Capital Watch January 2012

w w w. ca p i ta l- wat c h . c o m

CapitalWatch VOL. 5 NO. 1

inside Legislators introduce state transportation funding plans PAGE 3 Wagner says turnpike debt jeopardizes tollroad system PAGE 6 New natural gas fleet fueling stations slated for PA PAGE 8 Memo discloses nervous, divided Corbett administration PAGE 12 EDITORIAL: ‘Cap Watch fearless predictions for 2012’ PAGE 13

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JANUARY 2012

Gov. Corbett orders spending freeze of $156.6 million The Corbett administration has announced a freeze in state spending of about $156.6 million from the overall $24.8 billion executive branch budget in 2011-12.

“Until revenue collections improve, we must take precautions to ensure that the commonwealth budget remains in balance,” Gov. Tom Corbett said in a release on Jan. 4.

The budgetary freeze comes on the heels of revenue collections that are nearly $486.8 million below estimate, according to a Revenue Department report.

Most executive branch spending is reduced by just over one-half of one percent of the general fund budget, according to figures released by the office.

The Legislature and Judiciary, along with the three state row offices, the State System of Higher Education, the Higher Education Assistance Agency and other independent government entities, were asked to reduce spending by about $65.8 million out of $2.7 billion allocated to some independent agencies.

However, those cuts are only requests, and in the past, the Legislature and Judiciary ignored them.

The largest freeze made in the executive branch was to State Correctional Institutions, which received a $15.6 million spending reduction.

The budget freeze will reduce this fiscal year’s spending to state-related universities, including: Penn State, the University of Pittsburgh,

Temple and Lincoln. Those schools will see a reduction of 5 percent, or $25.7 million, in state funding.

Basic education subsidy funds paid to school districts will not be affected, according to the Budget Office.

“March and April are the two largest revenue months.

Because so much tax revenue is collected in these months, the extent of the shortage will not be fully clear until then,”wrote House Appropriations Chairman Joe Markosek, D-Allegheny, in his monthly General Fund Revenue Update.

However, Markosek did acknowledge “given continuing economic uncertainty, a revenue shortfall may likely be a factor in the next budget cycle.” CW

BIGGEST FREEZE (by dollar amount): • State Correctional Institutions: $15.6 million (Directed by Gov. Corbett) • Penn State University: $10.7 million (Directed by Gov. Corbett) • County Child Welfare: $10 million (Directed by Gov. Corbett)

BIGGEST REQUESTED FREEZE (by dollar amount): • Higher Education Assistance Agency: $21 million (Requested by Gov. Corbett) • State System of Higher Education: $20.6 million (Requested by Gov. Corbett)

Capitolwire com a service of GovNetPA, Inc.

Pennsylvania’s #1 Online Source for Political, Legislative and Public Policy News For a free trial subscription, please visit our web site at www.capitolwire.com.

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news 3

JANUARY 2012 CAPITAL WATCH

CapitalWatch www.capital-watch.com PUBLISHER/AD DIRECTOR Jim Laverty (717) 233-0109, ext. 122 EDITORIAL Editor-in-chief Jacqueline G. Goodwin, Ed.D. goodwinpin@comcast.net (717) 418-3366 Contributing Writers Peter L. DeCoursey Kevin Zwick News Service Capitolwire Graphic Design Lisette Magaro Production Shawn Skvarna Capital Watch is published every month.

Reproduction of this publication in whole or part is prohibited except with the written permission of the publisher. Capital Watch is non ideological and nonpartisan.

(717) 233-0109, ext. 114

Reps. Hanna, Frankel introduce state transportation funding plan Democratic state Reps. Mike Hanna and Dan Frankel have introduced a comprehensive legislative package to deal with the state’s transportation funding crisis.

“It has been five months since Governor Tom Corbett’s handpicked Transportation Funding Advisory Commission issued its report. The governor has chosen to say little about the group’s recommendations, other than he is assessing them,” said Hanna, D-Clinton/Centre.

“Pennsylvania’s deteriorating roads and bridges deserve a higher priority than the governor has given them.

And if he is choosing not to lead on this issue, then it’s time for the legislature to take action.”

The Democrats’ plans resemble that of Senate Appropriations Chairman Jake Corman, R-Centre, who introduced a funding proposal modeled after many of the $2.5 billion in TFAC recommendations.

The TFAC report urged PennDOT to consider a number of measures including adjusting outdated vehicle

Rep. Mike Hanna

Rep. Dan Frankel

driver fees for inflation, increasing fines, uncapping the Oil Company Franchise Tax over five years and modernizing many PennDOT services for cost savings. The proposal also carries specific

recommendations to ensure adequate funding for mass transit.

Frankel is sponsoring a proposal that would provide money from the Pennsylvania Turnpike for mass transit.

“Mass transit is a critical component of our transportation network,” said Frankel, D-Allegheny. “A well-functioning public transit system creates vibrant cities, takes cars off the roads, and gives freedom of movement to all our residents who can’t drive.

“Rural areas that don’t see much daily traffic still deserve upkeep, just as urban centers deserve buses and trains to get people to work,” he added. “It’s not either/or. We need both.”

Hanna continued: “By working in a bipartisan, bicameral manner, it is my hope that we can reach a consensus on this priority in the coming weeks.

“Given the governor’s recent support for a levy on Marcellus Shale, as well as the supportive tax votes of Republican legislators on that issue; it doesn’t appear that the Americans for Tax Reform no-tax pledge should be holding anyone back from voting for appropriate funding mechanisms for our state’s infrastructure needs.

The lawmakers said all funding generated by the proposals will go toward transportation projects.

“The long-term viability of our roads, bridges and mass transit systems, as well as the thousands of jobs for Pennsylvania workers that will be created through these projects, are critical to the commonwealth’s economy,” Hanna said.

The Democrats’ bills are H.B. 2099, H.B. 2101 and H.B. 2112.

To view the full TFAC report, go to www.tfac.pa.gov. CW

4

NEWS

JANUARY 2012 CAPITAL WATCH

Scarnati wants drilling package set in stone before Gov.’s budget address The leader of the Pennsylvania Senate is setting another deadline for passage of a Marcellus shale impact fee package.

Senate President Joseph Scarnati, R-Jefferson, said he wants the state House and Senate to decide on a Marcellus shale drilling policy, before Gov. Tom Corbett gives his budget address in early February.

With the Legislature set to return Jan. 17, Republicans in the General Assembly and Corbett have about one week to reach an agreement.

“I would strongly recommend that we have this wrapped up … before budget negotiations start,” Scarnati said. “I don’t think that there is any reason that we should hold back any longer. We know what our differences are, and there is going to have to be movement on both sides.”

Scarnati has been leading the charge on the natural gas drilling package in the state Senate.

While the shale bills have various components, the biggest sticking points are the amount and duration of the natural gas drilling fee and the government entity designated to collect it, Scarnati said.

The Senate wants to impose a $360,000

per-well fee over 20 years, while the state House passed a bill to impose a $160,000 per-well fee over 10 years. The state would collect the revenue in the Senate plan, but counties that host natural gas drilling would authorize and collect the fee in the House plan.

“I can tell you, the business community and the investor community around this state, they want uniformity across the state of some sort, no matter what the issue is,” Scarnati said. “A hodgepodge of tax collection is not conducive for good investment.”

Senate Democrats unanimously opposed the Senate GOP shale bill when it was voted out of the chamber late last year, citing concerns over the fee amount, the lack of revenue distribution to statewide environmental programs and inadequate watersheds and wells protections.

Senate Minority Leader Jay Costa, D-Allegheny, said Democrats were hoping to reach a consensus on the impact fee bills through a conference committee.

Steve Miskin, spokesman for House Majority Leader Mike Turzai, R-Allegheny, said progress had been made, but the collection of the fee

Sen. Joe Scarnati

revenue was a remaining sticking point.

Corbett supports the county-level fee and has expressed concerns about bringing the money from the fee to the state Capitol, where it could be divided among various special interests not related to drilling.

If history is any guide, Scarnati’s call for the impact fee legislation to be completed in the next month should be taken with a grain of salt.

In June 2010, lawmakers included a clause in the state budget announcing their intention to pass a natural gas tax

before the end of the year after last-minute negotiations on the tax threatened to stall the passage of the state budget.

By the end of 2010, no legislation had made it to the governor’s desk though the state House did pass a severance tax bill. A severance tax is based on a flat rate that is applied to the value of the resources removed.

In the summer of 2011, Scarnati said the Marcellus shale fee was his No. 1 priority for the fall legislative session.

By the end of 2011, nothing had been passed though each chamber approved a impact fee bill separately.

After House and Senate Republicans failed to work out a deal over the cost of the fee or who would collect it, the two bills appeared to be headed for a conference committee, tentatively scheduled for mid-January.

The committee would include three members from each chamber, with majority Republicans getting four of the six spots.

