Capital Watch September 2012

w w w. CA P I TA L- WAT C H . c o m

CAPITALWATCH VOL. 5 NO. 9

INSIDE The State of Working Pennsylvania PAGE 4

SEPTEMBER 2012

Charters, RACP reforms on fall legislative session’s

BY KEVIN ZWICK, CAPITOLWIRE

INTERVIEW: Dr. Donald J. Palmisano PAGE 6 Fumo files lawsuit from jail PAGE 9

t‘ o-do list’

State rep calls for top turnpike officials to resign PAGE 10 Senate candidate wants ban on abortion PAGE 11 EDITORIAL: What happens when you kick the can down the road?

PAGE 12

Republicans are expected to press to pass legislation on charter school reform and capital debt reduction when lawmakers return for a short voting session starting Sept. 24.

The limited fall session could be the last attempt for the Republican-controlled Legislature at passing legislation, before the electorate votes to possibly change the makeup of the General Assembly on the Nov. 6 general election.

Democrats will exhume arguments for transportation funding to fix the state’s numerous deficient roads and bridges.

Although lawmakers previously said there would be no lame duck session this year, the House and Senate have scheduled a few postelection session days in November for leadership elections and farewell speeches.

Here’s some key legislation (in current bill form) to keep an eye on this fall: CHARTER SCHOOL REFORM (SB 1115) An effort to place charter regulation under a statewide board fizzled out in the waning hours of the fiscal year. But legislative leaders and Gov. Tom Corbett expect the legislation to pass during the short, fall session.

Senate Majority Leader Dominic Pileggi, R-Delaware, said earlier this summer that charters would be a priority for his caucus, while House Majority Leader Mike Turzai, R-Allegheny, indicated he would be open to moving charter legislation as well. Corbett also remarked earlier this summer that the charter legislation was sidelined only by “a sentence!”

Budget negotiators clashed over a provision in the charter legislation dealing with charter and cyber charter vendors and the Right-to-Know law.

Both chambers passed their own version of charter legislation. However, the Senate declined to pass the House’s version because of questionable language critics said exempted charter and cyber charter vendors from the state’s RightTo-Know law.

Senate Education Democratic Chairman Andy Dinniman, D-Chester, praised Senate Republicans for not passing the House version, which he claimed protected Republican campaign contributors from the Right-to-Know law.

House GOP spokesman Steve Miskin contended “there is no big donor exemption.” He said

it just shielded companies from having to disclose all of their records and arose from a court case. Critics said his example was wrong and he misunderstood the relevant court case.

And amid the flurry of budget bill maneuvering, special education funding commission legislation was amended into SB 1115 and therefore also held up as part of the breakdown on charter negotiations.

That legislation, which both chambers said is a priority this fall, would form a commission to classify special education students into three different classifications of disability.

Funding levels would be based on the classifications.

While SB 1115 currently contains language for both the charter expansion and the continued on page 3

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NEWS 3

SEPTEMBER 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.

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Charters, RACP reforms on fall legislative session’s ‘to-do list’ continued from page 1

special education funding commission, those items could be divided into separate bills this fall.

REDEVELOPMENT ASSISTANCE FOR CAPITAL PROJECTS (HB 2175) Turzai said the House Republican Caucus’ focus will be on debt authorization and reforms to the Redevelopment Assistance for Capital Projects (RACP) program, which has been renamed officially the “Pennsylvania Economic Growth Initiative.” The name change, and other policy changes, was made by the Corbett administration earlier this year.

“That’s what the election is gonna be about – fiscal responsibility and private sector jobs. That’s it. That’s what the electorate is expecting from us,” Turzai said in July.

“The Budget Office tells us that (debt authorization) would be needed just for the financial management, the cash flow needs of the commonwealth.

That’s something we must do,” Pileggi said in July.

Administration officials in late June warned that delaying the debt authorization might result in some programs running out of money.

Turzai insisted on moving the debt authorization with the RACP reforms, while Senate Pro Tem Joe Scarnati, R-Jefferson, took issue with the ramifications the reforms would have on rural communities. Turzai’s RACP reforms, among other things, proposed tying funding to major job growth and favoring projects with increased private investment funding.

Scarnati said rural communities, which already have trouble with matching state funds dollar for dollar on projects, would be further burdened.

To work out the differences, RACP reforms and debt authorization were put off until the fall, also giving the Legislature a chance to see how Corbett’s RACP reforms played out.

Pileggi noted two of those reforms that Corbett had enacted by executive order were proposals from Turzai’s plan: capping the annual spend limit

of the program at $125 million, and establishing a vetting and scoring system for project applications.

TRANSPORTATION Many parts of the Transportation Funding Advisory Commission’s report, issued July 2011, have been enacted.

But Corbett has not made a push to enact the major component of the report’s recommendations, a signal for which legislative leaders are waiting.

Members of both parties have criticized the governor for not proposing a multibillion dollar new annual funding package to address the deficient roads and bridges.

And it’s assured Democrats will continue to make transportation and infrastructure funding an issue in the session days prior to the general election.

“One would think that [Corbett] saw some bridges in need of work on one of his kayak journeys of the last two summers. The engineers, project managers, foremen and laborers are ready to go. Governor Corbett, unchain these bulldozers!” Bill Patton, spokesman for House Democratic Leader Frank Dermody, D-Allegheny, wrote in an email.

The commission report called for $2.7 billion in new transportation fees and taxes to be phased in over five years.

The biggest increase would come 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, the commission estimated.

MISCELLANEOUS The Senate Republicans may move Senate Bill 247 to amend the Right-ToKnow law to include the Pennsylvania Interscholastic Athletic Association.

The chambers also may move legislation in response to a recent U.S. Supreme Court decision regarding juvenile convicts and life sentencing. The court recently ruled mandatory life-withoutparole sentences unconstitutional for juveniles. However, juveniles could still be sentenced to life without parole, but not via mandatory sentence.

Pennsylvania holds the nation’s largest population of juveniles serving life-without-parole sentences, according to a report from The Sentencing Project, based in Washington D.C. Miskin also said the House Republicans might run bills to set up penalties to deter teens from “sexting” and cyber bullying. CW

4

NEWS

SEPTEMBER 2012 CAPITAL WATCH

Court orders city tax increase for Harrisburg Harrisburg residents are facing a court-ordered income tax increase of 1 percent as part of an effort to repair the city’s finances.

Judge Bonnie Brigance Leadbetter of Commonwealth Court ordered the Harrisburg City Council to institute a one-year increase in the city’s earned Income Tax within 15 days, as requested by state-appointed receiver, William Lynch. Lynch is overseeing a recovery plan for financially distressed cities under Act 47.

Judge Leadbetter stated that the court’s power to order the Council to enact a tax increase intruded on the fiscal power of the legislators, but acknowledged that such action was appropriate when one branch--

in this case the City Council--“imperils” the function of another.

“Here, the Council has failed to act to alleviate an emergent fiscal threat to the health, safety and welfare of the citizens and threatened the ability of city government to function,” she wrote in a six-page ruling on the receiver’s request for the order.

Judge Leadbetter ordered that revenue from the tax increase be used only to pay for essential city services, and not to finance the schools or help pay off debt on a city incinerator which stands around $320 million.

The tax increase, from the current 1 percent to 2 percent, would net the city $1.7 million in the

fourth quarter of this year.

But even if the city begins to collect the tax in the final quarter, the money will not arrive in its treasury until the end of the first quarter of 2013.

Revenue from the increase is projected to rise to $5.1 million in 2013 and $6.9 million in each of the three years after that.

