Capital Watch December 2013

CA P I TA LWAT C H PA . c o m

CAPITALWATCH 5TH YEAR

ANNIVERSA

VOL. 6 NO. 12

RY

INSIDE House Bill 1608: Less regulation will improve telecommunications options, services for state residents PAGE 3 Faculty union accuses State System of mismanagement PAGE 5 Legislation to combat crime of child identity theft becomes law PAGES 10 Rival unions woo legislative Democrats in Great Transportation Deal debate PAGE 10 The elephant in the room PAGE 12 Should the Pennsylvania General Assembly be reduced in size?

PAGE 14

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DECEMBER 2013

Gov. Corbett signs transportation bill into law Governor Tom Corbett ceremonially signed into law House Bill 1060, Pennsylvania’s most comprehensive piece of state transportation legislation in decades.

The governor hailed the landmark legislation that will invest an additional $2.3 to $2.4 billion into the state’s transportation system by the fifth year of the plan.

“Earlier today I signed a truly bipartisan bill that will keep our families safe, create good paying jobs and keep Pennsylvania moving,” Corbett said. “Our elected officials put partisanship aside and, unlike Washington, we proved that by working together we can deliver and bring the quality transportation system that Pennsylvanians expect and deserve. Smoother roads, safer bridges, reliable transit systems and efficient ports are what this bill delivers.”

The event was held near a $16.8 million project where PennDOT is currently building two new ramps to improve travel through the U.S. 422/PA 363 (Trooper Road) Interchange in West Norristown and Lower Providence townships, Montgomery County.

Because of the landmark legislation, replacement of the approximately $149 million, Route 422 bridge over the Schuylkill River will start construction in about two years. Without the funding provided by the new legislation, drivers in this area would have had to wait until at least 2017 or later for the bridge to be replaced. As a result of the legislation, construction on the bridge will begin in 2015. In addition, SEPTA will receive funding to stabilize operations.

Gov. Tom Corbett signs into law a bill that will provide $2.3 billion a year for improvements to the state’s highways, bridges and mass-transit systems in Spring Mills. Sen. John C. Rafferty Jr., and Sen. John Wozniak look on.

By the fifth year of the plan, this legislation invests an additional: • $1.3 billion annually for state roads and bridges; • $480 million to $495 million annually for public transportation; • $237 million annually for local roads and bridges; • $144 million annually in a multi-modal fund; • $30 million annually for dirt, gravel and low-volume roadways; and • $86 million annually for Pennsylvania Turnpike expansion projects.

Partial funding for the new transportation package is being derived from the elimination of the flat

12-cent gas tax and modernizing an outdated transportation financing structure through the uncapping of the wholesale, Oil Company Franchise Tax. Also, changes in vehicle and drivers’ license fees will help to fund the plan.

Pennsylvania law states that revenues from fuel taxes must be directed to highway and bridgerelated costs and state police patrol functions and not used for any other purpose. Many road and bridge projects are slated to start next spring.

Declaring “a new era” in Pennsylvania, Gov. Tom Corbett hailed the passage of a $2.3 billion transportation infrastructure

bill as a show of effective government in the commonwealth, drawing a contrast with gridlock in Washington.

“We’re showing the people of Pennsylvania that here in Harrisburg, we can get things done. We can tackle the big issues and solve the big problems,” Corbett said at a press conference that concluded a whirlwind week of legislative action to get the massive infrastructure bill through the Republican-controlled Legislature.

“We’ve shown the nation now that our roads, our bridges and our transit systems are non-partisan.

And we’ve shown the world that continued on page 4

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House Bill 1608: less regulation will improve telecommunications options, services for state residents Question: If Pennsylvania’s rural telephone service providers were allowed to act more like the rest of the telecommunications businesses operating within the commonwealth, would they still serve those rural areas?

The Pennsylvania Telephone Association (PTA), which represents those providers, say they won’t abandon rural land-line telephone customers, despite what others have said would happen if rules currently governing those providers were relaxed.

“Their conclusion that customers will be abandoned, prices will rise and older Pennsylvanians will be left in the lurch is illogical and completely unfounded,” said PTA President Steven J. Samara.

PTA was responding to claims made last week by AARP Pennsylvania and other critics of House Bill 1608, which would remove the regulations currently placed upon traditional telephone utilities and overseen by the Public Utility Commission (PUC), which dictates how, when, where and to whom service must be provided.

“HB 1608 proposes sweeping changes

to the current regulatory framework that would severely limit the role of the Public Utility Commission to protect consumers,” said AARP Pennsylvania State Director Bill Johnston-Walsh. “We believe continued PUC oversight of telephone providers offers necessary consumer protections, particularly for land-line phone customers.”

“AARP is committed to protecting the future of universal service – a long-standing public policy that promotes the availability of basic phone service for all customers at reasonable rates,” said Johnston-Walsh.

“Until truly effective competitive markets for essential telecommunications services become a reality throughout Pennsylvania, we will work to preserve land-line phone service for the elderly and other citizens, especially those who rely on basic local phone service as a lifeline to family, medical, and other life necessities.”

Bill proponents argue that with the development of such things as cell phones, smart phones, tablet computers and Voice over Internet Protocol (VoIP), consumers now have many options and methods to

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communicate with each other, but none of these newer options are subject to the regulation that traditional telephone utilities are.

“House Bill 1608 is not about abandoning senior citizens or any of the customers that my member companies have served for nearly a century or more,” Samara said. “Rural local exchange carriers have spent hundreds of millions of dollars on a reliable, affordable land-line network that continues to function at a very high level, thus the satisfaction numbers driven in the AARP survey.”

AARP conducted a recent survey that found 94 percent of Pennsylvania residents over the age of 50 are satisfied with their land-line service, and 80 percent are unlikely to cancel that service. AARP said their survey also found that 74 percent of Pennsylvania residents age 50 or older (85 percent among rural residents) oppose any legislation that would allow land-line telephone service providers to terminate service in rural areas of the state. And 58 percent of the 50-plus crowd are against the PUC losing its authority to oversee the rates charged by providers, and 61 percent don’t want to see the PUC lose its ability to monitor the quality of service provided by land-line providers.

But Samara said the bill isn’t intended to do what AARP’s survey questions suggested.

“The legislation is carefully balanced to lighten regulatory oversight only where competition exists and customers have options, and continue Public Utility Commission authority in areas where that is not the case,” said Samara. “I hope that AARP will take another look at their survey and this legislation and see that their members and mine are aiming for the same objective.”

According to bill sponsor Rep. Warren Kampf, R-Chester, HB 1608 seeks “to create a more competitive telecommunications market in Pennsylvania and to provide consumers access to innovative products and services at competitive prices.”

During a public hearing held last week by the state House of Representatives’ Consumer Affairs Committee, the liberalleaning Keystone Research Center – which opposes the bill – claimed HB 1608 will ultimately hurt rural access to telecommunication services – particularly broadband service - and sharply increase telephone rates.

They claimed the legislation is structured to increase the profits of telecommunications companies, but it would also raise phone rates and put quality telephone service at risk in Pennsylvania.

And while the PUC disagrees with that position, one of its commissioners was in wholehearted accord with that allegation. continued on page 4

4

NEWS

DECEMBER 2013 CAPITAL WATCH

Gov. Corbett signs transportation bill into law continued from page 1

we value this over rhetoric,” he added.

The governor’s remarks followed the House’s final vote on the legislation, which passed 113-85. It passed the Senate on a 43-7 vote Nov. 21.

Throughout the legislative action, union supporters panned the bill for its prevailing wage law changes and conservative hardliners opposed to the bill said it would cause the “Corbett Gas Tax Increase.”

The bill generates the $2.3 billion by increasing the tax rate on wholesale gasoline purchases, known as the Oil Company Franchise Tax. The proposal would eliminate the 12 cents-per-gallon state gas tax, but many said the price is expected to rise a total of 28 cents-per-gallon over five years as oil companies pass down the entire increase to consumers at the pump. Corbett even agreed that at least some part of the cost will be passed to consumers.