Scarnati said he “has not given a lot of thought” about which two Senate Republicans might be on the sixmember panel.

Costa also declined to name names, but indicated state Sen. John Yudichak, D-Luzerne, was a front-runner.

Yudichak, in just his first term in the state Senate after 12 years in the state House, has been the Senate Democrats’ point person on the natural gas issue.

Aside from the passage of a Marcellus shale bill, the focus of 2012 must be on creating jobs and improving Pennsylvania’s economy, Scarnati said.

“If legislators are ever going to gain respect and trust of the taxpayer, it will be done by example of what we have done, not what we have said we will do,” he said to the state Senate moments after being unanimously re-elected as Senate president for another year.

Costa said jobs would be at the center of the Senate Democrats’ plan for the upcoming legislative session as well.

“We believe that jobs and the economy are critical issues that need to be addressed by this chamber, but by the administration also,” Costa said. CW

NEWS 5 5 news

JANUARY 2012 CAPITAL WATCH

January 2012 CAPITAL WATCH advertorial

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CW: Describe your firm’s products.

Gretchen R. Haggerty

Executive VP/Chief Financial Officer

United States Steel

Gretchen R. Haggerty, a native of Pittsburgh, earned a Bachelor of Science degree in accounting from Case Western Reserve University in Cleveland and a law degree from Duquesne University in Pittsburgh.

Joining the corporation as a management trainee in the tax division in 1976, Mrs. Haggerty was named tax assistant in 1977 and moved to the audit division the following year.

She transferred to the financial department as leasing analyst in 1980, became senior financial analyst in 1982 and advanced to corporate finance manager two years later.

In 1985, Mrs. Haggerty was appointed directorplant and general accounting for the former USS Chemicals Division. The next year she returned to the tax division as a general tax attorney and was named director-taxes, energy in 1987.

Mrs. Haggerty was named assistant treasurercorporate finance in 1988, appointed assistant comptroller-corporate accounting in 1989, and elected vice president & treasurer of USX Corporation in 1991. In 1998, she was named vice president-accounting and finance for U. S. Steel, and assumed the position of senior vice president and controller in January 2002. In May 2002, she was elected senior vice president and treasurer, and in March 2003, she was promoted to executive vice president, treasurer and chief financial officer.

In October 2004, Mrs. Haggerty relinquished the title of treasurer and continues as executive vice president and chief financial officer. Additionally, Mrs. Haggerty is chairman of the United States Steel and Carnegie Pension Fund and is a member of the Investment Committee of the Fund.

Mrs. Haggerty serves on the board of directors of USG Corporation, the Strategic Investment Fund, the Pennsylvania Business Council, the United Way of Allegheny County, and The Duquesne Club. She is a member of Financial Executive International, the Allegheny County Bar Association and is a Certified Public Accountant (inactive) in the state of Ohio

GRH: United States Steel Corporation manufactures a wide range of valueadded steel sheet and tubular products for the automotive, appliance, container, industrial machinery, construction, and oil and gas industries. The company has an annual raw steelmaking capability of 31.7 million net tons.

CW: When did you join the firm?

GRH: I joined the company as a management trainee in the tax division in 1976 upon graduating from Case Western Reserve University in Cleveland. Since then, I have advanced through a series of increasingly responsible positions in the tax, audit, accounting and finance departments.

I have served as an officer of the company since 1991 and assumed my current role of Executive Vice President and Chief Financial Officer in 2004.

United States Steel and the steel industry in general have undergone many changes during my career. Today’s steel industry is highly competitive, cyclical and much more globally oriented than at the start of my career.

I am proud to have played a role in helping United States Steel adapt to these changing conditions, allowing our company to remain a recognized leader in the global steel industry.

CW: What are your near-term and long-term goals for the company?

GRH: Over the long term, our strategy is to be forward-looking, grow responsibly, generate a competitive return on capital, and meet our financial and stakeholder obligations. We remain committed to being a world leader in safety and environmental stewardship; improving our quality, cost competitiveness and customer service; and attracting, developing and retaining a diverse workforce with the talent and skills needed for our long-term success. Our commercial focus is to provide value-added steel products for the customers and industries that we serve while also working to develop new steel products and uses for steel. With regard to capital investments, we remain focused on a number of key projects of long-term strategic importance that will help us improve our coke self -sufficiency (a raw material used in the iron making process), more efficiently serve our tubular product customers’ increased focus on North American

shale resources, and increase our participation in the automotive market through the production of newer advanced high-strength steels needed to help automotive customers meet increasingly stringent vehicle emission and safety requirements.

CW: Are your customers local, regional, national or global?

GRH: United States Steel has the ability to service customers around the world thanks to operations that are located in four countries (the United States, Canada, the Slovak Republic and the Republic of Serbia). Today, we are the eighth largest steelmaker in the world according to World Steel Association production statistics.

We’ve been making steel for more than 100 years, always with an eye to serving our customers’ needs in the most cost-effective ways possible.

CW: Where else does the firm have business locations?

GRH: United States Steel operates facilities in the United States, Canada, Slovakia and Serbia. We are also involved in several steel finishing joint ventures in the United States, Brazil, Canada and Mexico, and we have a transportation subsidiary and real estate division both of which are based in Pittsburgh. In the United States, we operate raw materials, steelmaking, steel finishing, and research and development facilities in Alabama, Arkansas, Illinois, Indiana, Michigan, Minnesota, Ohio, Texas and, of course, Pennsylvania. Here in the Commonwealth, we employ approximately 5,000 people at our Mon Valley Works, which includes three raw materials and steelmaking facilities near Pittsburgh (Clairton Plant, Edgar Thomson Plant and Irvin Plant) and one near Philadelphia (Fairless Plant), our Research & Technology Center, McKeesport Tubular Operations, our headquarters and other locations.

CW: What would you do to improve PA’s competitive business climate— so that your firm would invest more?

GRH: As an integrated steelmaker, United States Steel considers capital investments on a regular basis. In Pennsylvania, the company is currently investing $500 million at the Mon Valley Works’ Clairton Plant to complete the construction of C Battery, a new

coke making facility at the plant.

The project will result in improved environmental performance and efficient coke production. Given the scope of our presence in Pennsylvania, investing in our operations is an ongoing effort. To enhance the competitive position of Pennsylvania, the company will continue to advocate in Harrisburg for longterm, competitively priced energy rates, business tax competitiveness, including lowering the Corporate Net Income Tax and reducing the cap on the Net Operating Loss Carry forward, and a pro-growth regulatory plan for manufacturing and industry. We have also worked closely on policy issues concerning the responsible development of the Marcellus Shale.

CW: Are there public policy changes your firm is advocating?

GRH: The company advocates for enforcement of our trade laws, responsible environmental regulations, and numerous public policy issues that impact our operations related to energy, transportation and infrastructure. United States Steel was supportive of Pennsylvania's recent tort reform legislation regarding the doctrine of joint and several liability.

Other policy items the company is currently focused on include recommendations from the Governor’s Marcellus Shale Advisory Commission, including development of effective, high-quality infrastructure to service the developing natural gas industry.

CW: What did you think of recent political changes and their impact on business?

GRH: United States Steel operates in eight states in the U.S. as well as Canada and Europe. Because we have experience working with numerous government agencies and elected officials, political changes are expected and we strive to work with those government officials willing to work with our company on important issues, regardless of political affiliation. That said, the current political leadership in Harrisburg has been interested in working with manufacturing and industry, and we look forward to working with them to help advance public policy in Pennsylvania that will make the Commonwealth competitive.

6 NEWS

JANUARY 2012 CAPITAL WATCH

Auditor General Wagner, PA Turnpike disagree regarding toll-road system’s financial health Auditor General Jack Wagner is warning that the Pennsylvania Turnpike Commission’s long-term debt is jeopardizing the future of the state’s toll-road system.

“The statistics show clearly that the Pennsylvania Turnpike Commission is drowning in debt due to the burdens placed on it by Act 44,” said Wagner.

However, the commission, responding to Wagner’s claims, said there is no immediate financial crisis.

“Auditor General Wagner’s assertion that the commission is in a financial crisis today is simply not true,” wrote agency CEO Roger Nutt in a news release.

According to Wagner, Pennsylvania taxpayers could be on the hook for billions of dollars of additional debt if the General Assembly does not soon amend or appeal Act 44 of 2007, which requires the Turnpike Commission to provide $450 million a year in infrastructure funding to the Pennsylvania Department of Transportation.

Wagner noted that the agency’s long-term debt has increased by 181

percent, from $2.6 billion to $7.3 billion, since Act 44 was implemented.

Since 2009 the Turnpike Commission’s total net assets plunged 997 percent, from a surplus of $156 million to a deficit of $1.4 billion.

Act 44 was signed into law by Gov. Ed Rendell as a way to increase funding for state transportation projects.