Judge Leadbetter said officials could seek future tax increases by applying to the court after the initial oneyear increase.

According to the Lynch’s projections, every year until 2016 is expected to end with a budget deficit even if labor concessions are also factored in. CW

State residents earning less despite more productive economy Most middle-class Pennsylvania families have seen their wages and income stagnate since 2000 even though productivity in the economy has grown, according to the Keystone Research Center’s annual State of Working Pennsylvania report.

Growth in the size of the overall economic pie could have supported rising living standards for all Pennsylvania workers, Keystone’s researchers wrote, but an outsized share of the benefits went to the top 1 percent of earners, preventing board-based prosperity and slowing down the economic recovery.

Neither the “lost decade” for working families since 2000 nor a recent increase in unemployment and the shortage of jobs in Pennsylvania occurred by accident.

They were the result of poor policy choices that have been unfriendly to working families, the report concludes.

“Policymakers are hitting the economic brakes when they should be hitting the accelerator,” said co-author Stephen Herzenberg, PhD, an economist and executive director of the Keystone Research Center. “Policymakers are also tilting the rewards of economic growth to the top. Fix those problems and we can have broadly shared prosperity again.”

A LOST DECADE The State of Working Pennsylvania is Keystone’s annual report of how working Pennsylvanians are faring in today’s economy. You can read the full report here.

This year’s report had little good news for most working Pennsylvanians, following a decade in which most workers experienced stagnant or falling wages and a recession that made family-sustaining job opportunities harder to come by.

For a four-person family, median income grew nearly twice as fast in the 1990s as it did in the 1980s, but it actually declined by $6,136 over the course of the “lost decade”— going from $82,818 in 2000 to $76,682 in 2010.

This decline occurred despite growth in the Pennsylvania economy because the benefits of growth went disproportionately to the top 1 percent of earners.

The 1 percent captured more than half of all income growth in Pennsylvania between 2002 and 2007. After a brief setback, top incomes were on the rise again in 2010, capturing three out of every four dollars in income growth in Pennsylvania in the first full year of the economic recovery.

With economic forecasters predicting continued high unemployment in the nation and in the state, workers face the danger of another lost decade, Keystone researchers wrote. That would continue to claw back the wage gains of the second half of the 1990s, the only period of broad-based wage growth in the past 33 years.

“We remain stuck in the most extended period of high unemployment since the Great Depression,” said Mark Price, PhD, co-author and labor economist at the Keystone Research Center. “The longer we have this high a jobless rate, the greater the risk to middle-class wage gains made in the 1990s.”

POLICIES THAT WORK FOR THE MIDDLE CLASS Pennsylvania enjoyed a jobs advantage over most other states coming out of the recession in 2010, but that advantage has slipped. Budget cuts cost 25,000 teachers, first responders and other public servants their jobs in 2011, contributing to the state’s fall from the top 10 to 38th in state jobgrowth rankings.

Pennsylvania needs a new direction, researchers wrote, led by policymakers who will commit themselves to broadly shared prosperity and advance policies that promote the American Dream, the idea that people who work hard and play by the rules should be able to share in our nation’s expanding economic pie, and a democracy that is responsive to people rather than wealth and money.

The report also recommends an “Investment in the Future” plan that bolsters our infrastructure, manufacturing sector, education, skills, and scientific research in a way that grows jobs in the short run and lays the foundation for long-run growth.

Finally, it recommends wage and incomes policies that restore a level of equity in America that is compatible with widespread mobility and a strong economy.

“In the end, it’s about values,” Dr. Herzenberg said. “What kind of Pennsylvania do you want? We want one with widespread opportunity, improving living standards across the board, and a democracy responsive to the middle class and what benefits all Pennsylvanians. We think that’s what most other Pennsylvanians want.”

THE STATE OF WORKING PENNSYLVANIA: AT A GLANCE In the 1990s, Pennsylvania experienced the strongest job growth it has seen since the 1960s.

The period from 2000-2010 was the only one in the last seven decades with negative job growth.

Pennsylvania’s jobs deficit – the difference between the number of jobs the state has and the number it needs to regain its pre-recession employment rate – stood at 301,300 in July and is 74,000 jobs higher now than a year ago.

Median four-person family income in Pennsylvania declined by $6,136 over the past decade, going from $82,818 in 2000 to $76,682 in 2010.

Despite being better educated and more productive, the typical worker in Pennsylvania in 2001 earned only $16.43 per hour (in 2011 dollars), or 63 cents more than in 1979 – for a full time worker, that’s just $1,310 more per year.

During the short economic expansion from 2002 to 2007, the top 1 percent in Pennsylvania (62,000 taxpayers) captured 54 percent of all income growth in the commonwealth.

While average incomes grew by 15.4 percent, the incomes of the top 1 percent grew by 50 percent.

For the roughly 620 Pennsylvania taxpayers who make up the top 0.01 percent, KRC estimates that average incomes grew by $1.7 million in 2010, to $18.48 million. CW

NEWS 5 5 NEWS

SEPTEMBER 2012 CAPITAL WATCH

September 2012 CAPITAL WATCH ADVERTORIAL

Policy Roundtable Spotlight The PBC Policy Roundtable, like its national counterpart in Washington, is a forum in which CEOs meet on a peer-to-peer basis to formulate public policy proposals to the most pressing issues of competitiveness. The Policy Roundtable provides senior managers the opportunity to interact extensively with policymakers, policy experts, media, and other stakeholders; participate in policy evaluation; decide upon long-term public policy strategy; and guide policy education/advocacy efforts. Corporate Chairpersons, CEOs, COOs, CFOs, and Presidents are invited to become members of the PBC Policy Roundtable. For more, see: www.pabusinesscouncil.org.

CW: Tell us about the firm’s history.

William S. Latoff Chairman & CEO DNB Financial Corp.

William S. Latoff has been a Director of DNB Financial Corp. since 1999. He is presently Chairman of the Board and assumed the role of Chief Executive Officer in December 2004. He also serves as Chairman of the Board and Chief Executive Officer of DNB First, N.A. Mr. Latoff is a Director and past Chairman of the Chester County Industrial Development Authority and is Vice Chairman of the Chester County Library Trust Board. He is a member of the Chester County Economic Development Council and a former Board Member. He is a member of the Nominating Committee of the Federal Reserve Bank of Philadelphia and is a member of the American Bankers Association's Public Affairs Committee. He is a past Chairman of the Pennsylvania Bankers Association's Public Affairs Committee and a former member of the Government Relations Policy Committee. He is a member of the Chester County Chamber of Business and Industry, where he serves on the Nominating Committee. He is also a member of the Pennsylvania Business Council Policy Roundtable.

Mr. Latoff previously served on the Board of Directors of Elmwood Federal Savings Bank and Keystone Bank. He is Chairman Emeritus of the Chester County Historical Society. He was formerly a Principal of Bliss & Company, Ltd., Certified Public Accountants and has been a principal in a number of commercial and residential real estate development projects. He is presently Chairman and President of Brandywine Automotive Group which operates Land Rover and Jaguar of West Chester.

He was a former owner of Mercedes Benz of West Chester.

WL: DNB Financial is the holding company for DNB First. We are the oldest national bank in the greater Philadelphia region and were founded in 1860 with a simple charter – to provide exceptional service, value, and support to the customers and communities who depend on us. Today, more than 150 years later, our charter has never wavered, helping us remain a financially sound institution that our customers and communities can rely on --- even in the most tumultuous of times. We grew during the Civil War, two World Wars, and in the aftermath of 911 have remained true to our values. Our financial soundness is evidenced by our inclusion on the 2012 Bank Honor Roll by Keefe, Bruyette and Woods (KBW), a distinction we were awarded for being among the top performing banks in the country and one of only 28 banks recognized for two consecutive years.

