate.  His main focal points are on schools, jobs, government reform and the Harrisburg financial crisis, and he’s been pleasantly surprised by the camaraderie he shares with elected officials on both sides of the aisle.  “Most of my colleagues are cordial behind the scenes.  I wasn’t privy to those kinds of interactions when I was a staff member.  The casual discussions before and after meetings, or on the floor, are really friendly.”

Of course, when he requires some downtime from his busy schedule, he only has to throw on his running shoes and hit the roads in and around his neighborhood, as well as along the scenic Susquehanna River route.  He can also be seen at one of his children’s activities, or indulging in a little TV after everyone else has called it a night.

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house and senateBoth the Senate and House returned to work Sept. 15 with legislation authorizing Philadelphia to enact a $2-a-pack cigarette tax to help fund the Phlly School District’s budget. When the Legislature recessed in July the issue was left unresolved.

While the legislature’s agenda is packed with bills including public employee pensions to public records any aren’t approved this fall effectively die and have to be reintroduced come January, when a new two-year session begins.

For the Philadelphia School District, the cigarette tax is critical. And time is of the essence.

The system faces an $81 million deficit, and Superintendent William R. Hite Jr. has said if the tax does not pass by early October, he will be forced to lay off more than 1,000 employees, including teachers, and swell some class sizes to 40.”

There is no Plan B,” Hite said last week. “We’re not going to put children in those types of environment.”

Steve Miskin, spokesman for Republican leaders in the House, said he expects the chamber to vote on the cigarette tax by Sept. 17. It will then go to the Senate, where officials say it ranks high on the list of priorities.

“Both chambers are interested in finishing it as soon as possible. Nobody wants that bill to linger,” said Erik Arneson, spokesman for Senate Majority Leader Dominic Pileggi (R., Delaware).
Gov. Corbett has said he will sign the cigarette tax bill if it reaches his desk.

Another issue which proponents hope will find legislature approval privatization the sale of wine and liquor. Also Gov. Corbett’s wish list is pension legislation.

All 203 members of the House and half of the 50 senators are up for reelection. There is little confidence that such hotly debated bills will even be taken up, let alone make it to Corbett’s desk, particularly given the abbreviated legislative schedule. The House is set to meet for 11 days before members break in late October for the election, and the Senate for 10 days.

Legislative sources say there is only the slimmest chance of resolutions on liquor or pensions bills – though House Republicans are determined to jump-start debate on both issues.

Gov. Corbett announced last week that he would call a special session pension reform if he is reelected, an announcement that pundits say show he is conceding o the issue

“The governor still believes pension reform remains one of the major issues he and the legislature must deal with, and is hopeful that progress can be made,” Corbett spokesman Jay Pagni told the Philadelphia Inquirer.

The Inquirer believes the prospects appear better for debate on a medical marijuana bill – at least in the Senate , stating, “although Corbett has remained steadfast in his opposition to blanket legalization of marijuana for medicinal uses. He did say last spring that he would support a pilot study among child epilepsy patients seeking relief from seizures.”

The paper has reported that with two-thirds of the Senate supporting it, both Republican leaders and Democrats in that chamber say they are confident that a bill legalizing marijuana for medicinal purposes under a doctor’s supervision will be approved by the upper chamber.

Sen. Daylin Leach (D., Montgomery) said he believes that the House too has the votes to pass the bill – and that there is urgency to getting the bill done quickly.

“Every day we don’t have access to medicine for people who desperately need it is a bad day,” said Leach, who said he hopes the issue makes it to Corbett’s desk in the next few weeks.
Not so fast, countered Miskin, noting that the federal Food and Drug Administration has not approved marijuana for medical use.

“The majority of our members believe the FDA has the resources to determine what is and what isn’t medicine,” said Miskin.

 

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cancelledHouse GOP leaders announced they will not return to the Capitol next week to vote a bill enabling Philadelphia to increase its cigarette tax to help fund its schools.

House Speaker Sam Smith and Majority Leader Mike Turzai have asked Gov. Tom Corbett to advance funds to the School District of Philadelphia to ensure the schools open on time.

The House is scheduled to return September 15 when the Philadelphia schools would already be open for a full week. School officials said the schools would not be able to open safely without the ability to generate the revenue through the cigarette tax increase.

In a joint statement, House GOP leaders said they have failed to reach a consensus on other aspects of the legislation which deal with a hotel tax increase and a city redevelopment program. In a letter to Corbett, the leaders asked Corbett to advance education funding at a level “sufficient to allow the school district to open its doors and begin classes on time in September.”

“An early transfer of funds is critical to allow the school district to provide an education to Philadelphia’s school students. If such funding is not advanced, we fear that the education of thousands of Philadelphia schools children will be in jeopardy,” according to the letter. No dollar figure was given, but the letter notes the Corbett administration transferred $400 million in payments to the Philadelphia School District earlier than scheduled during the 2013-14 fiscal year.

“Such an advance of funds is not unprecedented,” the leaders wrote.

The Philly cigarette tax issue led to a few whirlwind days of politicking and legislating at the end of the 2013-14 fiscal year. Philadelphia Mayor Michael Nutter and other city and district officials for days lobbied for support of the enabling provision.
Philadelphia School District officials have said the district will begin sending layoff notices unless the Legislature passed the cigarette tax by August 15. The district was anticipating about $83 million from the $2 per pack increase on cigarettes sold in the city limits.

“As we have stated repeatedly over the last year, the Cigarette Tax is a critically important part of a multi-pronged solution to support the children of Philadelphia and our public schools for the next school year and for years to come. The news that the House will not return next week to pass HB 1177 is devastating to us,” according to a joint statement from Nutter and City Council President Darrell Clarke.

The statement continued: “Superintendent Dr. William Hite has been clear that without the new revenue from the Philadelphia Cigarette Tax to fill the now $81 million budget gap, he could not open schools on time. We support Dr. Hite’s belief that ensuring schools are safe and adequately staffed is more important than opening schools as planned on September 8th.”

The provisions holding up support for the House Bill 1177 are for hotel room tax increases to generate tourism dollars and the City Revitalization and Improvement Zone (CRIZ) expansions, which require more “in-depth policy discussion,” Smith said in a statement.

Miskin said earlier this week the two provisions would be stripped from the bill, which drew opposition from House GOP Whip Stan Saylor, R-York, and fellow Republican York Rep. Seth Grove, who said in a statement they would not vote for any amendment “which would be detrimental to the economic success of York County.”

The current form of HB1177 would authorize select counties and municipalities to increase a hotel room tax. The CRIZ program is used to develop vacant, blighted or abandoned properties for commercial use. The original program allowed chosen municipalities, primarily those of the third class with populations of at least 30,000, to establish a contracting authority to create a CRIZ area of up to 130 acres, comprised of parcels designated by the contracting authority. The chosen municipalities are permitted to issue bonds for construction and rehabilitation of the buildings and all new state taxes generated in the CRIZ areas are used to repay the bond debts. Bethlehem and Lancaster are currently the only CRIZ communities.

“As members of the House Rules Committee, we will not vote for any amendment which would be detrimental to the economic success of York County. The City Revitalization and Improvement Zone (CRIZ) and hotel tax for York County are important tools in creating jobs and increasing the economy of York County,” they said in a statement.

Smith and Turzai also said a vote on a public pension overhaul proposal is expected when lawmakers return in September.

— Kevin Zwick, Staff Reporter for Capitolwire