The turnpike portion of the law was intended to be only one part of the funding equation; however the other part of Act 44 – tolling Interstate 80 – never became reality.

After three years of studies, the federal government denied the application to convert I-80 to a tolled facility. The commission still must continue to make payments to PennDOT. But that hasn’t put the commission in jeopardy, according to Nutt.

Nutt wrote: “The nation’s major rating agencies have not changed their underlying ratings of Pa. Turnpike bonds for more than three years.

During that period, the Turnpike has provided more than $3 billion to the commonwealth for statewide

investment in transportation systems.

“Furthermore, the continued existence of the Turnpike Commission is not in jeopardy, as he [Wagner] alleges, because the PTC has developed a sound, fiscally responsible approach to meet all of its financial obligations, including the $450 million annual payments to PennDOT under Act 44.

Last June, the PTC approved a funding plan for all of its financial obligations for the next three years.”

However, both parties do agree that Act 44 in the long term does not

appear to be sustainable.

“No entity can continue to operate with significant increases in longterm debt and the continued serious depletion of assets caused by Act 44,” said Wagner. “It is time to rescue the Pennsylvania Turnpike Commission by repealing Act 44.”

Nutt agreed that something needs to be done regarding Act 44: “We agree with the Auditor General that Act 44 funding may have a negative effect on Turnpike traffic, toll rates, customer service and other traveler benefits sometime in the future.

“We certainly understand that, in the long-term, the funding stream (toll increases) necessary to do so may not easily be sustained, and so subsequent amendments to the funding requirements may need to be considered.”

State lawmakers for several years have been looking for alternative funding streams. A commission organized by Gov. Tom Corbett produced several funding proposals, but legislators have yet to act on them. CW

House Democratic leaders say they would whip votes if Corbett backs transportation plan

By Kevin Zwick, Capitolwire

Three top House Democrats are challenging Gov. Tom Corbett, saying if the governor supports his transportation commission’s recommendations, they will too.

If Gov. Tom Corbett comes out publicly for a set of new transportation revenue plans recommended by the governor’s transportation funding commission, Democratic leaders said they will try to supply a significant level of votes for it.

During a press conference, Democrats said now Corbett and Republicans need to take action to address the state’s transportation infrastructure funding problems.

But in an election year, some members who don’t see a direct benefit of voting for a bill that funds mass transit would have a tough decision to make, said Policy Chairman Mike Sturla, D-Lancaster.

“It’s gonna be tough for them to put up a vote,” he said. “(But) do you have bridges falling down in your district? You might be more inclined to vote for legislation if you can see there’s going to be a direct benefit to some of your constituents, like immediately in their face.”

Sturla said he does think there’s enough votes to get something passed, but it would take a combined effort from Democrats and Republicans.

“I think when you look at polls, Pennsylvanians say this is their top priority, not liquor store privatization, not shutting down Planned Parenthoods, not English as the only language,” Sturla said. “It’s transportation. They drive on those roads and hit those potholes every day.”

Corbett said in the fall that he would not rush to increase transportation funding because of the frail economic situation. But Democratic Whip Mike Hanna, D-Centre, said there is “a tremendous cost to inaction.”

Three bills were introduced: two from Hanna, whose bills are identical to legislation proposed by Senate Appropriations Chairman Jake Corman, R-Centre, and the other bill from Democratic Caucus Secretary Dan Frankel, D-Allegheny, which is nearly identical to another bill Corman introduced in October.

All three Democratic bills and Corman’s bills contain recommendations from Corbett’s Transportation Funding Advisory Commission, which adopted a report in July with recommendations for Corbett.

“There’s no original thought here, we’re taking this directly from Gov. Corbett’s advisory commission,” Hanna

said. “These are their recommendations and these are things we’re willing to start to talk about and we’re willing to help get votes for to get this done.”

House Democratic Leader Frank Dermody supports the efforts of his three colleagues, but had prior obligations and could not attend the press conference, Dermody spokesman Bill Patton said.

The governor has not announced his own transportation plan and the Legislature now has “to lead” on the issue, Hanna said.

Hanna’s legislation, like Corman’s bills, takes recommendations from the commission and seeks to raise $2.5 billion over five years for road and bridge projects and funding for mass transit.

Corman also said the next step is up to the governor.

Corman’s legislation hasn’t moved out of the Senate Transportation Committee. Corman said it is unlikely that the Senate would move any transportation funding bill without seeing a proposal from the governor.

“The governor runs PennDOT and we don’t send him something he doesn’t want,” Corman said.

The biggest increase comes from uncapping the Oil Company Franchise Tax, from its current cap at $1.25, when

the wholesale price of gas is now more than double that amount. Uncapping the tax would raise $1.36 billion, according to commission estimates.

Some concerns have been raised about oil companies passing off the increase to consumers at the pump, and Hanna couldn’t say whether the Legislature could prevent a company from doing so.

“There is nothing in this legislation that mandates passing the increase onto the pump,” Hanna said, later acknowledging that the Legislature can’t prevent an oil company from doing just that. “Maybe there is a way we could mandate … we’ll explore all of that. This is just a starting point.”

Transportation Secretary Barry Schoch has said in the past, the increase has not been passed along. Former Transportation Secretary Brad Mallory, who served under Gov. Tom Ridge, has echoed that point.

Mallory and Schoch each said this method would add the least to the price of gas of the available tax alternatives.

Frankel’s bill would dedicate the entire $450 million payment from the Pennsylvania Turnpike Commission to mass transit and also increase the allocation of the state sales and use tax used to fund mass transit from 4.4 percent to 6.4 percent. CW

news 7

JANUARY 2012 CAPITAL WATCH

Harrisburg political activist announces campaign against Barletta

By Kevin Zwick, Capitolwire

Gene Stilp, a good government activist known for his use of enormous props during political protests, has announced he will seek the Democratic Party’s nomination to challenge incumbent Republican U.S. Rep. Lou Barletta.

A “full-time citizen activist” and part-time consultant from Middle Paxton Township, Stilp said his main focus is the economy and ensuring that central Pennsylvania does not see reductions in “Obviously in this bad economy, this poor economy that is slowly recovering, the answer is jobs, jobs and more jobs,” Stilp said. “We have a unique position in central Pennsylvania … you’re not only concerned about jobs, but you’re concerned about the entire safety of the country and national defense.”

Stilp gained notoriety for his opposition to the 2005 legislative pay raise and for using props at political rallies – including a 25-foot tall pink blow-up pig.

“It’s obvious I’m gonna need a much larger pig to go to Washington D.C.,” he said.

Although Stilp said this is his first foray into congressional politics, this is not his first run for political office.

In 2010, Stilp nearly ousted Rep. Sue

Helm, R-Dauphin, losing by 314 votes.

He also ran in the 2006 Democratic primary for lieutenant governor.

Stilp said central Pennsylvania’s military presence, places like Fort Indiantown Gap in Annville and the U.S. Army War College in Carlisle, have a national security and economic benefit for the region, but are in danger of being downsized because of potential decreases in military spending.

“My intention would be to definitely, starting from this day forward, make sure the Army War College is not touched by any downsizing of the military,” he said.

“That is one of the main things we have to do … that is the nexus between jobs and national defense.”

Stilp said he will work with current federal lawmakers “to make sure Pennsylvania stands firms on no reductions.”

Stilp opted out of saying why Barletta, a first term congressman from Hazelton, doesn’t deserve a second term. “There’ll be plenty of time to do that,” he said.

However, his press release says Barletta “has become a typical Washington politician. He is part of a broken system that does very little and is in lock step with the Republican House

leadership that holds back the middle class from getting a better life.”

In an email, Barletta campaign manager Lance Stange defended the congressman’s first-term record.

“Because of his work to improve opportunities for America’s workers and job creators, make the federal government more efficient and responsive to the people, and fight against illegal immigration, Lou Barletta continues to receive overwhelming support from Republicans, Democrats, and Independents in both the current and future 11th District,” Stange wrote. “He is grateful for that support, and he looks forward to the 2012 Election.”

Stilp criticized the gerrymandered district, calling it the “Keystone District,” because of the district’s expansive reach through the middle of the state, from Wyoming County in the north to Cumberland County in the south.

Stilp also encouraged other Democrats and Republicans to join the race for the 11th congressional district and said he plans to ask for support at this weekend’s Democratic State Committee gathering in State College.

Bill Vinsko, a Democrat and WilkesBarre attorney, announced his plans

Gene Stilp

to run for the Democratic nomination for the 11th congressional district last summer, prior to the redistricting. His hometown of Wilkes-Barre and other Democratic leaning regions of Luzerne and Lackawanna counties have since been written out of the 11th congressional district, but Vinsko said he will continue campaigning.