“Will they pass some of that along? Yes,” Corbett said. “There is nobody in this room, nobody in this building, and there is nobody in this state that can say how much is going to go to the pump, because it is part of an overall cost of doing business.”

“Our roads weren’t safe: 10,000 miles of roads need to be repaired, 4,000 to 6,000 bridges need to be repaired, structurally deficient,1.5 million children got on 31,000 school buses and will continue to do that,” he said. “The longer we wait, the longer we put them at risk. The motoring public, whether it’s trucks, cars, buses, coming through Pennsylvania, were all exposed to the decaying infrastructure that needs to be repaired.”

Under the law, about $1.8 billion will go toward roads and bridges, nearly $500 million to mass transit agencies, and $144 million to a multi-modal fund for airports, freights and ports. Vehicle registration fees

Transportation Bill Fast facts

Here’s a look at the transportation funding package that was signed into law by Gov. Tom Corbett: New funds: • Increases statewide transportation spending by $2.3 billion a year.

Timeline: • New funds and measures to generate them are phased in over five years.

Money comes from: • Uncapping wholesale gasoline taxes (based on prices) so they rise with inflation while eliminating the 12-cent tax paid at the pump.

• Increasing some driver fees with inflation.

• Allowing drivers to pay a fine rather than face a license suspension if caught without insurance.

• Increasing fines for some traffic violations.

Cost to drivers: • Drivers will pay more through higher fees and increased gas prices resulting from uncapped wholesale taxes. Some lawmakers have estimated a 28-cent jump in retail gas prices after five years.

The state panel that recommended the changes estimated that the average driver would pay an extra $36 in the first year and $132 annually after the phase-in.

Other measures: • Increases threshold for “prevailing wage” on public works projects to $100,000 from $25,000.

• Allows PennDOT to increase speed limits on some highways to 70 mph.

• Allows PennDOT to direct some money to airports, ports, railroads and trails.

would increase, but not immediately, and be indexed to inflation.

The bill also changes the prevailing wage threshold on public transportation projects from $25,000 to $100,000. A number of Democrats opposed the legislation this week because of this change, which they said was an attack on working families. The issue

divided labor unions.

On Nov. 20, the proposal failed to generate enough support in the House. PennDOT Secretary Barry Schoch at the time compared the Legislature to a gridlocked Washington D.C. Then on Nov. 21, after the House took up the bill again and it passed, House Speaker Sam Smith, R-Punxsutawney, said

lawmakers didn’t want to be compared to Washington dysfunction, and again on Thursday, several House Republicans who had at first not supported the bill said they wanted to get something done.

“People hate politicians that do the politically easy things to do,” said House GOP Whip Stan Saylor, R-York, who opposed the bill Monday but eventually supported it. “We’ve stressed the fact that we do have our differences, and we do fight with [House Minority Leader Frank] Dermody and Hanna, and they fight with us, but in the end we get something done.”

Rep. Seth Grove, R-York, who also changed his vote between Monday and Thursday, said on the floor doing nothing is “unacceptable.”

Rep. Daryl Metcalfe, R-Butler, a critic of the proposal, said his staff identified over 130 fee increases.

Some legislators who opposed the bill said there were other options to raising the revenue to repair deteriorating roads and bridges, like re-prioritizing spending at PennDOT, merging the Pennsylvania Turnpike into PennDOT for savings, or charging a severance tax on natural gas companies and closing corporate tax loopholes.

House Democratic Caucus spokesman Bill Patton said the Democrats put a historic 48 votes, higher than any minority party had put up on a transportation vote.

There were also a few more flip-flops among House members between votes from Tuesday to Thursday: Democratic Reps.

Matt Bradford, Madeline Dean, and Mary Jo Daley, all from Montgomery County; Whip Mike Hanna, D-Clinton; Steve Santarsiero, D-Bucks, and Kevin Schreiber, D-York.

House Majority Leader Mike Turzai, R-Allegheny, also voted in favor of the bill after opposing it earlier this week. CW

House Bill 1608: less regulation will improve telecommunications options, services for state residents continued from page 3

Saying there is an increasing crisis in Pennsylvania for rural telephone service, PUC Commissioner James H. Cawley indicated the legislation would end up “depriving our most vulnerable citizens, our rural communities, or companies that are the pillars of their communities … they provide vital access to emergency services in our rural communities.”

“I think the rural telephone companies that have signed onto this bill have done so foolishly and short-sightedly,” said Cawley, adding: “This bill relies on robust competition; without competition, this bill will not work because it frees the companies to do as they please … we don’t know how much competition will exist ...” which

will end up causing services to disappear and “chaos in our rural areas, and people are going to get hurt.”

Cawley’s arguments against the bill are in opposition to that of PUC Chairman Robert Powelson and two of the PUC’s three other commissioners.

Powelson said the scare tactics of the bill’s opponents should dissuade legislators from altering Pennsylvania’s regulatory environment to allow for services to catch up with available – and evolving - technology.

“What Rep. Kampf is trying to accomplish is good public policy for Pennsylvania,” said Powelson, adding “the Federal Communications Commission (FCC) has made it abundantly clear over

the past decade, and more recently with the national broadband plan, traditional circuit-switch telephone networks need to be replaced in or to roll out an Internet Protocol-enabled network, and the FCC, as recently as this past week, has noted in the national broadband plan that legacy telephone regulation is an impediment to a smooth transition to a competitive market.”

“We want to ensure that customers have reasonable telephone rates and a variety of telecommunications options,” said Powelson, but acknowledged that Pennsylvania’s regulatory effort “has failed to keep pace with this ever-changing communications marketplace.”

“Some of our regulations are simply

outdated and hindering regulated entities from competing equally with unregulated service providers.”

And while Powelson said some work is still needed to clear up certain aspects of HB 1608 and the new marketplace it would create, he noted “there are important safeguards in the bill to ensure that all Pennsylvanians, including those in rural areas, will continue to have reliable wireline service available to them.”

“Given the tremendous changes in the telecommunications arena, I think it’s most appropriate for members of this committee and the General Assembly to come together to discuss these issues,” said Powelson. CW

NEWS 5

DECEMBER 2013 CAPITAL WATCH

Faculty union accuses State System of mismanagement The Pittsburgh Post-Gazette is reporting that an analysis commissioned by the faculty union and released Dec. 3 says seven stateowned universities, which claim faculty layoffs are needed, mismanage their budgets and lack accountability and oversight.

The state system, however, says it believes the report is replete with factual errors.

The Association of Pennsylvania State College & University Faculties, which represents more than 6,000 faculty and coaches, commissioned the 164-page analysis of the state universities that claim faculty

layoffs are needed to balance their budgets, communications director Lauren Gutshall said. Those schools are Cheyney, Clarion, East Stroudsburg, Edinboro, Kutztown, Mansfield and Slippery Rock.

APSCUF president Steve Hicks said the union is troubled by the mismanagement of public dollars.

“Every university is using a scheme to transfer debt to ‘component units,’ including the university foundations and student housing associations,” he told the PostGazette. “Money that the public believes is

dedicated to academics is instead going to these affiliates to pay for buildings.”

These entities absorb debt for “new dormitories and other lavish construction,” Gutshall added.

Pennsylvania State System of Higher Education spokesman Kenn Marshall told the paper that no public dollars -- tuition or state appropriations -- are used for auxiliary facilities. Such operations are funded solely through student fees, including room and board.

In October 2012, the state system put its debt total at $942 million, double what

it was a decade ago. But after factoring in privately financed student housing and other projects built by university-affiliated groups -- a sum estimated by Moody’s Investors Service to be nearly $1 billion -- total debt associated with the 14 universities is closer to $2 billion.

