Reduced Recidivism Achieves Big Savings for Corrections Dept. and Taxpayers

Dissatisfied by the grim circumstances of the stagnate economy, onerous tax burden and difficult budget cuts, Keystone residents are faced with an uphill battle ahead. Fortunately, there is one government department that has managed to save taxpayers several hundred million dollars. These savings have allowed the department to hold the line on a budget increase, thus, breaking a ten-year trend for additional state funding. For a department that has grown at an astonishing rate, this recent development proves to be promising in alleviating the state’s budget crisis. State officials are also taking the legislative initiative to increase the department’s effectiveness, which will provide even more relief for taxpayers.

Earlier this month, John Wetzel, Department of Corrections Secretary, testified before the Senate Appropriations Committee. In his testimony, Secretary Wetzel reported that the state’s inmate population is projected to flatten out. The secretary asserted that with some reforms, the prison population could even decrease. The department has attributed the big savings and the leveling of the inmate population to a significant decrease in the recidivism rate. The Board of Probation and Parole has reduced the rate of inmates returning to prison from 55 percent to 42 percent in just three years. This recent success has been attributed to crime-reducing treatment programs designed at rewarding prisoner’s good behavior.

The Department of Corrections has become the third largest department within the state budget. This makes their recent success story even more monumental. The state inmate population has rapidly grown by more than 500 percent since 1980. Corrections spending soared by a staggering 1,700 percent over the past 30 years. It was impossible for Pennsylvania to build enough prisons to keep up with this growing inmate population. State prisons are more than 13 percent above capacity even with the construction of 18 additional facilities.

Lawmakers are now answering Secretary Wetzel’s call for legislation aimed at reducing the inmate population and recidivism rate. Senate Judiciary Chairman Greenleaf (R-Montgomery) and Senator Brubaker (R-Lancaster) are avid supporters of Senate Bill 100. The judiciary chair asserts that current parole violations are accompanied by stern punishments and lengthy prison sentences that prove costly to taxpayers: $35,000 per inmate per year. Senator Brubaker explains that his co-sponsored legislation would permit for more nonviolent offenders to participate in successful rehabilitation programs. Senate Bill 100 recently passed the Senate and awaits a vote in the House.

The savings achieved by the Department of Corrections, at a time when other state expenditures are steadily increasing, are a point of relief for the budget. The reports showing signs of fiscal restraint in a department that has a long history of immense expenditure expansions are promising to say the least. Lawmakers in the Senate have acted swiftly to deliver legislation to further support programs that are successfully saving taxpayers hundreds of millions of dollars. It is now up to the State House to pass Senate Bill 100 and so that the Governor can sign these reforms into law.

Pennsylvania’s Fork in the Road on Transportation Spending

Motorists frustrated with high gas prices should be on the alert- your pain at the pump could get worse, and it has nothing to do with Middle East tensions or gas company profits.

Sadly, many in the transportation industry and some lawmakers in Pennsylvania believe the only way to fix our roads is to increase gasoline taxes and charge drivers more in vehicle fees. This low-octane loser is surely another wrong exit for taxpayers whose tank is already on empty.

To be certain, Pennsylvania’s roads and bridges need repair. But before taking one more dollar from working men and women through higher prices at the gas pump, lawmakers must do a better job spending the billions in taxes and fees they already get.

Gov. Corbett’s Transportation Funding Advisory Commission proposed uncapping the oil franchise tax- bumping up gas prices by an estimated 10 cents or more per gallon- while also increasing vehicle and license fees. Advocates for more transportation taxes and fees claim Pennsylvania, due to the lack of transportation funds, has the most structurally deficient bridges in the nation and some of the worst roads in the country.

While Pennsylvania’s roads and bridges may indeed be poor, there is simply no shortage of transportation dollars. U.S. Census and Federal Highway Administration data shows Pennsylvania spends more than $61,000 per highway mile, the seventh-highest road spending in the country. State highway spending exceeds $588 per person, more than 41 other states. And, state transportation spending has risen by more than 127 percent since 1995. The bottom line: Funds are available, but they’re not being spent well.