There are no constitutional or legal barriers preventing Vinsko, or any other Pennsylvania resident who does not live in the 11th congressional district, from running for the seat. CW

8 NEWS

january 2012 CAPITAL WATCH

New natural gas fleet fueling stations slated for PA’s highways

By Kevin Zwick, Capitolwire

Three more natural gas fueling stations are slated to be built in Pennsylvania as part of a nationwide push to open 150 natural gas fueling stations over the next 24 to 36 months.

Clean Energy Fuels Corp., a company backed by Texas oil and gas mogul T. Boone Pickens, plans to add about 100 to 150 natural gas fueling pumps to trucking stations across the country.

“Three stations in Pennsylvania are planned in the first 100, the backbone of the network. More will be likely as we ramp up to 150,” said Clean Energy Fuel Corp. spokesman Bruce Russell, noting that more details will be available sometime this month.

Clean Energy Fuels Corp. will be building the stations as part of their “America’s Natural Gas Highway” initiative, which has funded about 250 liquid natural gas stations. The locations will be at Pilot or Flying J truck stations along major trucking corridors, according to the company.

Thirty-three natural gas fueling stations are currently operating in Pennsylvania, mostly located in the southeast, central and western portions of the state.

The company says the national effort includes building compressed and liquid natural gas stations for long-haul, regional and port trucking

markets, as well as solid waste, transit, airport and municipal transportation.

Russell said that Clean Energy Fuels Corp., to a degree, thinks more stations would mean more people would have an incentive to buy natural gas powered vehicles. But he said there must be fleet demand before the company invests in opening highway stations.

With the governor’s signature on a memorandum of understanding signed last year by Gov. Tom Corbett and four other governors, that demand could present itself.

“In anticipation of soliciting a

[Multi-State Request for Proposal], the States will endeavor to coordinate with local agencies, municipalities, and companies to determine the number of [natural gas vehicles] each State can commit to purchase and the required specifications necessary to meet fleet needs,” according to the memo.

Building a “natural gas vehicle infrastructure” was part of the report submitted by Corbett’s Transportation Funding Advisory Commission last year, but that report has since been shelved. The Marcellus Shale report, along with subsequent legislation

currently being negotiated by Senate and House lawmakers and the governor, includes creating loan accounts for converting mid-size and large fleet vehicles to run on natural gas fuel.

“The governor shares the interest in both the House and the Senate in encouraging the use of natural gas within our transportation fuel portfolio,” said Patrick Henderson, the governor’s top energy staffer.

When the House passed its version of the Marcellus Shale legislation this past fall, it was amended by Rep. Dan Moul, R-Adams, and would establish loan accounts for converting transit vehicles to run on natural gas. The accounts were similar to a “Marcellus Works” package introduced earlier last year.

The governor’s original Marcellus Shale proposal, taking much of what was included in the commission report, called for “Green Corridors” for natural gas-vehicles 50 miles apart and no further than two miles from major highways. “… There are numerous and ongoing conversations that relate to the location and construction of natural gas fueling stations in Pennsylvania,” Henderson said. “We look forward to continued progress and partnerships on these efforts in the New Year.” CW

Attempt at updating small games law favored by charity groups

By Kevin Zwick, Capitolwire

Amid the legislative tango performed to pass mandatory redistricting plans this fall, dueling bills that would make long-sought-after changes to a charity gambling law are positioned for votes.

While updating prize limits of the Local Option Small Games of Chance Act is a perennial activity of the General Assembly, two bills passed their respective chambers with strong, bipartisan majorities this fall.

The legislation, HB 169 and SB 444, would increase prize limits for the first time since the law’s inception in 1988. Single chance prize limits would increase from $500 to $1,000 and total maximum weekly payouts would increase from $5,000 to $25,000, under the two pieces of legislation.

Charity groups, emergency response organizations and private clubs would benefit from the proceeds of the small games of chance – raffles, punchboards, pull-tabs, and daily and weekly draw-

ings – as a way to raise funds for their organizations.

The legislation requires a majority of the proceeds to be spent on “public interest purposes,” with the rest spent on operating costs.

Seventy percent of the proceeds would go toward “public interest purposes,” including: “activities and operations of a nonprofit benevolent, religious, educational, philanthropic, humane, scientific, patriotic, social welfare, social advocacy, public health, public safety, emergency response, environmental or civic objective,” according to HB 169.

The remaining 30 percent of the proceeds could be used for operating expenses of an organization, including taxes, utilities, heating and air conditioning, insurance and certain repairs to property, but cannot be used for wages, alcohol, food, or to pay fines.

HB 169 was amended earlier this month by the Senate Community, Eco-

nomic, and Recreational Development Committee.

Sen. Jane Earll, R-Erie, chairwoman of the committee and prime sponsor of SB 444, gutted the House language and replaced it with language from SB 444. She said the new language in HB 169 now mirrors that of the Senate bill, which passed the Senate 46-4 in November.

The Senate language would also require club licensees to maintain records relating to the printing or purchase of materials used in weekly drawings for monitoring and audit purposes by the Bureau of Liquor Control Enforcement.

Licensees would also have to file semi-annual reports to the Department of Revenue that note how much proceeds the club received from each game, the amount of prizes paid each week, with verification from itemized receipts and other documentation,

according to the bill.

Those higher reporting requirements have been a Senate condition of raising the prize limits for several years.

The bill does not include an expansion of small games to for-profit businesses, much to the chagrin of the Pennsylvania Tavern Association, which pushed for an expansion earlier this year.

PBA argued that increasing the prize limits, while not expanding the use of games, would put bars and taverns at a competitive disadvantage. Representatives from veteran, fraternal, and other non-profit organizations argued that the state established the small games law to assist nonprofits with fundraising. CW

NEWS 9

JANUARY 2012 CAPITAL WATCH

Sen. Mary Jo White says she will not seek re-election in 2012 Sen. Mary Jo White, R-Venango, a 14-year veteran of the state Senate, has announced that she will not seek re-election in 2102. “. . . I am announcing that I will not be a candidate for re-election to the Senate of Pennsylvania in 2012. After a career in the private sector, I never expected to have an opportunity to enter political life. It has been an exciting and challenging time, and I would not have missed it for the world.

“I have worked with talented and dedicated people in and out of government. I sincerely thank the people of the 21st District for their confidence and support,” she said in a statement.

Whether or not White or other Democratic or Republican senators would retire and not run next year was an issue for the Legislative Reapportionment Commission. Former Superior Court President Judge Stephen McEwen, the chairman of the panel and the only non-legislative leader member, pressed both sides as to whether anyone would retire.

Senate Minority Leader Jay Costa, D-Allegheny, for much of the fall said White or Sen. John Pippy, R-Allegheny, would retire, but that Senate Majority Leader Dominic Pileggi, R-Delaware, was concealing their plans so McEwen would move a Democratic western seat to the east.

McEwen made it clear to all parties that if a retiree emerged before the decision was made, that seat would be

moved. Costa said after the new Senate and House maps were voted upon that he believed Senate GOP retirees would emerge. The map was finalized Dec. 12. Just over two weeks later, White announced her retirement.

Pileggi and other Senate leaders maintained all fall they did not know what White would decide. She has also on occasions in recent years declined to communicate her plans and even how she may vote on a bill to the leadership, White allies and Senate leaders

said.

“She will certainly be greatly missed.

She represented her district aggressively, as a member of the Senate and the caucus,” Pileggi said.

As far as White’s announcement being a surprise, Pileggi said that this is a decision all lawmakers ask before each election.

“At her stage in her career, even in the last election cycle, there was certainly the possibility that she could decide that it was time for her to not

run for reelection,” he said. “I think every member has that decision making process to go through in each election.”

White, a Republican lawmaker from Venango County, is the chairwoman of the Senate Environmental Resources and Energy Committee.

“Aside from my parents, no one has had a greater influence on me than Sen. White. For that, I am extraordinarily grateful,” said Patrick Henderson, Gov. Tom Corbett’s energy executive who worked closely with White as the former executive director of the Senate environmental committee.

“She ran for office for the right reasons: to give back to her community, and to make Pennsylvania a better place to live and raise a family. And she succeeded,” Henderson said. “Over her 15 years, she quietly demonstrated that public service is a noble calling.”

“I’m no doubt partial, but I regard Mary Jo White as one of the smartest, funniest, hardest working and honest individuals I have ever met. More importantly, I regard her as a true friend. Her voice in the Senate will be missed, but her contributions to making Pennsylvania a better place will not soon be forgotten,” he said.

Costa commended White as “a very dedicated and outstanding legislator, some one who really worked the Environmental Committee very effectively and I have a lot of respect for her knowledge and ability.” CW

Turnpike customers encouraged to get E-ZPass to avoid higher tolls The Pennsylvania Turnpike Commission reminds customers that fares have increased up on most of the state’s toll roads by 10 percent as of Jan. 1 for cashpaying travelers only. Because electronictoll rates did not go up, E-ZPass customers will pay about 17 percent less than cash customers, on average.