CW: Tell us about your products and services.

WL: Customers who bank with DNB First will find all the products and services they would expect from a larger regional bank, including personal banking, business banking, and wealth management services.

Our Personal Banking products include: A variety of checking accounts, including Free Checking (that is still really free), online banking with bill pay, mobile banking, money market accounts, CDs, home equity loans and lines, and mortgages.

Our business banking products include: Checking, including Free Business Checking, cash Management services, including remote deposit capture (allows customers to deposit checks right from their desk without leaving their office), ACH, ARP, wire services, merchant services, online banking, mobile banking, and loans and lines of credit.

We continually invest in systems and technology to assist customers manage money more easily. These investments include upgrades to our web-

site, online banking with bill pay and mobile banking, and an expanding presence in social media. We truly want our customers to bank the way they wish.

CW: When and under what circumstances did you join the bank?

WL: I learned of DNB as a child, opening my first savings account at the main branch, which is where my family banked. During my early professional years, I developed an interest in the financial services industry and soon began investing in bank stocks.

After leaving the board of another bank, in 1999, I was invited to join the DNB Board and I became nonexecutive chairman in 2003. In 2004, at a time when the bank was in a transitional period, I stepped into the role of Chairman and Chief Executive Officer.

CW: What are your short-term goals?

WL: In the coming months, we will continue to focus on the same fundamentals that have been critical to our financial stability and success for the past 150-plus years. These goals include further enhancing our products and services for both individuals and business customers and continuing to support the changing needs of the communities that depend on us. As always, we will make sound financial decisions and look for opportunities to build our assets. One of the ways we accomplished that this year was through the acquisition of a new branch. The banking industry is in a transitional period and we will be opportunistic as growth opportunities present themselves. In short, we will do what we've always done -- remain strong and sound to continue to respond to the needs of our customers and communities.

CW: Where do you do business?

WL: Throughout the five county Philadelphia market along with Lancaster and Berks counties. We also have customers in Northern Delaware and Southern New Jersey.

CW: What public policy issues impact your firm’s business?

WL: In the wake of the financial crisis, Basel III calls for increased capital for all banks, large or small.

While the new rules are yet to be finalized, the initial draft reflects provisions that will have a profound impact on commercial banks nationwide and in Europe. In its current form, many of these provisions could be anti-competitive and weaken the financial services industry rather than strengthen it. The Consumer Financial Protection Bureau continues to be a lightning rod for industry attacks and Congress may well revisit the scope of authority and limitations on funding for this agency. The coming elections will have a major impact on the direction of these issues. Government must be cautious, the regulatory burden it places on banks may prevent them from seeking alternative revenue sources and inhibit their ability to grow and be profitable.

We also need to establish sources of revenue other than net interest income. While lending and investing will always be at the core of our business, there are other products and services we can provide that will help our customers reach their financial goals and generate new revenues for the bank.

CW: Are there any public policy goals for which the bank is advocating?

WL: The Basel III proposal should not be issued in its current form, particularly as it applies to community banks. As previously mentioned, many of the provisions are anti-competitive and will actually inhibit lending rather than promote it because of its over emphasis on risk aversion. Lending spurs economic growth and we need growth to create jobs and grow our economy. We join the PA Bankers Association and the American Bankers Association in advocating for moderation in developing and finalizing the new capital requirements under Basel III.

6 NEWS

SEPTEMBER 2012 CAPITAL WATCH

Interview: Dr. Donald J. Palmisano

Patients should control their own care, leader says Dr. Donald J. Palmisano is lead spokesman for the Coalition to Protect Patients’ Rights, which opposes the federal Patient Protection and Affordable Care Act reforms.

Former president of the American Medical Association, he is a clinical professor of surgery and clinical professor of medical jurisprudence at Tulane University School of Medicine. A graduate of Tulane Medical School and Loyola Law School, he served for two years in active duty in the United States Air Force as a Major and Chief of Surgery for the 821st Medical Group. Author of the book, On Leadership—Essential Principles for Success—Dr. Palmisano has testified before Congress and has appeared on dozens of national news shows on a wide range of topics including health system reform.

On August 9, Dr. Palisano joined local and national experts in a panel discussion on the impact of the federal Patient Protection and Affordable Care Act (PPACA) hosted by the Commonwealth Foundation.

Participants included Richard C. Dreyfuss, Commonwealth Foundation senior fellow; Nathan A. Benefield, Foundation director of policy analysis; Tessie Abraham, legisla-

tive counsel from the office of U.S. Sen. Pat Toomey; and Dr. William K. Daiber, Urology Associates of Central Pennsylvania.

Rep. Stephen Bloom of Cumberland County served as moderater.

Following the panel discussion, Dr. Palmisano sat down with Capital Watch Editor, Dr. Jacqueline Goodwin and talked about the Affordable Care Act. GOODWIN: Now that the Affordable Care Act (a.k.a. ObamaCare) has passed Constitutional muster, what are some of the weaknesses in the legislation?

PALMISANO: It’s not going to increase access. It’s not going to enhance quality and it will increase the costs of medical care.

DOCTOR TO DOCTOR – Dr. Donald T. Palmisano of Louisiana, national spokesperson for the Coalition to Protect Patient Rights, makes a point about inadequate reimbursement rates for physicians to Dr. William K. Daiber, a Camp Hill urologist, at a round table discussion on the national Affordable Care Act sponsored by the Commonwealth Foundation.

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GOODWIN: At the heart of the Affordable Care Act are the president’s two main stated goals: insuring the uninsured and pushing down the rapid rise in health care costs. Do you believe that either of those ambitions are going to be achieved?

PALMISANO: I don’t think they will be achieved. For instance, putting more people on Medicaid—Medicaid’s a failed system. We ought to put Congress on Medicaid for about two weeks, and Medicaid would get fixed. What we need to do, the people on Medicaid need to be on something like the Federal Employees Health Benefits program where they have an array of choices and they can pick and choose the company that they want.

We should allow more of health savings accounts. We should fix the broken medical liability system. We should allow people to buy across state lines, so no health insurer gets too much monopsony power, too much concentrated power.

Those are the things that will work.

GOODWIN: Included in the Act is an Independent Payment Advisory Board (IPAB). How will this board operate?

PALMISANO: The IPAD will consist of 15 unelected bureaucrats will virtually no oversight from the President or Congress. Voters will not be able to hold members on the panel accountable for their decisions and judicial review of IPAB’s recommendations will be prohibited under the law.

GOODWIN: Do you believe the IPAB will endanger senior citizen access to health care?

PALMISANO: Yes. The IPAD could endanger senior’s access to quality medical care. Starting in 2015, this panel will be empowered to cut billions from the Medicare program. These cuts will come in addition to the $500 billion that was taken from Medicare to fund the health care bill. continued on page 15

OPINION 7

SEPTEMBER 2012 CAPITAL WATCH

Clean indoor air should be available to all

BY STEVEN M. CHEVARRIA

Health advocates from across Pennsylvania declared a major victory in 2008 with the passage of the Clean Indoor Air Act (CIAA).

The law, while a huge step forward, was far from comprehensive. It was, in fact, a compromise that aimed to protect the majority of the public’s health while still protecting the rights of certain establishments to put the health of others at risk.

Unfortunately, exceptions to the CIAA essentially created two classes of hospitality workers in the Commonwealth – those who are forced to work in smoke-filled environments and those who can breathe worry-free. This is an

unfair reality, especially in a time when hard-working Pennsylvanians are not always able to choose where they earn an income to support themselves and their families.