Boyer & Ritter has also been commissioned by the faculty association to look into the financial statements at Bloomsburg, California, Indiana, Lock Haven, Millersville, Shippensburg and West Chester universities. CW

Senate approves proposal aimed at improving safety along railroads The Senate unanimously approved a measure sponsored by Senator David G. Argall (R-29) that would add railroad materials into the state’s Scrap Material Theft Prevention Act on Dec. 3.

Senate Bill 1077 would add several railroad materials to the list of items that a scrap processor or recycling facility may purchase strictly from a commercial entity, not an individual.

“The tragedy that occurred in New York over the weekend reaffirms that we must exercise extreme caution with our rail-

roads,” Argall said. “After hearing about the rise of railroad theft across the state, I knew the state had to act to keep our railroads safe in Pennsylvania. Can you imagine the deadly harm a stolen rail or warning sign could cause to the public? I’m hopeful this further deters criminals from stealing railroad property across the state and improves safety.”

Railroad materials, as defined in Argall’s proposal, includes crossing signals, spikes, track and other materials specifically used by railroads.

Currently, scrap processors are required to obtain a photocopy of the seller’s driver’s license, a signature from both buyer and seller, the license plate number of the vehicle belonging to the seller, as well as the date, time and description of the transaction if the materials are valued over $100.

Pennsylvania’s law also states that certain items, including beer kegs, detached catalytic converters, metallic wire valued more than $100, and several constructionrelated materials, are only allowed to be sold to a scrap processor through a com-

mercial entity. Argall’s bill would add railroad materials to that list.

Argall was asked by Reading and Northern Railroad, a local railroad based out of Port Clinton in Schuylkill County, to introduce a proposal aimed at curbing this illegal behavior.

“When the Reading and Northern Railroad brought this serious safety issue to my attention at one of my town hall meetings, I knew we had to find a way to crack down on this illegal behavior before there is a serious injury,” Argall said. CW

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6 NEWS

DECEMBER 2013 CAPITAL WATCH

PA House environmental panel considers new environmental rules for certain electrical generators

BY CHRIS COMISAC, CAPITOLWIRE

When was the last time the guys who owned the state’s power plants, the people who mined the coal and drilled for the natural gas that fuels those plants, health care organizations and environmental groups were all on the same side of an issue?

Still thinking? Well the most recent example was on display last week in the state Capitol during a public hearing about legislation that would impose pollution controls on certain electric generators called “demand response” generators.

For those new to the term “demand response,” or DR, it means an effort to reduce electrical consumption at the enduser, i.e. the customer, level in response to high wholesale electricity prices, electrical capacity needs, or system reliability events, such as an emergency brought on by bad weather or rolling blackouts or brownouts due to periods of high consumption by system users.

The effort has historically focused on users curtailing their electrical use, turning off lights or adjusting the room thermostats to operate heating and air conditioning systems less. However, self-generation of electricity - using a some type of electricity generator – has grown in use as a demand response. In the case of House Bill 1699, the focus is on the self-generation side of things, and specifically stationary reciprocating internal combustion engines (RICE), normally used to provide electricity in emergency/backup situations.

“I have long been a strong supporter of demand response and conservation measures, so I am delighted to see that there’s an increase in this area, in electric resources and the grid,” said bill sponsor Rep. Chris Ross, R-Chester. “But as with so many things, we have unintended consequences in efforts that we make.”

“There has been an unintended consequence brought to my attention that occasions the creation of this bill,” Ross said.

He explained that self-generating endusers have been using those generators in

non-emergency situations, making it possible for them to receive payments as they sell some of the electricity they generate to the electrical utilities as part of demand response programs.

Proponents of these programs describe them as win-win-win situation for regulators, utilities, and end-users by increasing grid reliability while helping to keep energy prices low.

“You have to remember that the owners of these generators are Pennsylvania businesses, water districts, hospitals and local governments” that use the income they generate from their DR participation “to keep the doors open, fund expansions, keep on extra employees, maintain their generators [or do] whatever they choose to do with it,” said Rick Counihan, vice-president Government Affairs at EnerNOC,

mony provided during last week’s House Environmental Resources and Energy Committee hearing.

“Some of the demand response that has been built into the system, and is growing, is in the form of generation through diesel generators that do not have emission controls attached to the systems,” said Ross.

According to Ross, 18 percent of the DR market is being supplied by backup generators, 93 percent of which are diesel-fueled, and that portion of the market is expected to grow over time.

And while he said he supports the use of DR emergency generators to help with times of high electrical consumption, Ross added: “... because these facilities, currently, are not being required to meet air quality standards, there are a number of these, particularly diesel generators, that

“And while the generators ‘will continue to need testing and they will turn on when a blackout hits, they will not be available to prevent the blackout,’ concluded Counihan.” the world’s largest provider of DR services.

Counihan said in Pennsylvania his company works with customers at over 1,800 sites, from steel mills, to food processors, to municipal wastewater treatment plants, to universities and school districts. Counihan estimated that approximately $50 million will be paid to Pennsylvania DR participants in 2013. He added that DR efforts have been credited with helping to avert significant power disruptions during the last few years.

But not everyone is sold on that position, as evidenced by much of the testi-

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are emitting [pollutants] and emitting at a time of relatively challenged air quality anyway, so they can wind up adding to the problem of air pollution at a time when many of them are being used.”

Testimony similar to Ross’ comments was presented to the committee by representatives of the Pennsylvania Coal Alliance, the Manufacturers of Emission Controls Association, the Northeast States for Coordinated Air Use Management, the Sierra Club, the Electric Power Supply Association, PennFuture, the Pennsylvania Electric Power Association, the American Lung Association and the Marcellus Shale Coalition.

Supporters of HB1699 claim the legislation is needed because the federal Environmental Protection Agency (EPA) softened its initial position of a few years ago that RICE be limited to only 15 hours of operation. According to the EPA, legal challenges, other petitions, public comment and new technical information made available to the agency prompted it to alter the limit, increasing it to 100 hours.

But DR companies said the EPA reached a good compromise with its changes, and HB1699 goes too far.

“EnerNOC is opposed to HB1699 because it would impose unnecessary and burdensome regulations on Pennsylvania businesses and institutions that go well beyond what has been deemed necessary by the Obama EPA,” said Counihan,

whose arguments were echoed by other representatives of DR companies.

Counihan said HB1699 would impose higher costs on DR participants and result in the elimination of most DR efforts, “thereby eliminating their [participants’] demand response income, raising costs to all Pennsylvania consumers and providing no environmental benefit,” resulting in “the total loss to Pennsylvania businesses and institutions in the tens of millions of dollars per year.”

And while the generators “will continue to need testing and they will turn on when a blackout hits, they will not be available to prevent the blackout,” concluded Counihan. He also claimed some supporters of HB1699 – other electricity generators and fuel suppliers – are trying to eliminate “a low-cost competitor from the market” to increase reliance on those other sources of electricity, as well as the fuel used to create it.

HB1699 supporters argue that since the DR participants are directly competing against power plants – they are being paid for the electricity they generate in excess of their needs – without having to adhere to the same pollution rules, the state needs to impose its own corrective action.

“We’re asking for something fairly simple,” said Ross. “Phased in, over a period of years, the people who wish to participate in this marketplace and get paid for it simply put air quality controls – along the lines of what EPA asks for – on to their facilities.”

HB1699 would require these backup generators to be registered with the state Department of Environmental Protection (DEP) every five years and certified as compliant with emissions limits. Those operating the generators would have to report annually on their generator operations, and meet “reasonably achievable” emissions limits.

The legislation defines those limits as meeting EPA Tier 3 or Tier 4 emissions standards, depending on an engine’s horsepower rating. Any engine with a horsepower rating of greater than 37 kilowatts, up to 750 kilowatts, would be governed

by Tier 3 standards. Anything greater than 750 kilowatts would be subject to tougher Tier 4 standards.

The bill would also establish a process for compliance that its proponents say “will avoid a complicated permitting system.”

That system would be funded by a $40 registration fee, collected once every five years from DR participants.