With the new rates the most-common cash toll for passenger vehicles have increased from $1.10 to $1.25 while the most-common cash toll for a standard commercial-truck classification (Class 5) rising from $8.95 to $9.85. (The 2012 fares were determined by applying a 10 percent increase on top of the 2011 fare then rounding up to the nearest nickel.)

The increase is applied to all vehicle classes on all Turnpike sections except the Southern Beltway (Turnpike 576) in Allegheny and Washington counties, where rates will be unchanged.

Turnpike Chairman William K. Lieberman of Pittsburgh said by not raising E-ZPass rates, the agency is easing the economic impact of a toll increase. “Since nearly two-thirds of travelers already use E-ZPass, only about a third of our customers will be affected,” he explained.

Getting E-ZPass is easy: Most customers enroll online at www. paturnpike.com or by calling 1-877-Penn-Pass (1-877-736-6727).

Customers can also open an E-ZPass account at many of the state’s AAA offices and at certain regional grocery stores including Acme, Giant Eagle, Get-Go and Karns. For a complete list of retail locations, visit www. paturnpike.com/ezpass/sales.

Chairman Lieberman said there are several reasons to motivate people to get E-ZPass. “We believe it’s important to encourage more travelers to switch to

E-ZPass because of the numerous benefits, including economic, environmental and customer-safety advantages,” he explained.

“Collecting tolls electronically is not only safer, faster and more convenient for customers, but it is better for the environment because it helps diminish idling at the toll plazas and also reduces the Turnpike’s operating costs.”

The cost to process an E-ZPass transaction is about four times less than the cost of handling a cash transaction; it costs the commission about $1 per transaction to collect a cash toll, and less than 25 cents per transaction to collect tolls via E-ZPass.

The lower E-ZPass rates apply to all individual and commercial E-ZPass customers regardless of issuing agency or state in which an account was established.

Presently, there are 24 E-ZPass agencies in 14 states, largely in the Northeastern

U.S., and more than 20 million E-ZPass transponders in use on toll roads, bridges and tunnels nationwide.

The 2012 increase is needed, in part, to satisfy the Turnpike’s funding obligation to the Commonwealth of Pennsylvania. A 2007 statute expanded the Turnpike’s role by directing it to utilize tollbooth revenues to help underwrite a transportation-funding shortfall. Under Act 44 of 2007, the Turnpike Commission continues to make annual contributions of $450 million to PennDOT; of that amount, $250 million is used for transit agencies across the state and $200 million is used to help fund non-Turnpike road and bridge projects.

To date, the commission provided more than $3 billion to the state under this law.

The 2012 toll increase will be the fourth rate hike needed to meet the debt-service costs associated with Act 44. CW

10 news

JANUARY 2012 CAPITAL WATCH

Kane for AG announces $2 million in warchest; other Democratic contenders highlight endorsements

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By Kevin Zwick, Capitolwire

The three Democratic candidates running for state attorney general have been busy– one announced more than $2 million cash-on-hand, while the other two rolled out politicalmoney-generating endorsements.

Kathleen Kane, a former Lackawanna County prosecutor, announced that her campaign has $2 million in its warchest.

It is unclear whether Kane’s $2 million comes from a personal loan, contributions or an independent group. Her husband’s family owns Kane is Able, a national logistics and trucking company based in northeast Pennsylvania.

The other two candidates, Philadelphia attorney Dan McCaffery and former U.S. Rep. Patrick Murphy, rolled out endorsements that will pay dividends in the form of funding and organization.

The flurry of announcements come a little more than a week from the Democratic State Committee meeting in State College.

McCaffery says his Jan. 5 press conference was to “show that Philadelphia is unified.” He did that with the help of two Philadelphia political and fundraising powerhouses: U.S. Rep. Bob Brady, chairman of the Philadelphia Democratic Party, and John “Johnny Doc” Dougherty, business manager for the highly active IBEW Local 98 union.

Murphy, of Bucks County, added his former colleague U.S. Rep. Allyson Schwartz, D-Montgomery, to an already expansive list of endorsements that include former Gov. Ed Rendell and former PA Democratic Party chairman T.J. Rooney.

The McCaffery and Murphy campaigns declined to announce their cash on hand.

Kane, who has not announced any endorsements from any major PA Democratic politicos, is leaning hard on her 12 years of experience as a prosecutor.

“It’s great news for the Democratic Party when the most qualified candidate running – the person with the most experience as a prosecutor – is also the person who has put together

the strongest campaign and can do the most to create a balanced Democratic ticket with President Obama and Senator Casey,” spokesman Daniel McElhatton said in a press release.

“Kathleen Kane has the experience, toughness, and independence to become the first woman elected Attorney General in Pennsylvania history.”

Her campaign is also pushing “Kathleen Kane is a career prosecutor, not a politician,” contrasting her campaign with that of Murphy and McCaffrey who tout their connections and support from current and former Democratic Party leaders and elected officials.

Newly elected Montgomery County Commissioner Leslie Richards and a handful of Philadelphia state representatives and senators have also endorsed McCaffrey. An added bonus is his brother, Supreme Court Justice Seamus McCaffery, who is a popular statewide Democrat.

Josh Morrow, spokesman for the McCaffery campaign, initially said that they received endorsements from two fire and police unions and the PA Trial Lawyers Association, but he later clarified that individuals from those organizations, not the organizations, endorsed McCaffery.

The PA Trial Lawyers Association and the Philadelphia Trial Lawyers Association have not endorsed anyone in the state attorney general race.

Murphy’s campaign announced an endorsement from U.S. Rep. Allyson Schwartz, D-Montgomery, which adds to Murphy’s already expansive list of endorsements, which includes: Former Gov. Ed Rendell; U.S. Reps.

Chaka Fattah, Tim Holden and Jason Altmire; newly elected Montgomery County Commissioner Josh Shapiro; and former state Democratic Party chairman T.J. Rooney, among others.

Murphy lost a re-election bid in 2010 to U.S. Rep. Mike Fitzpatrick, R-Bucks.

The Democratic nominee will face Cumberland County District Attorney Dave Freed or Sen. John Rafferty, R-Montgomery, in the general election. CW

OPINION 11

JANUARY 2012 CAPITAL WATCH

Cost Shift Concerns PA Business Community

By Adeolu Bakare

Recent policy changes in Philadelphia will likely affect stormwater management policies across the Commonwealth. The United States Environmental Protection Agency (“U.S. EPA”) National Pollutant Discharge Elimination System (“NPDES”) Stormwater Program regulates stormwater discharge into waterways by Municipal Separate Storm Sewer Systems (“MS4s), construction sites, and industrial operations, as well as through combined wastewater/stormwater systems.

Although most municipalities support stormwater infrastructure through general tax provisions, feebased stormwater programs have become increasingly prevalent across the nation after initial implementation through Western cities in the late 1970’s. Today, newly implemented stormwater fees are vigorously debated, including the Philadelphia Water Department (“PWD”) transition to a new fee structure. Philadelphia’s actions have broad implications for Pennsylvania lawmakers and business owners. Faced with aging infrastructure, budgetary restrictions, and environmental mandates, Pennsylvania municipalities must find innovative solutions to mitigate poorly structured separate and combined stormwater

quantity of stormwater from development are being closely examined at the federal, state, and local levels.

With its older sewer system made up of 60% combined sewers, Philadelphia sought to assign cost responsibility to those allegedly imposing the most stress on the stormwater system, while simultaneously incentivizing commercial and industrial parcel owners to reduce stormwater flow. Historically, Philadelphia charged all customers a stormwater fee based on meter size and usage. However, PWD is transitioning to a stormwater fee structure based on parcel square footage. The parcelbased fee is heavily weighted toward impervious area surfaces alleged as principal stormwater runoff contributors, such as concrete or asphalt. The plan included a credit system offering fee reductions for parcel owners adopting stormwater mitigation practices designed to either bypass the City’s stormwater system or reduce system inflows. PWD introduced its plans in its 2008 base rate case and implemented the new fee structure in July 2010, beginning a 25% per year staggered transition from 100% meter-based fees to 100% parcel-based fees in 2014.

Following initial implementation, PWD met opposition from business owners incurring drastic rate increases

stormwater programs and the potential for future stormwater authority authorization. CAC members generally agreed that perhaps traditional meter-based fees failed to assign stormwater costs in an equitable manner. Unfortunately, PWD focused discussions on the administration of parcel-based rates, and tabled questions regarding the merits and underlying science of PWD’s parcel-based fees. As a result, CAC members concentrated on extending a temporary 10% annual cap on fee increases and developing mitigation measures targeting severely affected businesses. CAC members also conducted extensive review of PWD’s credit program. PWD favored awarding credit for mitigation projects that reduced or eliminated public system inflow, as well as promoting the leveraging of private funds for stormwater mitigation. Some participants argued that credits should be available for all stormwater fees, including fixed costs. Business representatives universally expressed return-on-investment concerns. Major stormwater mitigation projects require significant capital outlays, which typically are expended only upon reliable future revenues. As PWD’s credit programs may be susceptible to future policy changes, area businesses may withhold maximum

When properly designed and managed, stormwater fees may potentially provide a fair and equitable system for maintaining essential infrastructure and fostering sustainable communities. systems. However, caution and diligence must be exercised in approaching any proposal to levy stormwater fees upon the Pennsylvania business community.

