Monthly Archives: January 2012

PennDOT Must Reform Spending Before Revenue

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As a follow up to a year-end press release which summarized 2011 as a “GOP Failure”, House Democrats continue to criticize Gov. Corbett and the GOP for failed leadership. This time, Democrats announced their initiative to take the lead in Pennsylvania’s transportation and infrastructure crisis. The Governor’s transportation advisory committee reported back with their findings in August 2011. As Republicans have put Pennsylvania’s infrastructure needs on the back burner of the legislative agenda, the Democrats are rightfully placing increased emphasis on transportation. However, their leadership fails to appropriately address the Keystone state’s growing infrastructure demands.

Both Democrats and the transportation advisory committee conclude that the Pennsylvania Department of Transportation is faced with a multibillion dollar budget gap. They claim that the correlation between increased fuel efficiency standards which result in decreased fuel tax revenues to be at the forefront of a revenue problem. Another facet of blame for a widening budget gap is inflation and increasing Pennsylvania State Police costs. According to the advisory commitee’s projections, PennDOT will face more than a $7 billion funding gap by 2020. This will further deprive the state of sorely needed construction and reparation projects.

While Democrats and the advisory committee should be commended for reviewing tens of millions of dollars in savings through modernization and efficiency, the overwhelming majority of their proposals include raising billions of dollars in increased fees and higher gasoline taxes. Another controversial move by Democrats is to utilize turnpike revenue to fund mass transit. This move is in opposition to a user-fee policy. Turnpike motorists will be paying for a form of transportation they choose to avoid. The Democratic plan for PennDOT is business as usual in Harrisburg as politicians choose to raise revenues and leave important reforms off the table.

In order to truly confront the infrastructure crisis in Pennsylvania, lawmakers must recognize the core of the problem is overspending;  not lack of revenues. The Commonwealth’s spending per road mile is ranked higher than nearly all other states. Additionally, gasoline taxes are amongst the highest in the nation. Pennsylvanians deserve more for the current funding. This can only be achieved through fundamental reforms. There are a plethora of policy options from which to choose that will give Pennsylvanians more for their tax dollars. These policies include the end of pork barrel transportation projects, reforming or eliminating prevailing wage laws, and enabling public-private partnerships for the Pennsylvania Turnpike and mass transit. Implementing such reforms will free up the necessary resources to rebuild Pennsylvania’s deteriorating infrastructure.

Pennsylvania’s widening transportation funding gap merits the attention of all lawmakers. For a proper solution it must be recognized that the dismal state of affairs is the result of a spending problem, not revenues. The status-quo is no longer acceptable as there are several ways to make real positive changes that will create more jobs through more construction projects with the same level of funding. Pennsylvania must invest wisely and be an efficient steward of taxpayer money as a practice of good governance while paving the roadways towards the future.

Harrisburg’s Lucrative Lobbying Industry

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Not only does Harrisburg share Washington’s spending problem, but both capitals are homestead to a multitude of rent-seeking lobbyists. As legislators recess for an extended two weeks, the rest of Pennsylvanians head back to work in order to survive in this dismal economy. An examination of accessible public information regarding the political culture of Harrisburg is in order. It may surprise the general public how extensively interest groups influence the political arena at the state level.

The Pennsylvania Department of State maintains reports on lobbying disclosure information. In their 2009-2010 biennial report, the department disclosed that a grand total of nearly $1 billion were spent in lobbying. To put this in perspective, the Pennsylvania coal industry produces $200 million annually. The size of the lobbying industry is more than  double the size of the coal industry. More than $500 million alone were spent on direct communication between lobbyists and policymakers.  Approximately $23 million were spent in the form of gifts, hospitality, transportation, and lodging for state officials,  staff and their families. The Department of State’s list of lobbyists consists of 571 pages and more than 8,000 entries. It is important to acknowledge that some lobbyists represent non-profits  and are not in the business of rent-seeking.

While the numbers surrounding lobbying may appear staggering, lobbyists have been very successful. The Pennsylvania government willingly hands out more than $750 million of taxpayer money in corporate welfare per year. This places Pennsylvania second in this state ranking category, behind only Ohio. As the government becomes entangled in business ventures, there are increased distortions in the market mechanisms of prices, profits, and losses. The convoluted tax code’s myriad of loopholes and exemptions merit strong incentives for the lobbying culture. The power hold of labor unions and big business across the state represent a large interest and are often at odds with taxpayers. It is not surprising that big government involvement in the economy yields such a large and undesirable rent-seeking industry.

The only way to protect taxpayers’ wallets and maintain constituent control over legislators is to rein in the size of government. Picking winners and losers in the economy through favorable appropriations or legislation should not be a function of government. Ending corporate welfare and introducing a more fair and simpler tax code is imperative to diminishing the influence of Harrisburg lobbyists. Limiting the role of government in the economy will undoubtedly allow for freer markets and a more prosperous Pennsylvania.