Ross also noted the bill does not place any new administrative or pollution control requirements on generators that are used only for true emergencies, such as loss of power, and it exempts generators located at residences, fire stations and nuclear power plants. CW

NEWS 7

DECEMBER 2013 CAPITAL WATCH

Blues continue low-cost health insurance policies as state officials look for answers to Obamacare issues Saying they want to simplify enrollment and avoid gaps in health insurance coverage, Pennsylvania’s four Blue Cross and Blue Shield insurance companies plan to continue to offer their “Special Care” insurance program a bit longer.

That means some Pennsylvanians who were facing a loss of the low-cost, limited health benefits insurance on Jan. 1, 2014 will be able to keep their coverage for a few more months: Until June 30 for customers of Philadelphia-based Independence Blue Cross, Pittsburgh-based Highmark and Blue Cross of Northeastern Pennsylvania; and until March 31 for Capital Blue Cross customers.

But don’t expect the same prices for the coverage. Independence Blue Cross and Highmark, which has 25,700 (6,300 and 19,400 respectively) of the approximately 30,000 Pennsylvanians enrolled in “Special Care,” indicated, “… offering the option to continue the Special Care plan for its current members will have an operational and financial impact” on the insurers. To

cover these members for an additional six months, both insurers said they will file a rate increase request with the state Insurance Department.

IBC and Highmark are also trying to help out people enrolled in their “Guaranteed Enrollment” plans (nearly 34,000, according to the two companies), which provide health care coverage to all individuals regardless of their medical conditions, i.e. coverage for people who would normally find it difficult to get insurance due to a pre-existing condition. The two other Blues insurers did not indicate they would engage in a similar effort.

According to IBC and Highmark, that insurance offering will still end on Jan. 1, 2014 as per Obamacare requirements, but if a “Guaranteed Enrollment” policyholder does not select a plan on their own by that time, they will enroll the policyholder in a new plan, based on their current benefits and monthly costs, in an effort to avoid any gap in coverage.

However, there is a downside: if an individual doesn’t get their new policy through the health insurance exchange, they cannot get federal health insurance subsidies if they would be eligible for them – those subsidies are only available for insurance procured through the exchange.

And while the Blues’ effort will impact quite a few Pennsylvanians, as many as 250,000 Pennsylvanians have received health insurance cancellation notices, according to the state Department of Insurance, and the options announced Tuesday only impact those receiving insurance through the individual insurance market, not the group insurance markets.

State Insurance Commissioner Tim Consedine said, “We have asked insurance companies that have not already done so to reach out to consumers so that they may make informed choices.

Individuals impacted by these cancellations will soon hear from their health insurance carriers about options to ensure

that they have continued coverage.”

But this is only a “bandage for people harmed by the ACA,” said Consedine: “Options for policyholders may differ and may include continuation of their current policies or enrollment in a new ACAcompliant product. Options will be insurance company specific and consumers are encouraged to call their current insurance carrier for information. Insurance companies will have the option to continue individual policies originally set for cancellation.”

“The Insurance Department will continue our efforts to make sure the insurance market remains competitive and minimize any disruptions for the consumer,” said Consedine. “The governor continues to highlight the need for real, thoughtful and long-term solutions … We will continue to assess the state’s options in the small group market and monitor daily changes to the ACA coming out of Washington, D.C.”CW

Sen. Argall’s spud legislation passes House One potato, two potato, three potato four, five potato, six potato, seven potato not any more. , . thanks to Sen. David Argall whose recent bill calling for the removal of weight restrictions on potatoes was passed by the House.

With the recent approval by the House, the state is one step closer to liberating potato sales from long held weight restrictions on the sale of spuds. Currently, potatoes can only be sold in bags that total less than three pounds or in exact weights of three, five, 10, 15, 20, 25, 50 or multiples of 100 pounds.

That’s right: It’s illegal to sell potatoes in quantities that equal say four pounds, or seven, or 22.

Following the House’s approval to lift the weight restrictions by a vote of 197-0, Sen. Argall declared Pennsylvania “one step closer to repealing this obsolete restriction and allowing the market to dictate potato packaging.”

“This is another example of undue government intrusion that only frustrates consumers and taxpayers with another unnecessary bureaucracy,” said Sen. Argall, a Republican from Schuylkill County.

The proposed legislation now heads back to the Senate for a vote, after which it would go to Gov. Tom Corbett for his signature.

Sen. Elder Vogel, chairman of the Senate Agriculture and Rural Affairs Committee, which also approved of the potato bill, sees abolishing the weight restrictions as a metaphor for “common sense” in Harrisburg.

“I also believe that the Commonwealth could make better use of its resources than to hinder the livelihood of our farmers,” Senator Vogel said. CW

Rep. Cohen wants PA agencies to seek ‘made in USA’ products State Rep. Mark Cohen, D-Phila., said having Pennsylvania agencies seek out American-made products when making purchases for the state would send a strong message to American workers and, last week, House lawmakers agreed.

Cohen introduced that concept as an amendment to a House Bill 530, which would require all Pennsylvania-purchased state and national flags to be manufactured in the United States. Under Cohen’s adopted amendment, Pennsylvania agencies would be required to give preference to products made in America when they are of similar price, value and usefulness. He called the proposal a general standard the state should set in principle.

“We are sending a very strong message that we believe in jobs for American citizens,” Cohen said of his amendment. “We’re using the economic power of state governments to create jobs for American citizens and Pennsylvanians.”

Cohen said his proposal received initial resistance from the bill’s prime sponsor, veteran state Rep. Paul Clymer, R-Bucks, because Clymer believed the amendment to be too confusing and too burdensome to agencies. He suggested a negative vote. Cohen said

House lawmakers ended up voting twice on the proposal so that those who originally voted no could change their vote following Cohen’s attempt to convince them of its merits.

“This simple standard should not be looked at as a burden to our agencies but as a standard for which government in general should aspire,” Cohen said. “My amendment recognizes that not all products the government uses are made in America. But it also recognizes the fact that there are things state agencies can and should do to support American jobs and American workers.

My proposal is one of them.”

Cohen said many Americans want to “buy American,” and so should the state.

“National polls show the vast majority of Americans prefer to purchase Americanmade products if they can find them,” Cohen said. “There are stores and websites devoted to promoting American-made products. I believe that Pennsylvania agencies can and should take the small step of searching for an American product of similar price, value and usefulness.”

House Bill 530, with Cohen’s amendment, now goes to the Senate for consideration. CW

DECEMBER 2013 CAPITAL WATCH

8

Happy Holidays from Capital Watch…

‘Twas the night before Christmas and all through the House…

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10 NEWS

DECEMBER 2013 CAPITAL WATCH

Senate Democrats in GOP-leaning districts get early warning

BY KEVIN ZWICK, CAPITOLWIRE

While Democratic Sen. Jim Ferlo pointed to his newly drawn Republican-leaning district in announcing he wouldn’t seek re-election, the GOP is issuing a warning shot to another Senate Democrat they say is even more vulnerable.

Sen. Rich Kasunic, D-Fayette, a veteran of the Legislature who first served in the House and has been in the Senate since 1994, represents the most-Republican district held by a Democrat. A GOP operative said the party could spent up to $1 million in the district and even suggested the 66-year-old legislator retire instead of having his lengthy legislative record dragged out.

Kasunic’s response: Bring it on.

“It’s a conservative district, and I’m a conservative Democrat,” he said in a brief interview last week. The district voted overwhelmingly for Republican presidential challenger Mitt Romney and GOP U.S. Senate candidate Tom Smith. But Kasunic said he has represented his constituents faithfully during his roughly 30 years in the Legislature.

“We’re energized. Our team is ready to go. We’ve been in elections before, this isn’t the first go around,” he said. “This is something we do all the time. It’s a constant campaign.”

He labeled the challenge as a push as

Republicans in Harrisburg “trying to influence the district with lobbyist money.”