Stormwater systems may be combined or separate systems. Separate sewer systems collect and convey only stormwater, and wastewater is disposed through a different system.

However, combined sewer systems, prevalent in municipal systems predating the 1940’s, dispose of wastewater and stormwater through a single system and contain permitted “passerby” provisions during wet weather, thereby creating more difficult water flows. Combined sewers pose a heightened pollution threat as any overflows beyond treatment capacity may result in both stormwater and raw sewage discharge into local waterways. As a result, these systems have come under significant fire from the U.S. EPA in recent years. But even the impacts of MS4s are undergoing heightened review as potential water quality impacts from the rate of flow and

under the newly introduced fee structure. While many parcel owners experienced slight or moderate bill adjustments, some experienced extreme rate increases. For example, a high-rise hotel with high water consumption and relatively low impervious surface area, paid $4,888/month under meter-based rates, but would pay only $860/month under full parcel-based rates. Conversely, an industrial facility paid $3,872/month under meter-based rates, but would pay $8,737 under fullparcel based rates. To increase awareness and stimulate a dialogue, PWD invited select stakeholder representatives to form a Customer Advisory Committee (CAC) to review the parcelbased fee structure and propose revisions if necessary. Based on CAC recommendations, including comments submitted by this author on behalf of large commercial and industrial endusers, PWD will propose modifications to the parcel-based fee structure in an upcoming 2012 rate case.

The CAC process underscores the controversial nature of fee-based

investment unless PWD assuages the concerns of the business community.

The controversies arising from Philadelphia’s ambitious stormwater fee restructuring will likely be closely monitored by other municipalities in light of recent regulatory and administrative developments in the Commonwealth. On September 17, 2011, the Pennsylvania Department of Environmental Protection (“PA DEP”) approved revisions to its NPDES General Permit for Stormwater Discharges from Municipal Separate Storm Sewer Systems (PAG-13). These revisions grant municipalities more flexibility in designing stormwater management programs. Additionally, the Pennsylvania Stormwater Management Act (Act 167), 32 P.S. §§680.1 et seq., which generally provides 75% state funding for planning and implementation of stormwater management plans, has not received general fund appropriations since fiscal year 2009. With increased flexibility for program design and the growing limitations of state funding,

Adeolu Bakare

PA municipalities may be inclined to consider stormwater fee programs, but will be carefully monitoring the PWD experience, especially its impact on the business community. Several proposed Pennsylvania bills directly and indirectly addressing stormwater issues remain in committee.

Regardless of any regulatory or legislative trends, much caution should be exercised before levying stormwater fees upon Commonwealth businesses or giving local authorities the opportunity to do so. When properly designed and managed, stormwater fees may potentially provide a fair and equitable system for maintaining essential infrastructure and fostering sustainable communities. However, stormwater fees, and related allocation and credit policies, remain controversial and seemingly slanted against business and industry. Unlike traditional utility services such as electric, natural gas, water, or wastewater, feebased stormwater service is a nascent concept. As such, our understanding of the impacts and attendant cost causation attributable to residential communities, commercial entities, industrial operations, and public facilities is still evolving. Whether other municipalities will follow the Philadelphia model is unclear at this juncture, but Pennsylvania lawmakers and business owners can be certain that stormwater management will be a critical component of the fixed utility service discourse for years to come. CW Adeolu Bakare is an attorney in the Energy, Communications and Utility Group at McNees Wallace & Nurick, LLC. His practice includes representation of large commercial and industrial businesses in fixed utility matters, including electric, natural gas, telecommunication, water, wastewater, and of course, stormwater services.

12 OPINION

JANUARY 2012 CAPITAL WATCH

Memo discloses nervous, divided Corbett administration

By Peter L. DeCoursey, Capitolwire

The Patriot-News of Harrisburg published the best Capitol scoop in months: a remarkable, and remarkably dumb memo by Gov. Tom Corbett’s deputy chief of staff, Luke Bernstein.

But the memo showed most in what it didn’t say: that the administration is defensive to the point of paranoia, . its leaking shows just how bad the and internal divisions among the top staff are now. And as they fight each other, top GOP insiders around the state are calling for Corbett to clean house.

Bernstein’s star has been ascending all year. When someone had to defend Senate Majority Leader Dominic Pileggi’s controversial proposal to split up the state’s electoral votes, on behalf of Corbett, Bernstein testified.

Bernstein was the Corbett administration’s voice when it came to congressional redistricting also.

As a former Republican State Committee executive director, Bernstein is a big fan of message unity, so on Dec. 7, he wrote a memo to the Corbett “team,” meant to help the Corbett folks show what a great first year their guy had.

The first six pages of the 10-anda-half-page document extol Corbett’s accomplishments in such a way as to make it sound like Corbett walked on water, and mixed stuff he proposed with stuff he actually signed into law.

mance during Three Mile Island outweighs raising taxes.

But what was interesting was Bernstein’s dredging up all the bad stuff that editorial writers and columnists write about Ridge and Thornburgh.

The first rule for governors is you never, ever, beat up the governors from your team. Ridge and Thornburgh both beat up their staff when they trash-talked their GOP predecessors.

Because every administration is composed of thousands of people, staff, appointees, friends and people in each county. And most of them did something for the new Guv, too, but still miss their guy. So when the New Guvs Disrespectful Kids – and every administration’s staffs are viewed as the New Guv’s Disrespectful Kids – act up, people get riled.

And this is the biggest punking any Guv’s New Kids have done to the Portraits On The Wall in eons. And the waves from that aren’t going to stop rolling for quite a while now. They will be rough for Bernstein and not much better for Corbett. Because governors get blamed for their staff.

Equally problematic for Corbett will be the final two pages of the memo, where, again, Bernstein recites every mistake or controversy several firstyear Republican governors experi-

And it’s not at all helpful that when Corbett wants another governor to help him out, they are going to think his staff is probably saying this to reporters and national GOPers and anyone else.

But the worst part of this is that it shows how panicky and scared the Corbett folks are, because they don’t believe they can just say good things about their guy. Tom Ridge and his high command didn’t beat up then Gov. George W. Bush, despite his very competitive nature.

One of the oldest rules in politics is nobody plays the man, not the ball, when they are winning.

So despite a good first year, the Corbett folks are running scared and so desperate to prove it was a good year that they have to run down other people.

Now Bernstein will dispute all this and note that the reason Ridge, Thornburgh, Kasich, Walker and the rest will be mad is that someone leaked his memo, which he himself wrote was not to be distributed.

He also wrote that some members of the team asked him for the memo.

So, to reconstruct, Bernstein and others began to discuss their talking points, including, according to sources, the trashing of their GOP predeces-

And unlike the Pennsylvania predecessors of Corbett, it isn’t clear that Bernstein is right in his assertions. He is basically just dumping on fellow Republicans.

But that part is pretty much just taken from the press releases.

The four-and-a-half pages that came next are what’s upsetting Republicans all over the state and will make the next Republican Governors Association really uncomfortable for Gov. Tom Corbett.

For two-and-a-half pages, Bernstein argued that Corbett’s first year was better than those of his four two-term predecessors.

What he wrote was mostly accurate.

Corbett did have a better first year than Govs. Tom Ridge and Ed Rendell. As for his arguments that Corbett’s first year was better than that of Govs. Dick Thornburgh and Bob Casey, some would agree with him, particularly those who, like Bernstein, view everything from a right-wing, anti-tax viewpoint, given that his first loves in politics were Rick Santorum and Lou Barletta. Others might say Thornburgh’s well-reviewed perfor-

enced, omitting anything they may have done right.

Which is especially notable when comparing Corbett to Wisconsin Gov. Scott Walker, Ohio Gov. John Kasich and others. They cut their budgets too, as Corbett did, and as Ridge, Thornburgh, Casey and Rendell did not.

And when referring to stuff they didn’t get done, Corbett is lauded for “proposing” things, while other governors “failed” or locked Democrats out of the budget signing or may face recall, etc.

In other words, it is about as unfair a comparison as you can get. And unlike the Pennsylvania predecessors of Corbett, it isn’t clear that Bernstein is right in his assertions. He is basically just dumping on fellow Republicans.

It’s bad enough that this memo beats up past GOP governors and offends their loyalists, who are now going to make life more difficult for Gov. Corbett than it needed to be.

sors and GOP governors in other states.