Keystone Opportunity Zone Needed For All of Pennsylvania

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The Senate Appropriations Committee unanimously voted in favor of SB 1237. This bill further amends legislation enacted in 1998 to established Keystone Opportunity Zones. Keystone Opportunity Zones are areas that satisfy specific criteria and receive special state privileges to foster economic growth by enticing both investors and entrepreneurs. These regions receive tax exemptions, tax deductions, tax abatements and tax credits. Business Facilities Magazine proclaimed this program as “the number one economic development strategy in the nation.” It is time that policymakers in Harrisburg create an opportunity zone program which incorporates all of Pennsylvania.

As the Keystone State continues to stagnate, it is becoming inherently important to learn lessons on policies that have been successful in stimulating growth. Opportunity Zones have experienced years of reduced tax burdens which helped to jumpstart their communities. The Commonwealth has a 10% corporate tax rate in addition to the federal 35% corporate tax rate. Surprisingly, Pennsylvania businesses are burdened with the highest corporate tax rates in the world. Additionally, the tax code is laced with loopholes that provide benefits to certain businesses. Reducing the corporate tax rate and loopholes will be a catalyst to increase the Keystone economy’s competitiveness. Similar reductions could be imposed on the series of other state taxes included in the opportunity zone program. In conjunction with diminishing the state’s tax burden, Pennsylvania can become a right-to-work state to increase the competitiveness of the labor force and assure job creators that they will not be subject to growth disparaging labor unions.

Greatly reducing the state’s tax burden will create significantly less revenues that would undoubtedly amount to budget deficits if spending remains at current levels. While closing loopholes will serve to increase the tax base and raise some revenues, spending cuts will ultimately be necessary to compensate for the decreased tax rates. Eliminating Pennsylvania’s more than $750 million in corporate welfare is a good start. Government must refrain from handing out favors to politically connected corporations at the expense of other businesses. In Auditor General Jack Wagner’s report, nearly 45% of welfare recipients were considered potentially fraudulent. Nearly $1 billion was spent in fraudulent Medicaid claims alone between 2005-2009. Strict monitoring of all the programs within the Department of Public Welfare would without a doubt produce a substantial savings.

Legislators in Harrisburg need to follow the successes of the Keystone Opportunity Zone program and deliver a plan which fosters economic growth throughout the entire Commonwealth. Pennsylvania must make serious changes to reduce its onerous tax burden and make the state more competitive for business. There is plenty of room for spending cuts in the bloated budget which would provide billions of dollars in tax relief. State officials were elected to restore Pennsylvania. It is time that they follow through with their promises and live up to the expectations of their constituents.

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Dems Attempt to Prohibit Private Wine Wholesale

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As House Bill 11- which supports the privatization of Pennsylvania’s state wine and liquor stores- makes headway through the House Liquor Control Committee, Democratic Minority Chair Dante Santoni attempted to amend the bill to outlaw provisions to privatize wine wholesale operations. The Democratic lawmaker was joined by all nine of his rank and file party members on the committee to effectively demonstrate their support for government distribution and control.

Undeterred by more than sixty percent of Pennsylvanians who are in favor of liquor privatization, state Democrats continue to oppose HB 11 and motion for amendments to keep government in the booze business. Big government lawmakers partnered with the United Food and Commercial Workers Local 1776 led by Wendell Young have been effective in employing a misleading, multi-faceted public affairs campaign to slow down liquor liberty.

Their campaign has emphasized that privatization would cost Pennsylvania $500 million annually in lost PLCB revenues. However, the spokespeople choose not to divulge the fact that nearly all of the profits coming from alcohol taxation would still exist under the private system. Ultimately, under HB 11, revenues may increase as licensed stores would be forced to pay corporate and property taxes that government stores do not. This is in addition to the estimated $2 billion windfall of initial liquor store license sales.

Perhaps the most seriously distorted allegation against privatization is that HB 11 will increase underage drinking and DUIs. Statistics show that Pennsylvania ranks in the middle in both these categories nationally. There is no correlation that privatization will perpetuate increased alcohol societal ailments. The negative public health accusations are just another strategy utilized to delude concerned citizens and sway public opinion in the favor of the status-quo. The real conflict of health interest exists in the government sale and promotion of alcohol when the commonwealth should focus on law enforcement.

Fortunately, both Democrats on the Liquor Control Committee and the liquor store union have been unsuccessful in putting an abrupt halt to liquor liberty for Pennsylvania consumers. Although House Republican leader Mike Turzai was unable to deliver during the fall session, there is still hope in 2012 to finally put an end to the government distribution of wine and spirits.