Kasunic’s southwestern district covers Fayette, Somerset, Washington and Westmoreland counties, and borders Maryland to the south.

The GOP also is considering running a challenger to Sen. Tim Solobay, D-Washington, whose district also voted for Romney but narrowly chose to re-elect Democratic U.S. Sen. Bob Casey over Smith.

Senate Minority Leader Jay Costa, D-Allegheny, brushed off the early talk of a challenge.

“The same could be said about Sen.

(Stewart) Greenleaf and Sen. (Tommy) Tomlinson,” said Costa about the two in Democratic-friendly districts in the Philadelphia suburbs. “We recognize they identified Sens. Kasunic and Solobay...both will be more than ready” for any challenge.

After picking up three seats in 2012, the Senate Democrats are hoping to further narrow the GOP’s majority or flip the Senate. But every dollar the GOP makes the Democrats spend defending seats like Kasunic and Solobay is a dollar not spent in the competitive suburban Philadelphia seats.

“We feel we will have ample resources to compete” across the state, Costa said. CW

Legislation to combat crime of child identity theft becomes law Individuals who are convicted of stealing the identity of a minor will now receive a stricter sentence under a new law authored by state Rep. Matt Baker (R-Bradford/Tioga).

“I am pleased this legislation made its way through the legislative process and was signed into law so quickly,” said Baker.

“The crime of identity theft continues to

grow, impacting millions of people across the United States each year. To think that these thieves are now targeting the identity of children is appalling. With this new law,

we can start to hold these criminals more accountable for preying on our society’s most innocent victims.”

Under the new law, children under the age of 18 are now part of a protected class of victims, along with individuals age 60 or older or those who are care-dependent.

Under the identity theft statute, when an offense is committed against someone of a protected class, then the grading of the offense is enhanced one degree.

Baker noted the Federal Trade Commission has identified theft committed against children as a growing problem. In testimony before Congress in 2011, the commission noted that identity thieves deliberately capture the Social Security number of a child in order to obtain employment; apply for government benefits, car loans and mortgages; and open new accounts. The commission also pointed to a study that found an estimated 142,000 instances of identity theft are perpetrated against children in the United States each year.

“Obtaining the identity of children is a growing trend because no one thinks to check the credit records of a child until he or she is old enough to apply for a credit card, buy a car or apply for a college loan,” said Baker. “Unfortunately, by that point a great amount of damage has likely already been done, which can take years to rectify.

I caution all parents to keep their child’s identifying paperwork in a safe and secure location and to only share the information with trusted organizations.”

House Bill 714 was signed into law as Act 97 of 2013 on Nov. 27. This marks the third identity theft law written by Baker to address a crime that occurs every 4 seconds and costs billions of dollars each year in the United States. CW

OPINION 11

DECEMBER 2013 CAPITAL WATCH

OFF THE FLOOR: Katie McGinty campaigns for governor

BY PETER L. DECOURSEY, CAPITOLWIRE

The eyes of Harrisburg real estate maven Alex Hartzler lit up when he saw Katie McGinty, Democratic candidate for governor at Fresco in downtown Harrisburg at lunchtime. Hartzler, the kind of businessman who knows and is known by politicians at the state and local level, brought his wife and partner over to meet McGinty at Fresco.

It was the kind of moment pleasing to both McGinty and Hartzler: Fresco is a place where politicos and lobbyists are all over the trendy coffee-and-meals joint. Hartzler liked being showered with attention in front of 100 or so people who were much more likely to know McGinty than any such other random group in Harrisburg. McGinty liked that Hartzler was acting like she was a big deal in a crowd she needs to treat her like a big deal McGinty acted as if Hartzler was $1 million dollar donor, giggling, laughing, squeezing his arm and telling his wife and partner how great he was.

Then Hartzler told her she was doing well campaigning, and told his wife and friend when he had last seen her and how well she had done since then.

Which was the cue for McGinty, still smiling in full sell mode, to lean forward, lock eye contact and ask Hartzler to be a Pioneer, a major early donor and collector of donors for her campaign.

Hartzler said something about it being early and McGinty, with a big guffaw, said she really needed his support, praised him some more and said: “The clock is ticking on being a pioneer. ” Hartzler pfumpfered, since McGinty is in somewhat of a double blind on this: party figures say she is a campaign star, but some wonder if she can get funded enough to compete with York businessman Tom Wolf’s $10 million self-funded budget, and the millions of dollars already raised by U.S. Rep. Allyson Schwartz and Treasurer Rob McCord.

But unless the people she meets and at least semi-dazzles are converts, she will get stuck in that limbo forever.

So she patted Hartzler’s arm one more time, said she looked forward to seeing him again, made one more pun about pioneers, and moved back into the interview. She clearly felt she had moved Hartzler one notch closer to signing up with her campaign.

And people like him are vital to her goal: “I know I’ve got to raise the money and I am going to raise the $5 million” she believes she will need to win the Democratic nomination for governor.

But her skill at being able to scold or wheedle or even nag so it puts a smile on the face of the people she is addressing is a huge skill. No matter whether she is reminding people or cajoling them, she works hard and skillfully to leave them with a positive impression of the encounter.

And that has had some effect so far. A Harper Polling survey put her at second, with 15 percent, to U.S. Rep. Allyson Schwartz at 22 percent, and Treasurer Rob McCord at 12 percent. McGinty is known and liked by only 14 percent of voters in that poll. Like McCord, she basically is getting the vote now of anyone who has ever heard positively of her, and that will change.

McGinty is comfortable with policy and answers questions about it straightforwardly.

Says McGinty: “I don’t see any need for an income tax increase,” and is confident that a “reasonable severance tax” which appears to be about half of what Schwartz is proposing, and $300 million in recovered funding from charter schools will restore $1 billion in Gov. Tom Corbett’s education spending reductions.

But she says the race for governor is about showing people, “that in government, whether in the federal government or the state government as DEP secretary, I have a deep passion and

scuttling it altogether. She accused McGinty of directing grants to her husband, a consultant for a group that received DEP funding when McGinty was secretary.

White also sounded for years like she thought McGinty spent years working for Al-Qaeda, not Vice President Al Gore and President Bill Clinton, blistering her repeatedly for her ethics, judgment and policies.

So how does McGinty remember that relationship? She remembers after the first confirmation battle, she and White had a quiet, fun, dinner and had glasses of wine. She says that happened throughout their relationship as DEP secretary when White was chairwoman of the Senate Environment Committee.

Others familiar with both remember one such dinner, and say while it went well on both sides, it didn’t change the combative tone White took right up to fighting McGinty’s renomination as DEP secretary four years later.

But that is McGinty, focused on the positive, even when remembering a profes-

Says McGinty: “I don’t see any need for an income tax increase,” and is confident that a “reasonable severance tax” which appears to be about half of what Schwartz is proposing, and $300 million in recovered funding from charter schools will restore $1 billion in Gov. Tom Corbett’s education spending reductions. long record of helping people solve their problems. And that is what people in Pennsylvania want and deserve: someone who is fighting for their jobs and for a secure retirement and for a better future in a state where the government isn’t solving people’s problems.”

But the poll gives her proof to show donors like Hartzler that her campaign is working, and the ability to line up more pioneers like him.

She also has a skill for taking on challenges. Her sisters went right into work after high school and “my parents weren’t overly convinced” that college was the right path for her, but weren’t opposed either.

She remembers her mother calling her at St. Joseph’s University on Friday or Saturday nights and ootching her to stop studying and go enjoy herself.

But unlike some politicians, if McGinty remembers the doubters and the critics, she keeps it to herself.

Sometimes she carries this to extremes, as in her new account of her relationship with Sen. Mary Jo White, R-Venango, who spent five years as McGinty’s nemesis in office. Not once but twice White held up McGinty’s Senate confirmation, in hopes of

sional relationship that had to be among the most difficult of her career. She is the only candidate among the Democrats who has that Tom-Ridge-like focus on the future, and that ability to set the past aside.