Bernstein’s memo, which was released just before many Corbett-ites went to New York to defend their year at Pennsylvania Society’s weekend schmoozefest, says: “Many folks have been asking for internal talking points comparing year one of the Corbett administration to previous and current administration, as well as some additional talking points on our year one accomplishments.”

So folks asked Bernstein to put his name on this toxic waste memo, and he did.

The folks who asked him that did so right before Corbett’s biggest supporters in the state GOP, the wallets and corporate chieftains of the state, began to put heavy pressure on the governor to change his team.

A group of the major donors to Corbett says they have already told him he has a choice: keep his current

team, especially Legislative Secretary AnnMarie Kaiser, and a few others, or have a chance to win a second-term.

One claims he told the governor he told him it’s a new team or one-term Tom time.

Democrats called Ridge that. Republicans who raised major coin for Corbett are saying his team is risking that.

Republican insiders are more united that Corbett needs to change his staff than Eagles fans are united that defensive coordinator Juan Castillo and his boss, Andy Reid, should go.

And those that were not before this, will hop on that express now.

Interestingly, before the memo, Bernstein was not on the GOP insider “Gotta Go” list. He was one of those, along with Budget Secretary Charles Zogby, DCED Secretary Alan Walker and General Counsel Steve Aichele, whom GOP insiders thought were doing the best they could.

So, who leaked that memo? Somebody who feared they were on their way out? Someone who wanted to focus the pressure on Bernstein, and take it off themselves.

But this didn’t just put Luke in the soup. It landed Gov. Tom Corbett there right along with him.

So it wasn’t a typical gubernatorial administration power battle, because in those, the first rule is smite your foe but don’t touch the boss. Whoever leaked the memo wanted to make Corbett do what he always does in a crisis: shut up, circle the wagons and stick to his long-time loyalists.

Which sounds like someone is paying more attention to their fate than Corbett’s, and sure makes it sound like folks inside the administration are awfully defensive for people claiming they had a good year. Especially when they did.

And there is one more comparison Bernstein didn’t make between Corbett and Ridge, Rendell, Thornburgh and Casey. The predecessors all learned from their first year, and sure, they raised taxes and in all three cases, signed off on pay-raises during their terms, several by Thornburgh.

But they had bad years but finished them poised for success. Corbett had a good first year, handling weather crises, cutting the budget and getting further voter constraints on public school spending.

But when your staff makes the governor go on a quiet statewide apologize-to-the-GOP-insiders tour to take Luke Bernstein down a peg, and those GOP insiders have been saying you need to change personnel, coming off a year with good results, that is not exactly poised for success. CW

OPINION 13

JANUARY 2012 CAPITAL WATCH

Editorial

Cap Watch fearless predictions for 2012 Let’s face it now, folks. If you didn’t breaks. No one will like it; a majorlike the way 2011 went for state govity will vote for it. ernment in Pennsylvania, you’re likely • A roll out of a Corbett vision to hate 2012. If good things didn’t for encouraging public private happen for your issues or program partnerships – in essence, a blue interests in 2011, they unlikely to fare print for privatizing traditional better in a Presidential election year government services. It will be and a “redistricting and reapportioncharacterized as a way to bring ing year” to boot. efficiency to government services Even incumbents who got a gift while “monetizing” state assets from Santa in terms of a “safer” leg(converting future service fees to islative or Congressional seat in the current cash for the state).

2011 Census follies will be running cautious campaigns – especially in • A Marcellus Shale impact fee the face of extremely low approval that will be embarrassingly low ratings for lawmakers at all levels of compared to other gas-producing government. states but a victory in the sense that Punxsutawney Phil will have noththe legislature will at least agree to ing on the average legislator or Consomething if only to close the door gress member. Everyone will be afraid on the issue before the November of his or her shadow. elections.

Add to this gloom and doom the • Vouchers will go nowhere prospect of a new recession after because no one will know where we’ve not recovered from the last to find the money to fund them and you can see why the only people and rural Republicans will remain looking forward to 2012 are the opposed. makers of anti-depressants. Why the possibility of another recession?

• Highway and transit advocates Well, primarily because none of the will reposition efforts to increase causes of the 2008 market collapse transportation funding as a jobs have been remedied. generation program; the oil franWe had a “housing bubble.” Too chise tax ceiling will be “adjusted” many people were given mortgages somewhat because the actual rate they couldn’t afford on homes that will remain the same. But the were much bigger and more lavish real money in the short haul will than they needed and too many of come from a bond issue with the them were built. Even in the face of franchise tax paying off the bonds record foreclosures, one in five home or 30 years. Bonding will be okay mortgages is “underwater” – meaning because highway construction is a the homeowners owe more than the capital investment returning diviproperty is worth. dends over time as well as thouThe one thing that could surely sands of short term jobs. save the economy is increased consumer spending – something that is • In the surprise move of the year, not likely to happen with 8 percent the Corbett Administration will folunemployed by federal standards and low California’s lead and consider twice as many considering themselves launching on-line sales of state lot‘under-employed” and almost everyone tery tickets (a practice permitted wondering how secure the job they under a recent U.S. Justice Departnow hold truly is. ment ruling).

This brings us back to our elected By now, our readers are saying, officials. Each of them is wondering “But what about privatizing the state how secure his or her job really is. So liquor store system? Surely with the don’t expect any of them to be big state in such desperate need of funds, risk-takers in 2012. the legislature will agree to auction Here is our short list of New Year off the 625 state stores.” Chances prognostications: are, you’ll still be buying that gift bottle of booze for your boss next • Gov. Tom Corbett does a 2011 Christmas from the same friendly budget redux. Spending cuts, local Wine and Spirits Shoppe that layoffs, no new consumer taxes, got your business in 2011. After all, some selective business tax cuts or you are in Pennsylvania. CW

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14 OPINION

JANUARY 2012 CAPITAL WATCH

Pennsylvania budget crisis fixes can be found

By David R. Fillman

News that our commonwealth is confronting yet another budget crisis as we begin this year reminds me of the old cliché that lack of planning on your part does not constitute an emergency on mine.

In the case of our state budget and a projected $500 million revenue shortfall, however, the issue is a lack of action in Harrisburg — not a deficit in planning.

The fact is that the Legislature and Gov. Corbett can choose from a wide array of viable, fiscally sound options for closing the projected deficit. The Corbett administration has the opportunity to make some long-overdue improvements to the state’s tax structure.

First, the math: Budget Secretary Charles Zogby tells us that halfway through this fiscal year, our revenue

What does this mean? For starters, the administration will use the crisis to justify another round of budget cuts that stand to harm millions of our fellow citizens and our state as a whole.

In fact, the budget secretary is already rounding up a list of $500 million in current-year cuts for the governor’s consideration.

If recent history is a lesson, public school students will suffer in larger classrooms with fewer teachers, fewer tutors and aides and less academic support overall. Families will have to dig deeper to pay for college, as funding cuts to our state and public universities will be targeted once again for deep cuts.

There will be fewer screenings for newborns; fewer nurses and aides tending to our parents and grandparents in nursing homes. Those with special

education.

Already, battle lines are being drawn and the administration is once again reiterating the “no tax” pledge. That is regrettable because the CLEAR Coalition, among others, has identified a handful of overdue, common-sense proposals to generate more state revenue while creating a more fair and balanced tax structure.

What we now need is action on the following: A fair excise tax on the big oil and big gas companies reaping hundreds of millions in revenue in the state’s Marcellus Shale. We remain the only significant gas-producing state without such a tax. A real tax would generate much-needed funds for the state and local communities most impacted by the natural gas boom.

An end to the gaping tax loophole

…the CLEAR Coalition, among others, has identified a handful of overdue, common-sense proposals to generate more state revenue while creating a more fair and balanced tax structure. is roughly $345 million below projections. By June 30, the end of this fiscal year, we can expect revenue to be $500 million below forecast.

On top of that, Zogby forecasts roughly $800 million in additional costs next year that are unavoidable, such as pension costs and debt service.

needs, abused women and children will have less access to vital services.

We know about all of these impacts because we’re living with them right now in every community in our commonwealth. The current budget we are all living with was driven by sweeping budget cuts, including $860 million in

that allows large national and international corporations to shift profits from Pennsylvania to Delaware. The Delaware loophole is great for major corporations, but it shifts the burden to tens of thousands of Pennsylvaniabased businesses that follow the rules and pay their fair share of taxes.

David R. Fillman

Closing this loophole would generate up to $550 million a year in new revenue and would create a more fair tax structure for all businesses and all Pennsylvanians.

Close a sales tax loophole that rewards companies for sending the sales taxes they collect from all of us to the state on time. For merely transferring money that belongs to the state treasury, these businesses earn a 1 percent discount. This fix would generate up to $74 million a year in new revenue.