According to the Centers for Disease Control and Prevention (CDC), longterm exposure to secondhand smoke, such as those that occur in a workplace, is associated with a 25–30 percent increased risk for coronary heart disease in adult non-smokers. In fact, hospitality workers, such as bartenders and servers, working an 8-hour shift in a smoky bar or restaurant get the same exposure to smoke as if they had smoked a half a pack of cigarettes themselves

There is no safe level of exposure to secondhand smoke. Although the CIAA exempts some workplaces that have separate ventilation systems for smoking and non-smoking sections, not even the most advanced ventilation systems remove all of the risks.

The time is right for Pennsylvania to join the other 29 states that have enacted comprehensive, statewide smoke-free laws that cover 100 percent of indoor workplaces. The American Heart Association urges the General Assembly to support comprehensive clean indoor air legislation – such as Senate Bill 35 – that would prohibit smoking in all indoor workplaces and public places, with no exceptions. A

comprehensive clean indoor air law would protect all workers and the public from the harms of secondhand smoke exposure and would provide a level playing field for all businesses across the Commonwealth.

In the event that the General Assembly is unable to enact a comprehensive clean indoor law, we must take measures to ensure that local communities can further restrict public smoking by supporting legislation that will remove the state preemption provision.

Steven M. Chevarria is vice-chair of the American Heart Association Capital Region Board of Directors and co-founder and CEO of Pansalus Consulting, a wellness consulting firm. CW

The Tax Man Cometh!

SCOTT C. WEAVER, CFS, CAS

As a nation, we are currently witnessing firsthand in Greece how excessive national debt cripples a nation, plays economic havoc and creates social unrest. Fiscal LIFE as we know it is about to change. Once the greatest creditor nation in the world, we are now the greatest debtor nation in the world.

Unfortunately, most Americans are either ignorant of this country’s crushing debt, continue to turn their backs on the nation’s problem, or their needs are being met by federal spending. They live in the “here and now” with no concern for the future fiscal train wreck waiting to happen. These daunting numbers speak for themselves: • U.S. net public debt is more than $16 trillion dollars • U.S. public debt has doubles in the last four years • The current fiscal year ending in September will post the fourth straight deficit in excess of $1 trillion dollars • Not since WWII has the U.S. debt to GDP been this bad and now stands at an unsustainable 70% There is plenty of blame to go around. This is not a Democrat problem or a Republican problem. This is an American problem. However, while everyone is finger

pointing, the debt clock continues to In addition to the above tax, a new tick out of control. At the end of this 3.8% taxable income under health care year, we face the “fiscal” cliff. Part of reform law begins in 2013. And finally, this fiscal cliff involved imposition of a Medicare tax of 0.9% on so-called tax increases. In addition to all the tax, high income earners. What is “high the U.S. population already pays for its income” in the government’s eyes? goods and services, the Bush Tax cuts, If you are single, then you are highif allowed to expire, will have the folincome at $200,000. If you are marlowing tax impact: ried, then it’s $250,000. Wasn’t the • Top tax rate on ordinary tax increase supposed to be only on income rises from 35% to almost millionaires?

44% - an increase of 25% As mentioned before, “the tax Scott C. Weaver, CFS, CAS man cometh.” Tax efficient financial • Top tax rate on capital gains planning and investing is now more rises from 15% to almost 24% - an important than ever. Consider gifting, increase of almost 60% Charitable Trusts, Roth IRA conversions, 529 College • Top dividend tax rate increases from 15% to Saving Plans, investments that provide tax deferral almost 44% - an increase of almost 200% and retirement income guarantees, maximize contri• Estate tax exemption - $5 million to $1 million butions to your company 401K, 403b or an individual and the rate rises from 35% to 55% - an increase of IRA, Global Equipment Investments, tax deferred life over 55% insurance, annuities, conservative mutual bonds and tax • Limitation on Itemized Deductions – this limita- efficient mutual funds as part of your tax strategy. tion will reduce the value on itemized reductions As always, plan your strategies within the scope of adding another 1.2% tax. the law and seek out competent professional help. CW

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Groups urge court to uphold zoning regulations On July 26, Commonwealth Court rejected a portion of the state’s Marcellus Shale oversight law that would have established statewide zoning for drilling activities. The court ruled that the state cannot force municipalities to allow drilling that is in conflict with local ordinances. The ruling also overturned a provision in Act 13

that allowed the state to waive gas well setback requirements In an amicus brief filed Sept. 4 in the Supreme Court of Pennsylvania, the PA Chamber, along with the Pennsylvania Manufacturers’ Association; National Federal of Independent Business; Pennsylvania Business Council and the Pennsylvania Chemical Industry

Council, argued that Commonwealth Court’s decision erroneously empowers municipalities to sue on behalf of select groups of residents and in sense has created a form of associational, not representational, standing for municipalities not previously recognized by the courts whereby municipalities can advance constitutional claims on behalf

of property owners. The brief asks the Supreme Court to reaffirm that municipalities cannot assert the personal rights of select residents against the Commonwealth.

The brief also argues that Commonwealth Court’s decision unnecessarily and improperly creates new constitutionally protected rights. CW

8 NEWS

SEPTEMBER 2012 CAPITAL WATCH

State’s chiropractors/physical therapists urge action by insurance commissioner & legislature Pennsylvania’s more than 4,000 licensed chiropractors and physical and occupational therapists are urging State Insurance Commissioner Michael Consedine and members of the state legislature to stop a controversial new Highmark Inc. insurance coverage plan from going into effect on September 1st. Known as the Physical Medicine Management Program, or Physical Medicine Authorization plan, the problem-plagued initiative relies upon the use of a computer software algorithm to determine whether patients may use physical medicine services such as chiropractic or physical therapy, and if so, how many and what type of treatments they may receive. The computer program will in essence begin making the treatment decisions for patients, rather than the doctor or therapist who actually examined the patient and made the diagnosis.

“This is a chilling snapshot of the future of healthcare in America, and one of the most egregious violations of a patient’s right to choice as we’ve seen,

said Dr. Daniel Schatzberg, President of the Pennsylvania Chiropractic Association (PCA), which represents more than a thousand chiropractors in Pennsylvania. “Doctors and therapists who are actually seeing the patient will no longer have control over that patient’s

according to a statement by Highmark’s Chief Medical Officer, Donald Fischer, M.D., M.B.A. “This program (PMMP) has been vetted at the highest levels and is reasonable, fair and necessary. We are all about assuring the right care for the right member at the right time.”

“This is a chilling snapshot of the future of healthcare in America, and one of the most egregious violations of a patient’s right to choice as we’ve seen.” treatment,” said Schatzberg in a recent news release issued by the Association.

For its part, Highmark says the new program is necessary because it is “designed to promote appropriate utilization of physical medicine services to address the growing concerns of Highmark’s customers over “unwarranted variations” in the delivery of care that contributes to rising health care costs,”

In other words, said PCA’s Schatzberg, “Highmark believes that many patients are being overtreated by doctors and therapists, which allows them to bill insurers for more services. Highmark calls this over-utilization and alleges, without any supporting proof, that billings for these services are increasing. So they chose to cut costs and increase their profits by limiting patients’ access to these services.”

Schatzberg’s PA Chiropractic Association is being joined in the fight against Highmark by the Chiropractic Fellowship for Pennsylvania, and the Pennsylvania Physical Therapist Association, with the three groups representing the majority of Pennsylvania’s thousands of chiropractors, physical and occupational therapists, and other physical medicine providers.