And of course, who was most critical of McGinty for that, challenging her honesty again and again? Sen. Mary Jo White and her chief aide, Pat Henderson, who is now

the governor’s energy czar.

Henderson has already treated McGinty’s campaign as a game of Whack-A-Mole from his new perch. And if McGinty’s campaign does get oxygen and prove as real, I bet White joins him with the big rubber mallet playing Whack-A-McGinty.

Interestingly, while characterizing her relationship with White as producing the alternate energy portfolio standards, and priding herself on “turning it around with Mary Jo,” she notes one Pennsylvania icon with which she is on the outs.

Democratic consultant Bob Shrum wrote in his memoirs that he remembered McGinty because she felt Vice President Al Gore didn’t know good beer from a hole in the wall. So, Shrum wrote, McGinty would arrive at strategy meetings with a six-pack of her own beer, so she had something decent to drink.

McGinty says that beer was Yuengling, and that she was a devotee of the Schuylkill County beer, and brought it everywhere she would need a beer for years.

Until she came back to the state and learned more about the business practices of Dick Yuengling.

“I’m buying Miller Lite now because I am not in sync with Mr. Yuengling on his anti-union practices,” she said.

McGinty also remains rooted, she says, in what her parents, a cop and a restaurant hostess, taught her when she grew up in a part of Northeast Philadelphia where there used to be horse farms but now is mostly developed.

When I asked her as she campaigns for governor, whose voice does she hear in her head of her three political mentors – former Gov. Ed Rendell, former President Bill Clinton or Gore – she said “none of them.

“I hear my mother in my head in terms of saying ‘always bring warm spirit and good cheer,’ and my father, who would say: ‘Don’t put up with too much nonsense.” CW

12 OPINION

DECEMBER 2013 CAPITAL WATCH

Politically Uncorrected: The elephant in the room

BY G. TERRY MADONNA AND MICHAEL L. YOUNG

It wasn’t a “big “story. In fact, the article published by the Pittsburgh Post-Gazette last June received little follow-up and even less attention. That’s unfortunate – because it’s a story that explains the anxiety so many Americans express about both Obama’s Affordable Care Act and even “reasonable” gun controls.

More about that in a minute.

The not so big story was about a Butler Pennsylvania resident, one Jeffrey L Burtner, suing the Pennsylvania State Police in federal district court. Mr. Burtner sued to force the state police to correct their records erroneously showing he was involuntarily committed to a state mental institution.

Under state law anyone adjudicated as a “mental defective” or involuntarily committed cannot possess a gun. On this basis, the state police relied on their “instant check system” to deny Mr. Burtner the right to buy a new hunting rifle. Their system showed that he had been committed in 1992.

Now this is where it gets interesting.

Mr. Burtner asserted he has never been committed to a mental institution and he immediately challenged the “mental defective” designation.

He approached both the hospital and the provider cited as the sources of the state police report. They both indicated they had no such records that he had been committed. Mr. Burtner’s attorney forwarded this exculpatory evidence to the state police, expecting perhaps they would do something sensible with it.

So far so good. Mistakes happen, no one is perfect, and all’s well that ends well.

Not quite! This is where it gets positively Orwellian.

The state police through their legal office acknowledged they possessed no evidence of Mr. Burtner’s involuntary commitment, stating: “the PSP has been unable to find any involuntary commitment documentation on Mr. Burtner …”

Understand what is happening because what comes next is stunning.

Here, apparently, is a law-abiding Pennsylvanian, attempting to exercise his second amendment rights to buy a new hunting rifle. He reportedly had bought other guns before. Lawfully and willingly, he submits to the required background check, alleges damaging misinformation in the government’s data bases, hires an attorney to help him gather corrective information, and submits that information to the state police.

Upon receipt of that information the state police acknowledge they have no information to the contrary. In other words, they acknowledge they have no basis to deny the purchase or rely on the disputed information about Mr. Burtner.

So the state police corrected their records, apologized to Mr. Burtner for the embarrassment and inconvenience (to say nothing of the costs he had incurred) and approved his original application to purchase a hunting rifle.

That’s certainly what should have happened!

But what actually happened provokes outrage. Upon acknowledging they had no evidence that he had ever been committed, the state police told Mr. Burtner that to get the incorrect information removed from the government data base,

requiring the state police to expunge its records — records the state police have already acknowledged are unsupported by any facts.

Happily for Mr. Burtner the whole farce finally ended in November when the state finally agreed to settle the lawsuit, pay him $400, and allow him to purchase a gun.

What is wrong with this picture?

For starters, it’s preposterous that a citizen must go into federal court to force a

“Opposition arises because we don’t trust our governments to administer these programs with competence and common sense. It’s not the laws most oppose; it’s the government that incompetently administers them.” he “… would have to take legal action for the PSP to remove it from PICS (the instant background check).”

He was compelled to go to federal court and ask for a declaration so that he can exercise a constitutional right, while

state agency to correct their own records when those records are preventing him from exercising a constitutional right.

But the injustice imposed on Mr. Burtner, however unpleasant his experience, pales against the corrosive erosion to

confidence in government that even such small incidents provoke. Mr. Burtner’s ordeal also explains what is so inexplicable to gun control advocates – why millions of Americans still resist or are indifferent to reasonable gun control measures. And it helps to explain why almost two thirds of Americans now oppose the Affordable Health Care Act. Opposition to these programs do not arise because most Americans’ oppose either sensible gun control or workable health insurance. Opposition arises because we don’t trust our governments to administer these programs with competence and common sense. It’s not the laws most oppose; it’s the government that incompetently administers them.

That is the elephant in the room amid the gun debate and health insurance – and indeed many of the controversies of our time. We increasingly don’t trust government to get it right.

Americans fear that Mr. Burtner’s story will become their story – that if gun laws are strengthened or health insurance expanded, government will screw it up.

We have lost trust in government and Mr. Burtner’s story and others like it exacerbate those feelings.

Somehow, Americans’ must come to believe again that government will do the right thing and the smart thing most of the time. We must come again to believe that government can do its job. Until that happens we will make little progress with guns or health insurance or any of the pressing challenges confronting us today. CW Terry Madonna is Professor of Public Affairs at Franklin & Marshall College, and Michael Young is a former Professor of Politics and Public Affairs at Penn State University and Managing Partner of Michael Young Strategic Research. Madonna and Young encourage responses to the column and can be reached, respectively, at terry. madonna@fandm.edu and drmikelyoung@ comcast.net.

NEWS

Gov. Corbett expands small games of chance

Gov. Corbett signs legislation to legalize small betting pools

Gov. Tom Corbett has signed into law bills that will expand gambling in Pennsylvania by allowing small games of chance in bars and taverns. One allows for three games – pull tabs, raffles and daily drawings – in taverns.

Erik Arneson, spokesman for the Senate majority leader, says the other bill signed by the governor updates an earlier law dealing with small games in private clubs: “Which increased reporting requirements [and] re-established a lot of things that were in the law but were not necessarily being followed everywhere. And some of those were seen by the organizations to be overly burdensome.”

Arneson says the bill signed into law makes adjustments to those requirements and also expands the roster of small games of chance that can be offered in private clubs such as American Legions and VFWs.

Legislation introduced by state Rep. Neal P. Goodman and state Sen. Lisa Boscola that would allow volunteer organizations and social clubs to run small betting pools has been signed into law by Gov. Tom Corbett.

The language of Goodman’s legislation, which is identical to Boscola’s bill, was inserted into H.B. 290 in the Senate. The House last week concurred with the Senate changes to H.B. 290, and voted to send it to the governor for his signature.

“Many veterans’ organizations, volunteer fire companies, and social clubs across Schuylkill County allow small betting pools in conjunction with special sporting events, such as the Super Bowl and NCAA basketball tournament,” said Goodman, D-Schuylkill.

“Many of them are struggling financially, and these pools help them increase patronage.”