These are just three fair, reasonable options that lawmakers and Gov. Corbett should embrace to close any budget gap and spare Pennsylvania families from more painful cuts. CW David R. Fillman is executive director of AFSCME Council 13 and chair of the CLEAR Coalition.

Lack of uniform operating standards threatens natural gas drilling in Pa

By Gene Barr

Reaching an agreement on a comprehensive Marcellus Shale oversight bill is essential to foster the industry’s growth, lower energy costs for consumers, provide appropriate environmental protections, generate adequate revenue to address local impacts, and sustain and build on the economic opportunities – both direct and indirect – that natural gas drilling is providing to Pennsylvanians. Key to the success of such oversight is the adoption of uniform regulatory standards at the state level, which would provide drillers with a clear picture of the operating environment in the Commonwealth for this highly sophisticated industry.

This clarity is currently lacking.

To date, more than 115 municipalities have adopted more than 145 different ordinances ranging from land-use

limitations to road use restrictions to noise limits to well setback requirements. Many are designed to ban drilling activity altogether. And local ordinance activity is increasing. Since Oct. 1 of last year, 27 municipalities in 11 counties have considered or adopted oil and gas industry regulations.

Having been a local government official in southeastern Pennsylvania for 10 years, I recognize and value the importance of our local government system, which provides valuable services to the Commonwealth’s communities and citizens. But, in my role at the Pennsylvania Chamber of Business and Industry, I have seen first-hand the adverse impact that multi-municipal jurisdictions can have, as well as the impact of inconsistent, arbitrary local rules and regulations.

Regardless of the industry, job cre-

ators above all else want and need a predictable operating climate. They want to know the rules and the potential costs. It was this very uncertainty about proposed policies and regulations emanating from Washington, DC, that led many employers to hold back on investing in their operations and work force as the nation struggled to emerge from one of the worst recessions in recent memory.

Similarly, the confusion resulting from a hodge-podge of existing and emerging local ordinances, even if well intended, make it very difficult for drillers operating in multiple jurisdictions to be in compliance and to effectively and efficiently operate. And without uniform operating rules, competing states are marketing their more competitive and predictable shale producing climates in order to attract

capital and jobs from Pennsylvania.

The longer this process drags on and the longer drillers face rules that differ from municipality to municipality, the less investment, jobs and revenue will be realized in the Commonwealth.

Companies involved in Marcellus Shale drilling here strive to make sure they are in full compliance with laws and regulations; and citizens residing in communities where drilling activity is taking place want assurance that those companies are following the rules. The best way to ensure both and enable the Commonwealth to reap the greatest economic benefits from the industry is to adopt rules that are consistent throughout the Commonwealth. CW Gene Barr is president and CEO of the Pennsylvania Chamber of Business and Industry.

travel 15

JANUARY 2012 CAPITAL WATCH

By Jill Gleeson

Beach

It is seemingly endless stretches of beach graced by sand so soft and white it brings to mind less clichéd sugar than finer flour. It is the gentle embrace of the Gulf of Mexico’s famed waters, luminous even as they fade from indigo to teal, cobalt to aqua. It is the echo of a seabird’s call across the sound of the surf, the caress of an ocean breeze under the lemon-yellow sun’s gaze. It is a place built on that once-cherished idea of community, where bicycles outnumber cars, nature is nurtured and residents greet visitors as friends. It is Rosemary Beach, Florida, and it seems a glorious, gracious world away from the incivility of the workaday world.

Rosemary Beach was created – born – in 1995 as an antidote to fast-paced, gridlocked, strip-malled boroughs where inhabitants have deeper relationships with their cars than their neighbors and locally-owned businesses have been usurped by big-box retailers and fastfood restaurants. Inspired by small town America of the mid-twentieth century, Rosemary Beach is a shining example of New Urbanism, a town-planning model that trumpets small neighborhoods rich with green space located a short stroll from a village center enlivened by unique eateries and shops.

Located on 107-acres on Florida’s northwest coast between Destin and Panama City, with 2,500 feet of ocean frontage, Rosemary Beach is all this and more. It’s a place as free from stress as it is pollution, crime and traffic, where the herb for which the town is named grows wild, dappling the air with its scent. But if the town seems a paradise in which to live and work (a little less than 200 full-time residents are lucky enough to do so), it makes for a veritable heaven for vacationers. With over 200 luxurious rental accommodations to choose from, ranging in size from cozy studios and one and two-bedroom carriage houses to lavish five-bedroom cottages, individuals, couples, families and even large groups can all find something to suit.

Thanks to strict building codes and guidelines, there is a charming visual harmony to Rosemary Beach.

Private and public structures have been designed in the Pan-Caribbean style, recalling the architecture of

coastal cities such as New Orleans and Charleston. Linking them are peaceful footpaths and boardwalks winding through and along gardens, pocket parks and lush greens. A commitment to environmentally-friendly practices (which include the use of pervious pavers, dune walkovers and natural construction materials), dictates the use of native plants in public areas.

They not only provide crucial habitat for wildlife and reduce the need for watering and pesticides, but also create a more genuine, relaxed landscape.

Relaxation is the rule, not the exception in Rosemary Beach. Time seems to slow there, encouraging leisurely strolls down the town’s 2.3 mile fitness trail, or alongside the soft surf, under the night sky’s starry gaze.

Four magnificent pools, including the Sky Pool, an all-weather heated pool boasting a retractable roof, inspire not just swimming but drowsing the afternoon away in a comfortable chaise. Massages may be booked at the Fitness Club, which also offers personal training, Pilates and yoga classes and at Vivo Spa Salon in the town center, where clients may pamper themselves as well with face and body treatments and hair and nail services.

A lazy morning can also be spent browsing the exceptional shops of Rosemary Beach – happily without ever running into a tacky t-shirt store or bland chain retailer. Rent a bike at Bamboo Bicycle Company, gear up for the beach at Bombora Sun & Surf or pamper skin, body and hair with the fine products of Pish Posh Patchoulis. Tennis

lovers will want to hit up the Racquet Club’s eight clay courts, six of which are lighted for nighttime play. (Private and group lessons with the club’s resident pro are available.) For those looking to do more than sun and swim, Sea Oats Beach Service rents surfboards, kayaks, catamarans and more.

Like so much else in Rosemary Beach, dining out is a pleasingly unhurried, leisurely affair; meals made with care from the freshest, locally-sourced ingredients encourage lingering.

Among the town’s options: Restaurant Paradis, an elegantly hip eatery specializing in steak and legendary Gulf seafood exquisitely prepared; Wild Olives, a market, deli and bakery also featuring a to-die-for selection of tapas, cheeses, salads and sandwiches; Summer Kitchen Café, the town’s first restaurant and the perfect place to grab a light, healthy bite; Onano Neighborhood Café specializing in Northern Italian cuisine so authentic diners swear they’re in Tuscany. For dessert, don’t miss the decadent chocolate creations at La Crema Tapas and Chocolate.

Quiet and quaint, boasting a congenial charm that recalls the best of long-ago America – and yet offering the finest modern amenities - Rosemary Beach beckons. And with the new Northwest Florida Beaches International Airport now just a 20-minute drive away and shuttle service to and fro available, travel to the town is easier than ever.

Isn’t it time to heed the call? For more information about Rosemary Beach, phone 866-348-8952 or visit www. rosemarybeach.com.

Winter is a great time to get away to Rosemary Beach. Temperatures average in the mid-50s, reservations can be made with little advance notice and rates are at an all-time low. Winter daily rates for carriage houses, loft/flat units and cottages range from $177 to $1,143; weekly rental rates from $1,043 to $8,001.

For those looking to make their escape later in the year, spring & fall daily rental rates range from $193 to $1,286; weekly rental rates from $1,155 to $9,002. Summer & spring break daily rental rates range from $218 to $2,644; weekly rental rates from $1,330 to $18,508.

Rental guests receive complimentary access to the Fitness Center, all pools, the private beach and the Racquet Club’s tennis courts. Information on last-minute specials and packages can be found at www.rosemarybeach.com under “vacation rentals.”

In additional to the current rental options available in Rosemary Beach, the Pensione Inn, an 11-room hotel with a contemporary European appeal, is slated to open by April of this year. Room rates, which include Gulf views, free Wi-Fi Internet and access to the town’s amenities noted above, start at $150.

Should you wish to purchase a piece of paradise for yourself, there are currently almost 100 real estate offerings available in Rosemary Beach ranging from ranging fractional ownership in the twobedroom, three-bath properties of the Private Residence Club for $115,000, to a $4,990,000 fivebedroom, six-bath Gulf-side home.

For more information on rental accommodations at Rosemary Beach, phone 866-348-8952 or visit www.rosemarybeach. com. For more information on Rosemary Beach realty, phone 850-278-2000 or visit www.rosemarybeachsales.com.