“Highmark needs to focus upon those providers or patients who are abusing the systems and controls already in place and take appropriate enforcement action against them, noted Dr. Schatzberg, “as they currently do and have done in the past. We don’t shut down the entire medical industry because some doctors over-prescribe or over-use diagnostic services – they are dealt with on a caseby-case basis. The same unbiased standards should be applied to chiropractors and physical and occupational therapists, who are united in their opposition to Highmark’s blatant discriminatory practices.” CW

NEWS 9

SEPTEMBER 2012 CAPITAL WATCH

Conference to address critical energy issues The second annual Energy Management Conference will be held on Oct. 11 at the Hilton Towers in Harrisburg. Once again, state energy leaders and professionals will convene at the area’s preeminent Energy Management Conference, sponsored by the Industrial Energy Consumers of Pennsylvania (“IECPA”), the Pennsylvania Foundry Association, FirstEnergy Solutions, McNees Wallace & Nurick LLC, GDF SUEZ Energy Resources, and the Manufacturers’ Education Council.

Last October, these same organizations collaborated to form the area’s seminal energy symposium structured specifically to identify and address critical state, regional and national energy issues. The Honorable James Cawley, Pennsylvania’s Lieutenant Governor, provided the 2011 keynote address to 200 attendees, representing all facets of energy production, management and use.

Featured luncheon speaker of this year’s conference will be Pennsylvania Public Utility Commission Chairman Robert F. Powelson, who will discuss these natural gas price levels, the state of electric competition, the Marcellus Shale gas well impact fee (Act 13), alternative energy portfolio standards, as well as the energy efficiency and conservation programs (Act 129). .

This year’s agenda continues the vigorous discussion initiated at 2011’s inaugural Energy Conference that focused on electric rates and shopping oppor-

tunities, as well as energy efficiency and conservation. Many of the 2011 Energy Conference panels and presentations were staffed by local Electric Distribution Companies, including PPL Electric Utilities Corporation, FirstEnergy, and others.

The conference will highlight Pennsylvania’s role as the emerging energy epicenter of the U.S. and will focus on the impact of the natural gas production surge via the Marcellus and Utica Shale plays. One panel will address the implications of Pennsylvania being on the cusp of an “industrial renaissance” due to “the shale revolution” and its impact on natural gas prices that will surely yield opportunities for natural gas and advanced energy technologies. Conference subject matter will also provide practical energy guidance and insight for all levels of the business, industry and operations community Conference presentations will deal with current “best practices” offered to help businesses better manage and plan energy use and consumption. These practices will include case studies, detailed discussions regarding complex energy issues such as demand response (and emergency demand response) pursuant to Federal Energy Regulatory Commission (“FERC”) Order 745, as well as default service options, risk management and “rate responsive” facility operation.

The conference will include five interactive and concurrent morning work-

shops, coupled with nine interactive and concurrent workshops throughout the afternoon.

One workshop will focus on savings opportunities for savvy energy endusers in Pennsylvania’s competitive power marketplace; another will address wholesale power procurement options and discuss the benefits of bypassing retail power suppliers in competitive electric markets.

Pennsylvania Public Utility Commissioner Pam Witmer will lead a panel discussing the second round of energy efficiency and conservation plans under Act 129, with an emphasis on energy market forecasts and opportunities for industrial and commercial customers, including renewable and alternative energy options, such as solar technology, will also be discussed with an emphasis on project costs and power purchase agreement provisions.

A focal point of the conference will be a panel discussion on the impact on electric rates from current natural gas price levels. As noted recently by FERC, “…natural gas is being used much more heavily in electric generation. This trend appears likely to accelerate as coal-powered generation is retired, renewable energy resources require more backup by natural gas plants, and low natural gas prices encourage more use of gas.

And recent problems, most importantly, the Southwest outage in February 2011, suggest that more resources must be

allocated to planning for the increased use of natural gas to generate electricity.”

What makes this panel especially timely, and as noted by FERC, is that within the next few years, PJM is anticipating about 18,000 megawatts of coal plant retirements or about 10 percent of its total generation fleet. The proximity and abundance of regional natural gas form the ideal replacement fuel, but electric power generation can be a less-thanideal gas customer due to its real-time variability. For example, some would suggest that natural gas is a “just in time fuel” that can provide only limited response in “real time.” This panel will likely address these and other issues, such as generation fuel diversity, the PJM transmission expansion process, “gas day” versus “electric day” scheduling differences, and the suite of available gas options for electric generators other than firm service.

The economic implications of this conference are large for all energy end-users, but particularly for large commercial, industrial and institutional customers.

Conference attendees will include legislators, regulators, staff, administrators, engineers, operators, attorneys, producers and, of course, energy managers.

Interested persons are encouraged to register as soon as possible, as space is limited. On-line registration is available at www.MECseminars.com or by calling 614.229.7990 (Ext. 3). CW

Former state Sen. Fumo files lawsuit from jail against two former associates You can’t make this stuff up: former state Sen. Vince Fumo is suing two people for stealing from him.

Yes, the guy doing time in federal prison for stealing from Pennsylvania taxpayers has filed a lawsuit against two former associates for taking his money.

The Philadelphia Daily News writes Fumo alleges in his suit that two New Jersey pals - Andrew Cosenza, who chaired of the Fumo for Senate committee, and his brother, Dominic - who ran his political-action committee “engaged in a scheme to take money from the campaign for their own personal use and benefit” while he’s been locked up.

In other words, while he’s been locked up in Kentucky on 137 counts of conspiracy, fraud and related offenses Fumo is, as the Daily News states, “accusing them of what he’s doing federal prison time for - engaging in a scheme to take money (in Fumo’s case, from taxpayers) for personal use and benefit.”

Fumo’s lawsuit accuses the Cosenza brothers of “self-dealing” and depleting the PAC of more than $100,000 in less than a year.

According to the Daily News, the PAC remained active, even after Fumo was convicted in 2009, by contributing money to politicians and reimbursing Andrew Cosenza thousands of dollars for travel and other expenses.

The Daily News reports that in 2010, the PAC paid $17,100 to “International F.S. Management” and “INF Ret. Management” for office expenses and consulting services. Those entities have the same Mount Laurel address as the Cosenzas’ company, Cozco Management, which runs the Philly Steak & Gyro stands at Philadelphia International Airport and elsewhere.

In May 2011, Fumo attorney Dennis Cogan told the Daily News that Fumo had no role in the PAC. But emails that Fumo wrote to Cogan that month, sub-

sequently disclosed by prosecutors, show that Fumo was considering changing the committee’s name to “get it under the radar for a while.”

“Also, we need to know if it’s OK to rename the committee without changing my right to be reimbursed from it,” Fumo wrote to Cogan two days before the Inquirer story was published.

After reading the story, Fumo chastised Andrew Cosenza for disobeying “specific” orders that Fumo had given him on how to spend the PAC money. “I am PISSED!” Fumo wrote.

The newspaper reports that Fumo stated. “My appeal is coming up on Wednesday and this makes me look like a corrupt crook still in business from prison,” Fumo wrote. “It’s akin to Gotti running his mob operations from his jail cell. Even Joey Merlino hasn’t gotten this kind of f--king adverse press!!!”

According to the Daily News, last October, Fumo emailed Andrew Cosenza

Former state Sen. Vince Fumo

to say that he was disappointed that Cosenza hadn’t raised additional money for the PAC. The suit, which lists nearly $450,000 in Fumo for Senate expenditures since 2008 to support the breach of fiduciary duty claim, says that Fumo is “presently a resident of Ashland, Ky., but maintains and will re-establish his residency on a permanent basis in Philadelphia shortly,” the Daily News reports.