Pennsylvania’s fiscal house is already facing a four-alarm fire with the state’s spending crisis, and transportation must be considered in the context of all state spending. Fixing roads and bridges is a fundamental government responsibility, but many other state programs are not.

How can any legislator look taxpayers in the eye and demand they pay more at the pump each month to fix failing bridges, while state government hands out billions of dollars in subsidies for sport stadiums, corporate headquarters and “green jobs”? Redirecting state borrowing for corporate welfare to transportation would make better use of taxpayers’ dollars.

There are more ways to sure up funding for roads and bridges that won’t empty the wallets of Pennsylvania drivers. Currently, the cost of state-funded construction projects ballooned by tens of millions of dollars due to archaic mandates that force private employers to pay workers inflated wages, increasing labor costs upward of 30 percent for the same quality of work. Redefining prevailing wage rates on state-funded construction projects can free up funding that could be used on other badly needed projects.

Moreover, transportation projects, like all government appropriations, must be prioritized. Beautification, streetscaping, bike trails, parking garages, and new maintenance buildings might garner applause and photo ops for politicians, but they eat up funding that could be used for vital repairs. Every dollar spent on unnecessary aesthetics is one dollar that cannot be spent fixing our more than 5,000 deficient bridges.

Furthermore, Pennsylvania has the opportunity to bring private sector expertise and financing to transportation. Public-private partnerships, which the commission supported, are contractual agreements between a government agency and a private entity to build or manage a project. These partnerships minimize costs and maximize accountability as private contractors put their own capital on the line while government retains ownership and oversight.

Lawmakers should also stop sending turnpike toll money to mass transit systems in Philadelphia and Pittsburgh that most Pennsylvanians don’t even use. Mass transit must rely on user fees, not taxpayer subsidies, freeing up turnpike revenue to repair the roads motorists are paying to drive on.

Ultimately, gas prices have already taken a financial toll on Pennsylvania drivers. Before taking more out of the wallets of drivers and taxpayers, lawmakers must prioritize the billions of dollars we spend today and protect our investment in transportation. Otherwise, Pennsylvania taxpayers will be out of gas along with patience for business-as-usual overspending.

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Jonathan Humma is a research fellow and Nathan A. Benefield is director of policy analysis with the Commonwealth Foundation (www.commonwealthfoundation.org), Pennsylvania’s free-market think tank.

Commentary also featured in the York Daily Record and Johnstown Tribune-Democrat newspapers.

Democrat Touts Hollywood Handout

As part of the Democratic Caucus’ 2011-2012 policy agenda, Democratic leaders issued a platform for accountable government operations free from corporate and outside influences. The pledge of good governance was to be accompanied by fair fiscal policy aimed at protecting working families from tax increases and ensuring that out-of-state corporate interests pay their fair share. However, just last week, thanks to Pennsylvania’s film tax credit for movie producers, House Democrat Paul Costa celebrated a multimillion-dollar film project in his district. The Allegheny County lawmaker boasts many years of hard work in maintaining his corporate welfare program. He credits himself for the creation of thousands of jobs and nearly a billion dollars of economic activity since 2007. Interestingly, research and policy analysis debuts a much different tale, one of special interests putting taxpayers last.

According to Rep. Costa and reports by the Pennsylvania Legislative Budget and Finance Committee, Governor Rendell’s $60 million film tax credit appears to be an important investment for Pennsylvania. Advocates of the film tax credit argue that the tax incentive is responsible for thousands of jobs and increased economic activity in the Commonwealth. The problem with their claims is that the report does not show a direct relationship between tax credits and increased film production. The report acknowledges that the majority of film producers do not even apply for the film tax credit which indicates that the tax incentive is not nearly as strong as proponents believe.

