Pennsylvania schools

Pennsylvania Lawmakers Propose Shale Tax to Pay Down Pension Debt

Pennsylvania lawmakers this week released two dueling shale tax proposals. One of those proposals calls for an 8 percent extraction tax, with a significant portion of the revenue going towards the state-level pension systems.

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Setting the bar on the high end, Democratic state Sens. Art Haywood, Vincent Hughes and Larry Farnese focused on putting money back in the state’s education coffers with their plan for an 8 percent shale tax. Texas – the only state to produce more shale gas than Pennsylvania – has an extraction tax of 7.5 percent.

At a press conference held at Philadelphia School District headquarters, Haywood called 8 percent “affordable.”

“Some people are going to say that it’s extreme,” said Haywood. “Eight percent is not as extreme as zero, which is what we have now.”

With that plan, the state would raise more than a billion dollars in revenue in the first year, Haywood said. Off the top, $100 million would go to environmental concerns, with the rest of that revenue split 60 percent for education and 40 percent to defray pension costs.

If the lawmaker’s projections are to be trusted, the tax would net over $360 million for the pension systems in its first year.

Pennsylvania’s state-level pension debt amounts to around $47 billion, according to the state’s budget office.

Photo credit: “Flag-map of Pennsylvania” by Niagara – Own work from File:Flag of Pennsylvania.svg and File:USA Pennsylvania location map.svgThis vector image was created with Inkscape. Licensed under CC BY-SA 3.0 via Wikimedia Commons – http://commons.wikimedia.org/wiki/File:Flag-map_of_Pennsylvania.svg#mediaviewer/File:Flag-map_of_Pennsylvania.svg

Pennsylvania Candidate Wolf Doubles Down on Pension Stance

Pension reform has been a center-stage issue since May in the race for Pennsylvania governor.

During an interview this week with the Philadelphia Public School Notebook, Democratic candidate Tom Wolf forcefully doubled down on his position that pension reform isn’t the state’s fiscal priority. The exchange:

Q: How is the escalating cost of pensions impacting school financing in Pennsylvania, and what do you think should be done about it?

A: Our current pension situation is the direct result of almost 10 years of leaders in Harrisburg kicking the can down the road and the state paying less than its fair share. What we’re seeing from Gov. Corbett is more political games – he is pushing a plan that creates no immediate savings for taxpayers.

As governor, I will let Act 120 [a 2010 law reducing pension benefits to new employees] work and create innovative solutions that are fiscally responsible and fair and beneficial to taxpayers and future employees.

A further explanation of how the two candidates differ on the issue of pensions, from the Times-Herald:

Corbett says the burgeoning cost of Pennsylvania’s public pensions is a crisis that requires prompt, decisive action. Wolf argues that it’s a problem that can be resolved in the years ahead.

Corbett wants to scale back pensions for future school and state employees as a meaningful step toward savings. He says the taxpayers’ share of the pension costs for current employees — $2.1 billion this year — is crowding out funding for other programs and helping drive up local property taxes.

Wolf contends that the pension problems are partly the result of the state contributing less than its fair share of the costs for nearly a decade and that a 2010 law reducing pension promises to future employees and refinancing existing obligations needs more time to work.

Act 120 was a 2010 law that reduced pension benefits for some employees but kept intact the current defined benefit system. Wolf has been adamant that the law needs time to work.

Corbett wants to shift new workers into a 401(k)-type plan.

Photo Credit: “TomWolfYuengling” by Tom Wolf. Licensed under Creative Commons Attribution 2.0 via Wikimedia Commons

Pennsylvania Pension Reform Not Likely As Election Draws Closer

The election for Pennsylvania governor draws closer, but pension reform seems farther away than ever.

Gov. Tom Corbett has made pension reform his campaign cry. But he remains down in the polls as the urgency to pass pension reform dwindles around him—both from inside and outside the capitol. ABC 27 reports:

A typical late-August day and all is quiet at the Capitol.

But this silence is not golden for a governor who has criss-crossed the state begging/cajoling/shaming/pleading with lawmakers to give him pension reform.

“We have a bill out there right now that I want the legislature to come back and finish,” Governor Tom Corbett said a week after the legislative exodus in early July.

The governor has poster boards calling pensions a $50 billion problem that will burden future generations of Pennsylvanians.

There is disagreement among lawmakers on how to fix pensions and disagreement as to whether there’s even a problem.

“The word crisis is being used for ideological reasons, not any mathematical reasons,” insists Senator Rob Teplitz (D-Dauphin).

Teplitz, and most Democrats, believe the problem was created by the state failing, for years, to pay what it owed toward pensions and now it’s time to pay the consequences and pay up.

“It does feel more painful,” Teplitz said. “But just like any family that delays making its credit card payment, sooner or later you gotta make that payment.”

There’s no urgency among lawmakers because there’s not urgency among voters, said one pollster. Education funding is on the mind of the electorate, not pension reform. From the Philadelphia Daily News:

[Pollster Terry] Madonna said that for voters the pension-funding increase is “not something they relate to,” while Pennsylvania school districts raise local property taxes, lay off staff and curtail programs.

Other high-level observers agree that voters aren’t as engaged on pension issues. From ABC 27:

“It’s something that the public still hasn’t been able to get its arms around,” said Lowman Henry, a conservative commentator with the Lincoln Institute. “As a result, you’re not seeing that type of collective pressure on lawmakers that is going to push them to make what are very difficult decisions in an election year.”

The latest poll shows Corbett trailing his Democratic challenger, Tom Wolf, by 25 points. Wolf currently holds 49 percent of the vote, while Corbett holds 24 percent. Twenty-five percent of voters remain undecided.