Fumo is scheduled for release in 2014.

CW

10 NEWS

SEPTEMBER 2012 CAPITAL WATCH

Pennsylvania Turnpike $7 billion in debt To meet the financial demands created

by Act 44, the Pennsylvania Turnpike Commission is now more than $7 billion in debt, up from $2 billion in 2002 and $4 billion in 2009. The burden continues to grow, with the turnpike required to make payments until 2057.

“Because of insufficient sources of cash flows from current operations, the commission plans to issue debt for the foreseeable future to finance its required payments to PennDOT,” the commission’s auditors reported

in the agency’s current annual financial report.

“There can be no assurance that the commission will be able to continue to issue debt on terms that are acceptable, or at all, to finance these obligations.”

Highway and bridge projects around Pennsylvania have grown dependent on the money from turnpike tollpayers, and so have transit agencies such as SEPTA. If the turnpike stopped making its $450 million-a-year payment to PennDot, the

already strapped state transportation budget would lose about 12 percent of its financing.

That could cost SEPTA about $160 million of its state operating subsidy of $616 million a year, a 25 percent cut that would force fare hikes and service cuts for local bus and train riders.

If the turnpike defaulted on the payments on its Act 44 debt - which it says it will not do - state law would require taxpayers to pick up the tab through the gasoline tax.

The turnpike’s liabilities now exceed its assets by more than $1.3 billion, a sharp turnabout since 2009, when its assets exceeded its liabilities by more than $150 million.

Meanwhile, tolls have risen sharply: Next January, the cash toll for driving a car from Ohio to New Jersey will rise to $39.10 and the E-ZPass toll will go to $30.77. In 2003, the cost was $14.70.

In 2014, tolls will increase by an additional 3 percent. And they will continue to rise every year after that. CW

Daley calls for top officials to resign because of mounting turnpike debt Citing escalating debt and new borrowing, state Rep. Peter Daley, D-Washington, is calling for two of the Pennsylvania Turnpike Commission’s top officials to resign.

In a letter, Daley wrote that CEO Roger Nutt and COO Craig Shuey should leave, because they showed a “lack of leadership, inability to manage funds and failure as a fiscal watchdog for the Turnpike Commission.”

Daley pointed to a recent article in the Philadelphia Inquirer, which discussed the Turnpike Commission’s $7 billion debt.

“They need to step down, there needs to be a revamping of how we do business with the Turnpike Commission,” Daley said.

Daley also called for internal audit of the turnpike and an investigation by the

Attorney General’s Office and the auditor general.

Carl Defebo, spokesman for the Turnpike Commission, said Nutt and Shuey would remain employed at the commission for now, but declined to give further comment.

In January, Auditor General Jack Wagner said Act 44 of 2007 — which required the turnpike to pay the state Department of Transportation $450 million annually — was the major reason why the Turnpike Commission was “drowning in debt.”

PennDOT spent those funds on mass transit and various road and bridge projects statewide.

The commission’s total debt has increased from $2.6 billion to $7.3 billion since Act 44 was passed, said Wagner,

Rep. Peter Daley

who described Act 44 as creating a “debt time bomb” for the commission, resulting in higher tolls every year.

The Turnpike Commission in July announced that tolls would increase again in January 2013, the fifth time

since Act 44’s passage. At the time of the announcement, Nutt said the toll increase was needed to cover the obligatory payments set up by Act 44.

Daley voted for Act 44 in July 2007, but neither Nutt nor Shuey was on the commission.

Daley said the Turnpike Commission’s problems predated that vote.

“Act 44 may have helped to exacerbate this problem, but the problem was there before we passed that legislation,” he said.

Gov. Tom Corbett appointed Nutt to CEO of the Turnpike Commission in March 2011. Nutt is the father of Brian Nutt, a former chief of staff and political adviser to Corbett.

Shuey was named COO of the commission in January 2011. CW

Turnpike Commission OKs 2013 toll increase effective Jan. 6, 2013 The Pennsylvania Tur npike Commission has approved a 2013 rate schedule that will result in overall tollrevenue growth of 3 percent. It entails a 10-percent toll increase for cash-paying customers and a 2-percent toll increase for those who pay with E-ZPass. With the increase, E-ZPass customers who currently see as much as a 17 percent savings on Turnpike tolls will save about 25 percent starting next year.

The new rates will become effective on Jan. 6, 2013 at 12:01 a.m.

“Implementing this toll increase generates the needed revenue to satisfy our annual transportationfunding obligation of $450 million to the Commonwealth of Pennsylvania, while at the same time helping to boost enrollment in E-ZPass, which has been a longtime commission priority,” said Chief Executive Officer Roger E. Nutt.

The last time tolls were increased for Pennsylvania Turnpike E-ZPass customers was in January 2011, when the commission first introduced the E-ZPass pricing differential.

New revenue from the increase will be allocated to fund debt-service costs associated with the Turnpike Commission’s funding obligation to the commonwealth stemming from a 2007 state law known as Act 44.

“Act 44 expanded the commission’s role by mandating annual contributions to PennDOT for broader, statewide transportation needs, including funding for highways, bridges and publictransit operations,” CEO Nutt said.

“To date, the commission has provided $3.4 billion in financial support under that act.”

The commission, at the July 18 meeting, also lowered the annual service

fee paid by E-ZPass account holders; the annual fee for non-commercial customers will drop from $6 to $3 per transponder, beginning Jan. 1, 2013.

The Pennsylvania Turnpike Commission also selected a program manager to lead the potential implementation of a cashless, AllElectronic Tolling (AET) system. The commission voted unanimously to engage HNTB Corp. after a competitive process.

HNTB is an internationally-recognized firm with deep experience in tolling.

The firm has offices in Philadelphia, Norristown, Harrisburg and Pittsburgh; the AET project will be managed from HNTB’s Harrisburg office.

An AET collection system offers numerous advantages to motorists and the agency, including enhanced safety, a cleaner environment, improved customer convenience and operational efficiencies.

“Because of these and other benefits, AET has emerged as much more than a trend in the tolling industry worldwide, and a number of American tolling agencies have gone cashless in recent years,” CEO Nutt said. “But certainly, the Pennsylvania Turnpike is the largest toll system in the U.S. to begin to implement such a system.”

The AET program manager will assist the Pennsylvania Turnpike Commission in the study of: workforce consulting, outreach and engagement; financial analysis; public and legislative outreach; traffic-and-revenue studies; engineering analysis and design; environmental studies; development of video-tolling collection methods and systems; farecollection business rules; and customerservice center plans and requirements.

The conversion is expected to take at least five years. CW

NEWS 11

SEPTEMBER 2012 CAPITAL WATCH

GOP U.S. Senate candidate Smith calls for ban on abortion regardless of circumstances Republican U.S. Senate candidate Tom Smith says he wants a federal ban on abortion regardless of how the life was conceived, including rape, at the Pennsylvania Press Club luncheon Aug. 27.

Smith spoke for 15 minutes and answered 20 minutes of audience questions, then met with reporters after that.

He was asked about Missouri U.S. Rep. Todd Akin’s comment saying some kinds of rape were “legitimate.”

Smith said: “My stance is on record and it’s very simplistic: I’m pro-life, period. And what that congressman said, I do not agree with at all. He should have never said anything like that.”

Asked if his proposal for an abortion ban would have exceptions for incest and rape, Smith replied: “No exceptions.”

Then a reporter asked him how he would tell a daughter or granddaughter who was raped to have a child against their will?