In reality, the tax credits are ineffective in providing substantive increases in economic output. Policy analysis also indicates that tax credits fall short in paying for themselves. States with the most robust film tax credits report a meager twenty cents in tax revenue for every dollar given out in credit. In Pennsylvania, the $60 million dollars in tax credits are allegedly accompanied by $18 million additional dollars in tax revenues. This leaves two-thirds of the tax credit on the taxpayer’s tab. The film tax credit effectively mitigates the industry’s tax liabilities into an increased share of the state’s tax burden on both workers and businesses.

Democratic Rep. Costa’s beloved film tax credit is in direct opposition to his caucus agenda. The corporate welfare program enables Hollywood Studios to prosper at the expense of Pennsylvania’s hard-working families. The program provides neither substantial economic activity nor enough tax revenues to be self-sufficient. The film tax credit represents yet another special interest successfully lobbying for private privilege with the deception of fostering real economic growth. As a result, many states have decided to put taxpayers first and have abandoned their film tax credit programs.

Skyrocketing Pension Contributions

Following through on his word to balance the budget without raising taxes has been a challenging task for Governor Corbett. His administration has made tough decisions on government spending and there are more difficult decisions ahead. Balancing the public ledger has been accompanied with budget cuts which provoked discontent amongst many Pennsylvanians. While such necessary cuts has left many Keystone residents dissatisfied, the Commonwealth will produce a second sustainable budget. Unfortunately, there is a looming threat that lies ahead in the arena of skyrocketing state pension contributions. Lawmakers recently met with the Public Employees Retirement Commission. The commission’s grave testimonies made it abundantly clear that there must be attention focused on pensions in order to minimize the eminent day of reckoning.

Between state and public school employees, there is an unfunded liability of more than $40 billion which is more than 150% larger than the entire General Fund. The current budget appropriates more than $1 billion towards pension obligations. This is an increase of more than $300 million from last year. The state contributions are expected to rise 600% in merely six years to a total of $4.2 billion. The immense increase in pensions in the budget is certain to undermine the budgeting process for years to come. Lawmakers will be forced to substantially increases taxes or continue to make spending cuts. The retirement commission estimates that it will take more than 30 years to fund all the liabilities.

Unfortunately, this forthcoming pension crisis was self-imposed. Just a decade ago, the Public School Employees Retirement System (PSERS) was actually running in a surplus. During this time, the General Assembly passed 50% benefit increases for themselves, 25% increases for other state employees and a 25% increase for those already retired. In addition to boosting benefits, lawmakers voted to postpone making proper payments to the retirement plans in 2003 hoping that the fund would experience a rapid growth over the course of the next decade. However, the Great Recession caused a 30% collapse in the market value of the retirement funds. Coupled with the many years of underfunding, Pennsylvania is now faced with a fiscal nightmare as courts have ruled that it is not permissible to retroactively adjust benefits.

The introduction of a defined-contribution plan instead of the current defined-benefit plan is a vital component to recovery. Richard Dreyfuss, business and actuary scholar, emphasizes that defined-contribution plans boast several benefits in comparison to the current disastrous plan. In contrast to the unfunded liabilities accrued by pensions, defined-contributions’ annual government payments are the final cost. Benefits remain stable as a percentage of the employee’s payroll rather than rapidly increasing state costs to cover increasing liabilities and decreased investment returns. Not only do defined-contribution plans provide stable budgeting, but they also prevent manipulation by politicians who want to increase benefits while deferring the costs to the future. The defined-contribution plan is a pay-as-you-go system in which benefit increases require sufficient funding. This plan provides an important safeguard to taxpayers as costs are straightforward and not unfairly bestowed upon future taxpayers.

Pennsylvania’s pension obligations are growing at unsustainable levels and require immediate action from the General Assembly. The nature of pension plan politics has been to increase benefits while deferring costs into the future. The future has now caught up with the present. The Commonwealth must institute a retirement plan that is both fiscally responsible and fair to taxpayers.