Under the legislation, volunteer organizations and clubs that have a small games of chance license could offer sports betting pools if the entry amount is $20 or less, there are no more than 100 participants, and all proceeds are awarded to the contestants.

OPINION 13

DECEMBER 2013 CAPITAL WATCH

A rational approach to energy and environmental policy

BY JOHN PIPPY

There is a move afoot by the federal government that would impact every American’s pocketbook and throw thousands of people out of work. It is being done in the name of improving the environment, yet the environmental benefits would be minimal.

Worst of all, in its quest to eliminate coal as a fuel source for producing electricity, the U.S. Environmental Protection Agency is ceding America’s competitive edge to India, China and other developing economies, and forcing our country to backtrack and increase our reliance on foreign energy sources.

There is a reason why coal-fired electricity represents half of the nation’s energy portfolio. It is plentiful, and coal-fired electricity is less expensive than other energy

ogy. And without the incentives to keep coal on a path toward zero emissions, the U.S. will lose an important edge that it enjoys now as the world leader in clean coal technology.

India and China, which burn several times more coal than the U.S., have no plans to curtail its use. Now there are reports that Japan, too, plans to increase its use of coal to fill the gap that occurred when it shut down its nuclear industry in the wake of the tsunami disaster in 2011.

This unilateral economic disarmament by our country will eliminate thousands of family-sustaining jobs in the U.S., and as an energy-producing state, Pennsylvania will be particularly hard hit. With 39

“The proposed carbon standards would effectively shut down approximately half of the nation’s coal-fired power plants.” sources. It is a more reliable energy source than wind or solar.

Much to the surprise of many people, the reductions in coal emissions have been significant over the last several decades. From 1970 to 2009, coal generation increased by 225 percent while emissions of regulated pollutants decreased by 77 percent.

The EPA has now proposed to reduce carbon emissions to standards that are impossible to meet with today’s technol-

underground mines and the remainder from 377 surface mining and reprocessing sites, Pennsylvania is the nation’s fourthlargest coal producer.

Last year, Pennsylvania mining created 49,100 direct and indirect jobs with a total payroll in excess of $2.2 billion. Taxes on these wages netted over $700 million to the coffers of federal, state and local governments. Mining industry jobs pay an average annual salary of $75,000, significantly

more than the average private-sector salary of $45,000 per year.

The proposed carbon standards would effectively shut down approximately half of the nation’s coal-fired power plants.

Federal regulators are well aware of the economic fallout and have simply chosen to ignore it and, in fact, are attempting to impose the standards without congressional input.

A reasoned approach to energy and environmental policies, based on science and technology, would create a win-win scenario. Emerging technology will continue to allow reductions in coal emissions of sulfur, nitrogen, particulates and carbon if we give it the time and the incentives to develop.

A reasoned approach would have the following four characteristics: 1. Carbon standards should not interfere with the generation of affordably priced and reliably generated electricity, particularly in states heavily coal-reliant.

2. States should have the flexibility to develop plans unique to their specific circumstances.

3. Carbon regulations should not precipitate additional plant closures and create stranded costs for emission control investments.

4. Finally, a reasoned approach would remove regulatory barriers to efficiency improvements at existing coal plants.

John Pippy

Environmental quality is important to everyone, including the coal industry. We don’t need to choose between jobs, the economy, affordable energy, a stable electric grid and a clean environment. We can have all of those things if we work collaboratively to forge rational energy and environmental policies.

If you agree, please visit www.IAmCoal. com to voice your concern to Pennsylvania’s congressional representatives. CW John Pippy is CEO of the Pennsylvania Coal Alliance, which represents underground and surface bituminous coal operators in Pennsylvania, and the businesses that service and supply the industry.

Give small organizations a fighting chance

BY REP. DEBERAH KULA

The holiday season is a perfect time to give thanks to our hometown organizations that strengthen the fabric of our communities.

Groups like our VFWs, fire companies and fraternal organizations, among others, help everyone from our youngest to oldest community members, providing unique educational and social opportunities to residents across the 52nd District. Many times, these groups are able to offer such assistance through proceeds from raffles and drawings.

But recently, Gov. Tom Corbett signed into law legislation that stands to prevent these organizations from carrying out their very important charitable work in our neighborhoods. Legislation that was originally drafted to help ease the burden of state regulations on small games of chance for our local groups has now led to the largest expansion of gambling in recent history.

Under the new law, about 4,500 taverns across Pennsylvania would be licensed

to operate games such as raffles, daily drawings and pull-tabs. These establishments will be able to pay out a maximum of $35,000 per week in prizes that were once reserved for our small groups. What’s more, it’s estimated that the Pennsylvania Lottery could see a 5 percent reduction in profits in light of the new law.

It’s no secret that our small clubs and nonprofits are already facing enormous challenges in today’s tough economic climate. Many have had to significantly scale back on operations, offering fewer scholarships and cutting back on veterans services.

Some have had to close their doors altogether. Unfortunately, in the wake of this new law, this alarming trend could become the status quo in the next few years.

However, there are some bright spots in this law that are cause for cautious optimism. Clubs that rake in less than $40,000 annually may keep up to $20,000 for operating expenses, and only those with

proceeds exceeding $20,000 yearly will be required to submit an annual report to the state. These regulations aim to ease burdensome requirements on our small groups as they work to stay afloat.

I have followed this issue particularly closely over the past year. In May, I held a public hearing on the subject in Uniontown, which was attended by representatives from the Perryopolis Volunteer Fire Department and the American Legion, as well as the Fayette County district attorney. I have also spoken with colleagues on both sides of the aisle to lobby for what’s best for our communities.

No matter what happens in the coming months and years, I am committed to making sure our community groups, like the VFWs, American Legions and fire companies, can continue to do the important work we’ve all come to know and expect. I hope our generous neighbors throughout the 52nd District will do the same. CW

Rep. Deberah Kula

Rep. Deberah Kula, D-52, represents parts of Fayette and Westmoreland Counties.

14 OPINION

DECEMBER 2013 CAPITAL WATCH

SHOULD THE PENNSYLVANIA GENERAL ASSEMBLY BE REDUCED IN SIZE?

Yes.

BY TONY MAY

Maybe.

BY CHARLIE GEROW

The Pennsylvania General They say that size matters.

Assembly is made up of 253 That’s certainly what House elected members; 50 in the Speaker Sam Smith and many state Senate and 203 in the of his colleagues think about House of Representatives. the Pennsylvania General This works out to one Senator Longtime TV partners, Tony May and Charlie Gerow provide commentary and analysis on political matters every Sunday on WHPTV-CBS 21’s program, “Face the State,” in addition to being regularly Assembly. for every 256,000 residents and featured on the Pennsylvania Cable Network (PCN). In their other lives, May is a partner at Triad one Representative for every After presiding over what Strategies, and Gerow is CEO of Quantum Communications.

63,000 residents. It takes is effectively the largest state about four House districts to House in the country (New equal on Senate district in population. Is there any magic to these numbers? In practical Hampshire, with its “citizen legislature” has more House members, although fewer terms, no. So why do we need such large legislative bodies?

At one time, when the primary mode of transportation was the horse – or maybe the Senators) for the past 3 1/2 years, Speaker Smith has called for a reduction in the size of railroad – and very few people had telephones. Face-to-face conversation was the primary the legislature.

Speaker Smith has two bills, each a Constitutional Amendment, one to reduce the nummode of communication supplemented by the printed word. Times have changed. Let’s dispense with the boring details but today, anyone can communicate with everyone at the ber of Representatives by 100, the other to cut the Senate by 12. With more than 60 bisame time. partisan co-sponsors on his lead bill, both have been voted out of Committee. Of course, We could cut the number legislators by – pick a number; say 20 percent – with no to become law they still need to pass the full House and then the Senate, then both the adverse impact on democracy whatsoever. That would mean a 40-member Senate and a House and the Senate in the next session and then go before the voters on a referendum.