He said: “I lived something similar to that with my own family, and she chose life. And I commend her for that. She knew my views, but fortunately for me, I didn’t have to … she chose the way I

Pay Less with E-ZPass Customers Now Pay Rep. Tom Smith

begins at conception. I’m not going to argue about the method of conception.

It’s a life. And I’m pro-life. It’s that simple. OK?” Smith is running in the fall election against incumbent U.S. Sen. Bob Casey Jr., D-Scranton, who has been attacked

Asked if his proposal for an abortion ban would have exceptions for incest and rape, Smith replied: “No exceptions.” thought. Don’t get me wrong, it wasn’t rape, but she did” and then he was interrupted by a question of his daughter’s situation was similar to that of a rape victim.

“Having a baby out of wedlock.”

Asked if that was similar to rape, he said: “No no no, but put yourself in a father’s position, yes. I mean it is similar.

This isn’t … but back to the original, I’m pro-life period.”

Asked if he were comparing being a victim of rape to having a baby out of wedlock, he said: “No I did not say that.

I didn’t even come close to saying it. I said I went through a situation. … It’s very, very difficult. Do I condone rape?

Absolutely not. Do I propose life? Yes I do. I’m pro-life period.”

Asked what is the similarity between an out of wedlock birth and a child of rape, Smith said: “A life is a life. And it needs [to be] protected. Who’s going to protect it? We have to. I believe life

by some pro-life groups for voting for measures opposed by Catholic groups and abortion opponents.

Smith also contrasted his views on economic issues against those of Casey. He said he would vote to repeal the federal health care act which Casey supported.

He also criticized Casey for voting too often with President Obama. Asked to name an issue on which Smith was independent of conservative Republicans and Tea Party Groups twice at the luncheon, Smith declined.

After the luncheon he told reporters he opposed the federal No Child Left Behind law and supported returning education policy laws to the states and local school districts.

Those two stances have been pushed by conservatives since President Ronald Reagan declared them in 1980, and are listed by many Tea Party groups as goals. CW

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12 OPINION

SEPTEMBER 2012 CAPITAL WATCH

Editorial

What happens when you kick the can down the road?

People who live or work in Harrisburg watch the goings on in City Hall with a kind of morbid fascination. It would be entertaining if the cost of a spectator seat weren’t so high. We suggest that if Gen. William Lynch should ever throw in the towel as the state-appointed fiscal czar for the city that Gov. Tom Corbett appoint TV’s Jerry Springer to replace him.

The City is functionally bankrupt.

But the Commonwealth doesn’t want the City to file for bankruptcy – mainly because of the precedent it would set. So the battle lines are drawn. You won’t let us file for bankruptcy, says city council, so you can’t make us raise taxes to help pay the bills. Nyah, nyah, nyah.

Their reticence is understandable but their obligations are clear. The longer they delay, the more cost the taxpayers will have to absorb. Right now, the debt is compounding at a cost of about $1 million a month. Thus, with every passing month, they are, in effect, handing every

man, woman and child a bill for $20 to cover the cost of Council’s inaction.

In a way, you have to sympathize with Council’s plight. They have no real role models at the state or federal level where real procrastination is practiced as a high art – usually under the guise of partisan politics.

In Washington, we face the “fiscal cliff ” when the government runs out of borrowing authority. We need to raise taxes and cut costs but compromise – deciding what taxes to raise and what programs to cut – eludes Congress to the detriment of every American.

In Harrisburg, you don’t have to look far for examples of the cost of “kicking the can down the road.”

We have a public employee pension gap between future benefit costs and project income and earnings. Hearings have been held but all the talk was about changing over to a system to lower costs in the distant future by lowering pension benefits.

No discussion was held about where to find the $40 billion or more to fund benefits for current state workers who might retire under the current pension scheme.

The front pages of Pennsylvania newspapers a few days back were filled with stories about the ballooning debt at the Pennsylvania Turnpike -- $7 billion and growing. It’s due not to current turnpike operations or improvement costs but, rather, the need for the turnpike to pay something short of $500 billion a year to cover part of the state Department of Transportation budget. Why? Because under Act 44, the turnpike was supposed to toll Interstate 80 and use the profits from that enterprise to generate the $500 million. When the federal government said no to tolling I-80 specifically because funds were going to be siphoned off for other roads, nobody had the strength of character to repeal Act 44’s financial burden to the turnpike.

As a matter of fact, the Transportation Funding Advisory Committee commissioned by Governor Corbett has estimated that real costs to maintain the status quo for transportation in Pennsylvania will require about $3.5 to 4 billion in new funds yearly but the General Assembly has declined to deal with the need – or even part of the need – because the Governor took a Grover Nor Quist “no new taxes” pledge. Meanwhile the turnpike is headed for fiscal disaster and roads and bridges in Pennsylvania continue to decay back to the state they were in the latter days of the last century.

Oh, well, at least the Commonwealth addressed the state’s debt to the federal government that it has incurred by borrowing from Washington to pay unemployment benefits during our protracted economic slowdown. How could this happen and is there a model for the state to follow to address other financial needs?

Actually, no. The state floated bonds to raise the cash to pay back the feds. To be fair, the interest rate is lower – but the debt is still there. CW

NEWS 13

SEPTEMBER 2012 CAPITAL WATCH

Department expects cooperation from e-commerce companies The Department of Revenue has announced that it expects substantial compliance from remote sellers after the deadline for ecommerce retailers with Pennsylvania nexus to become licensed and begin collecting sales tax went into effect Sept. 1.

“We have taken steps to ensure that both e-commerce companies and brickand mortar retailers in Pennsylvania are treated equally, and we’re committed to having government work with businesses instead of against them,” Governor Tom Corbett said. “That’s why we are very confident that the Department of Revenue will see a high level of cooperation from e-commerce companies.”

“We are very pleased with the response we received from e-commerce companies so far,” said Revenue Secretary Dan Meuser. “Our optimism, and their willingness to cooperate, is a direct result of Governor Corbett’s directive for the department to be as responsive, fair and business-friendly as possible in dealing with this issue.”

The department’s goal is to treat all businesses the same under Pennsylvania’s current tax laws.

The Department of Revenue issued a Tax Bulletin on Dec. 1, 2011, which explained existing sales tax nexus law for remote sellers, clarifying the law and the department’s authority to require e-commerce and other out-ofstate sellers with physical presence in Pennsylvania to collect sales tax.

In January, in response to concerns from e-commerce companies about their ability to meet the original Feb. 1 compliance deadline, the department extended the deadline.

“We heard the concerns from e-commerce companies and worked with them to set a deadline they could meet,” Meuser said. “As a result of this flexibility, we expect e-commerce companies both large and small to comply with their responsibility to register and begin collecting sales tax on Sept. 1.”

Sales and Use Tax Bulletin 201101 relies on in-state activity to establish nexus, as required by the U.S. Constitution, and provides examples of in-state activity sufficient to require sales tax registration and collection.

Businesses with Pennsylvania nexus that do not become registered and begin collecting Pennsylvania sales tax will face a variety of escalating enforcement options over time, including assessment, audit, lien or referral to a collection agency or the Office of Attorney General. CW

Inspired by the great Mille Miglia of Italy, THE

Mille for MS

features a cocktail reception for participants and sponsors Friday evening. A 100 mile countryside tour and awards ceremony on Saturday and a concours d’elegance Friday evening and Saturday afternoon for the public. All for a world free of MS

14 OPINION

SEPTEMBER 2012 CAPITAL WATCH

This fall’s mostly waiting for Shell and the Supremes

BY PETER L. DECOURSEY, CAPITOLWIRE

For the first time I can remember, the governor and the legislature and their activities this fall are in a clear third place as insiders wait for the important decision of the fall.

The governor may someday this fall release his pension or transportation plans, starting next year’s debates early.

It too is possible that a deal on charter school reform - which should have gotten done in June - and perhaps a bill on the state’s debt limit and RACP debt reform – which also coulda got done in June – might happen.

And when you read that to yourself, put heavy stress on the word “might.”

But the big decisions and announcements this fall will be made by others and reacted to by the governor and legislature.

In second place is Royal Dutch Shell, who will hopefully shell or get off the pot and tell the state if they will or won’t build an ethane cracker plant in Beaver County.

More likely, having gotten an agreement for site clean-up from the state, and

perhaps more than $65 million a year in tax credits for 25 years, they will try to squeeze more out of the governor. And if they do, or have already done that, we won’t hear about it for months, probably after the election.

But that is only the second-place finisher for the waiting governor and Legislature.

Maybe this has happened before, but I certainly don’t remember a fall where

Supremes will host a doubleheader: Voter ID in the morning and reapportionment in the afternoon.

And don’t forget the other big case the Supremes will hear this fall: whether the Legislature and governor violated the constitution by limiting the application of local zoning laws to natural gas deep-drilling.

Basically the court will tell the Legislature this fall if voters will have to

Maybe this has happened before, but I certainly don’t remember a fall where the Supreme Court expected to decide three cases this big in a fall, with decision on two likely before the November elections. the Supreme Court expected to decide three cases this big in a fall, with decision on two likely before the November elections.

And each would require a major or tricky re-do.

The big day is Sept. 13, where the

have ID, whether the legislative leaders’ GOP-dominated maps will be in place for the 2014 elections and whether they have to go back to the drawing board in defining state and local powers over zoning natural gas drilling.

So the court will rule on three of the

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biggest new laws passed during the Corbett administration, two of them among the governor’s signature priorities.

It is not clear what the Legislature can do if they get hosed on any one of these or all three.

Court-watchers are expecting our Supremes to split 3-3 on the voter ID case, with three Democrats against, and the three Republicans upholding it. Since Commonwealth Court Judge Robin Simpson already upheld it, a tie sustains the law.

A less partisan court is expected to narrowly overturn the lower court and allow the state to supplant local zoning, with Justice Seamus McCaffery possible joining his 3 GOP brethren on that vote, and the other two Democrats, Max Baer and Debra Todd, likely against.

And the reapportionment case? Only the Good Lord knows - and he hasn’t told many, if any of us what he plans yet for that one.

The voter ID case will shock people if Corbett and the GOP legislature are not upheld.

The zoning case could go either way, but best guesses are the law is upheld and the lower court overturned.

But on reapportionment, no one knows what Chief Justice Ron Castille will do.

Having restored his reputation by voting to dump the GOP legislative leaders reapportionment plan seven months ago, no one knows if that sated his usually well-controlled maverick impulse, or whether he enjoyed it and will go back for another taste.

One thing is for sure: If Castille, as expected, votes with his party on Voter ID because he agrees with them and zoning for shale drilling because pro-business is his pattern, anything can happen on the reapportionment vote. Because that map does not now need to get done until late 2013. And Castille, who likely wants to vote to overturn on shale and to uphold on Voter ID may want to order a special master and let the court draw the next map.

If they do, I have this image of Justices McCaffery, Baer and a floor full of pizza boxes and beer cases while they play with maps 24/7 for two months. Then they’ll tell the special master what to report.

All Pennsylvanians and especially reporters spend a lot of time waiting for the governor and Legislature to shape the environment we live in.

Now they know how we feel. Because this fall is the Supreme Court’s world: the other two branches will just live in it. CW

NEWS 15

SEPTEMBER 2012 CAPITAL WATCH

Shale Coalition releases recommended practice for pre-drill water sampling The Marcellus Shale Coalition (MSC) has released a Recommended Practice (RP) for pre-drill water supply surveys.

This is the third in a series of recommended practices, all aimed at reinforcing the MSC’s Guiding Principles to “continuously improve our practices and seek transparency in our operations” while furthering a fact-based dialogue that encourages responsible American natural gas development.

Pennsylvania regulations require natural gas producers to sample and test – with the owner’s consent – all water supplies within 2,500 feet of a proposed Marcellus Shale natural gas well. These pre-drill tests, which are conducted by certified laboratories, provide a baseline analysis of water chemistry prior to site preparation and development activities.

Many natural gas producers test well beyond the 2,500 feet requirement, and were doing so prior to Pennsylvania enacting these new regulations.

According to the Center for Rural Pennsylvania, nearly 40 percent of

Interview: Dr. Donald J. Palmisano continued from page 6

GOODWIN: How can Congress achieve true health care cost savings?

PALMISANO: To achieve true health care cost savings, Congress should consider creating a consumer based alternative in the current program. The model similar to the one provided for federal employees, members of Congress, and many private sector groups would provide vouchers or credits to patients in need of financial assistance, stimulate competition in the health insurance market, and allow patients to find plans that best suit their needs.

GOODWIN: What else would you like to add?

PALMISANO: The current system is not working, and the new health-care law is only going to make the system worse. What we really need is a system that allows the patient to be in control with a doctor’s trusted advice.

We need a health-care system in which coverage isn’t linked to one’s job, giving consumers greater ownership of their health care. Making such a system work would require considerably more price transparency from health-care providers. Access to care is likely to become a more significant problem in the United States as up to 32 million Americans gain health-care coverage under the current law without a commensurate increase in the number of physicians. CW

Pennsylvania’s water wells do not meet at least one safe drinking water standard and another 20 percent of wells contain pre-existing methane. More information about that analysis is available here. The pre-drill water survey RP document, along with an overview, is available here.

“For years, well before shale gas production began in the Commonwealth, straightforward science has informed us that Pennsylvania’s groundwater chemistry drastically varies across regions,” said MSC president Kathryn Klaber.

“This Recommended Practice builds upon what’s required by law and lays out in great detail steps operators can take to help ensure homeowners have a clear understanding of their water quality before natural gas-related activities begin. These tests, paid for by the natural gas producer, are shared with the well owners and state regulators, serving a critical public health function in many cases.”

Developed by technical experts from a host of MSC member companies, this RP

recommends the following steps: A pre-drill survey should be conducted on all identified water supplies within a given area of the well pad surface location as required by the State Regulatory Agency (SRA).

Water supply sources such as wells, springs and ponds should be evaluated prior to earth disturbance for site construction or prior to spud. Consideration should also be given to sampling water supply sources that are not currently in use.

With the assistance of the water supply owner, locate the water supply(ies) and sampling location(s). Use GPS (preferably NAD83 datum) to determine and record the latitude and longitude of each water supply.

The samples shall be collected, in accordance with all appropriate sample collection, preservation, handling, and defensible chain-of-custody procedures.

Appropriate sample collection procedures can be found on the United States Environmental Protection Agency

(USEPA) website (www.epa.gov).

Water samples shall be analyzed by an SRA certified laboratory using USEPA SW-846 methods or drinking water methods (where drinking water methods exist). For parameters that have a Maximum Contaminant Level (MCL), the laboratory should be instructed to provide a laboratory reporting limit no greater than the published MCL. Operators should inform the water supply owners and/or residents that any and all information/data collected will be provided to the owner/occupant and to the SRA (if required by state regulations) and, as such, the information could be disclosed as public information upon inquiry to the SRA. Continued Klaber: “Additionally, the MSC is developing a robust pre-drill water quality database. When complete, this first of a kind library will serve as an important environmental and public health tool to help address water quality challenges that have persisted in rural communities for decades.” CW