160 to 163-member House. Each Senate district would jump to 320,000 residents (the With a Legislature more than twice the size of California’s (which has three times the population of Luzerne County) and each House district would increase to 78,000 resipopulation of Pennsylvania) and nearly 100 members more than Florida and 75 more than dents or so (the population of Scranton).

The cost of operating the General Assembly should decline – a bit but not much. Texas, the case for reducing the size of the Pennsylvania General Assembly appears at Legislative salaries account for less than a percent of the overall cost of operating the first glance to be easy to make. Several states with legislatures significantly smaller than General Assembly. Even if you reduced the number of secretaries and legislative aides pro Pennsylvania’s have legislation pending to reduce the size of at least one chamber. Even rata, it doesn’t make much of a dent in a $27 billion General Fund budget. But it will send Nebraska, with the nation’s smallest legislature (49 seats in the only unicameral legislature a positive message to those who are the governed and those who pay the bills. And, in in the country), has a size reduction proposal. some ways, it should improve government operations and improve the legislative process.

Proponents argue that a smaller legislature would make the body more manageable and The latter is a conclusion based upon the reality that while society as a whole is now stitched together by the World Wide Web and wireless devices, the General Assembly is efficient and make the legislative process flow more smoothly. Others believe there would still rooted firmly in face-to-face communications and 203 members is just too many for be a cost significant saving by eliminating the salaries of members and staff.

It’s hard to argue that reducing the number of legislators would increase efficiency. the kind of human interactions that make for successful and positive interpersonal communications. With 50 members, it’s possible for every Senator to know all of his or her But efficiency is not necessarily the greatest virtue when it comes to doing the people’s colleagues on a first name basis and have established some level of personal discourse business. Checks and balances and keeping the size of districts small enough to allow and even friendship, regardless of political stripe or party affiliation. With more that 200 Senators and Representatives to be closer to those whom they represent and serve are also members – unless you are really, really gregarious, you’re going see and interact with many fundamental. colleagues in two dimensions.

Size alone is not the issue. The full time legislature itself has been the focus of other Let’s be frank: there are two groups who will be instinctively against reducing the size of the General Assembly because it will impact them directly: the members whose seats proposed reforms. Those reformers believe that Pennsylvania should return to the days will be eliminated and legislative leaders who should find it easier to lead a larger, less of not-so-long-ago when the General Assembly was part time. They point to the fact that personal group. the vast majority of states do not have “full time” legislatures. The example they cite most And, as long as we’re being honest, a smaller General Assembly might make it easier for frequently is Texas which has more than twice the population of Pennsylvania, is exponenlobbyists to increase their influence. tially larger geographically and significantly more diverse. The Texas Legislature is only Overall, though, the outcome should be worth the effort even if much of the impact is in session for a few months every two years. On alternating years it doesn’t meet at all. symbolic or relatively abstract. Reducing the size of the legislature would demonstrate to Returning to a part time legislature, they argue, would more directly dress the ills the public that the members of the General Assembly are capable of acting without self proposed to be reformed by reducing the size of the legislature. It would adopt the same interest. It would raise the profile – and the status – of members of the General Assembly because each lawmaker would represent a larger constituency. As it is now, serving as type of reform, they say, without making individual Members more distant from their a member of a metropolitan county council or county commissioner is a step up above a constituents by forcing them to represent many more people. legislator in terms of the size of the constituency if not in terms of pay or perquisites. And, Reducing the size of the General Assembly isn’t a bad idea. But it isn’t a panacea either. there’s no inconvenient commute.

It’s certainly possible that something smaller will do the job more efficiently. But it’s Reduce the size of the General Assembly? It’s a good thing. CW equally plausible that one that isn’t overworked will do better. CW

NEWS 15

DECEMBER 2013 CAPITAL WATCH

RECORD STOCK MARKET HIGHS! NOW WHAT?

BY SCOTT C. WEAVER, CFP, CFS, CAS

Do you get out of stocks and find safety somewhere else or do you stay the course and ride this amazing bull rally? After all, according to Dan Egan, Director of Behavioral Financial at Betterment “record highs don’t predict falls in the market”. According to his article “Record highs! Time to sell?,” there were 1,069 record high days and 14,842 other “non record high days’ since 1954. Using data from the S&P) 500, there was no consistent pattern of unusual market loss versus the 14,842 normal days one year later. Comparing the two performance matrix, the average return was almost identical. Remember though, the best investors pay closer attention to what’s in front of them instead of what is behind them. The above data is helpful, but is not a guarantee of market conditions moving forward. Here are some portfolio strategies that may be helpful for today’s market.

1) 2)

Rebalance Buy and hold

REBALANCE

According to the Wikipedia encyclopedia, rebalancing is the action of bringing a portfolio that has deviated from one’s target asset allocation back into line. Under-weighted securities can be purchased with newly saved money; alternatively, over-weighted securities can be sold to purchase under-weighted securities. However, shifting money from your winning asset into your underperforming asset is counterintuitive to the human brain. Who feels comfortable with selling your winners and buying your losers?

Rebalancing can help reduce risk, but not guarantee it. Rebalancing will definitely bring you back in line with your original allocation. But in some cases, this strategy may under perform other strategies from a real return stand point. In my opinion, rebalancing is more about defense than offense. This strategy, however, is consistent and easy for the average investor to accomplish. It does bring discipline and a strategic plan to the investment allocation. And having a strategy with some limitation is far better than no strategy at all.

A study co-authored by Nobel Prize-winning economist William Sharpe concluded that rebalancing worked best when assets that had been performing strongly or poorly made sharp moves back to their historical averages, such as right before tech crashes.

If you must lighten up on stocks, be defensive. You really need to think twice before owning bonds today. If you shift your stocks into bonds, position your portfolio for inevitable interest rate hikes ahead. Treasuries and other Government issues are more sensitive to rate hikes. Instead, consider corporate bonds, which are more closely tied to company earnings than rates. Another option is to move into short-term bond funds.

Also consider Floating Rate funds that adjust their interest rates quicker than traditional bond funds. Other risks apply, so consult the prospectus before investing.

Scott C. Weaver, CFP, CFS, CAS

Some other suggestions when rebalancing include:

 For taxable investments, consider rebalancing every 15 months to take advantage of the long term capital gain rate.  Rebalance symmetrically whereby allocations across assets or asset categories are traded back to target  Rebalance asymmetrically whereby allocations are only traded where assets or categories breach tolerances around

a target – this is Transaction Cost Sensitive approach.

BUY AND HOLD

The rebalancing argument is regularly getting your portfolio back to your ideal stock and bond mix forces you to see high and buy low. The buy and hold strategy advocates doing nothing until your need of the money is close at hand.

John Bogal, founder of the Vanguard Group, compared the performance of a 70% stocks and a 30% bond portfolio that was rebalanced annually with a portfolio that was never touched or the “buy and hold strategy”. According to Bogal’s study, from 1826-2012, 55% of the time rebalancing beat doing nothing by 0.23%. When rebalancing hurt returns, the penalty was larger – 0.43%.

Sticking to your buy and hold strategy requires a strong stomach and lots of time. This passive investing approach is low cost and can be tax efficient.

If you are close to retiring, you may not have the time to wait out severe market losses.

According to Bill Bernstein, author of Deep Risk, annual balancing helps portfolios suffer lower one year losses, while the above study by John Bogal suggests the buy and hold strategy over long periods of time tend to slightly outperform rebalancing. Risk aversion and time seems to be the deciding factor between the two strategies.

Pray for future market gains, prepare for a potential correction and as always, do your homework.

Happy Investing!

Scott C. Weaver

The information contained herein is obtained from sources believed to be reliable but its accuracy and completeness is not guaranteed. Any tax or legal information in this piece is merely a summary of our understanding and interpretation of current laws and regulations and is not exhaustive. Neither NEXT Financial Group, Inc., nor its representatives are qualified to give tax or legal advice.

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