Capital Watch January/February 2014

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

CAPITALWATCH 6TH YEAR

ANNIVERSA

VOL. 7 NO. 1

RY

INSIDE House takes baby steps toward addressing education funding PAGE 3 DePasquale to audit Department of Education PAGE 4 Lawyers for Corbett, Kane seek reversal of Voter ID ruling PAGE 6 Marijuana bill continues to gain steam PAGE 9 Editorial: Harrisburg on the rebound PAGE 13 Pro/Con: Should Pennsylvania raise the minimum wage?

PAGE 14

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JANUARY/FEBRUARY 2014

Pennsylvania voter ID requirement ruled unconstitutional A Pennsylvania state judge has struck down Pennsylvania’s 2012 law requiring voters to produce a state-approved photo ID at the polls, setting up a potential Supreme Court confrontation that could have implications for other such laws across the country.

The judge, Bernard L. McGinley of Commonwealth Court, ruled that the law hampered the ability of hundreds of thousands of Pennsylvanians to cast their ballots, falling most heavily on elderly, disabled and lowincome residents, and that the state’s reasons for the law — that it was needed to combat voter fraud — was unsupported by the facts.

“Voting laws are designed to assure a free and fair election,” the judge wrote in his 103page decision. “The Voter ID law does not further this goal.”

Judge McGinley, a Democrat, in his ruling said the photo identification requirements “unreasonably burdened the right to vote. “...the photo ID provisions in the Voter ID Law violate the fundamental right to vote and unnecessarily burden the hundreds of thousands of electors who lack compliant photo ID,” he wrote.

In addition, Judge McGinley ruled, the state’s $5 million campaign to explain the law had been full of misinformation that has never been corrected. He also said that the free IDs that were supposed to be made available to those without drivers licenses or other approved photo identification were difficult and sometimes impossible to obtain.

The Pennsylvania Voter ID law, considered one of strictest in the nation, was passed by legislative Republicans in early 2012 with the full support of Gov. Tom Corbett. No Democrats supported the plan. It was challenged in the summer of 2012 by lawyers for the American Civil Liberties Union and voting rights groups, who said McGinley’s ruling was a “devastating indictment” of the Voter ID law.

The case is now expected to go to the state Supreme Court. Pennsylvania Attorney General Kathleen Kane said in a statement she was awaiting instructions from the governor about how to proceed.

“I respect Judge McGinley’s very thoughtful decision in this matter. The Office of Attorney General will continue to defend the rights of all Pennsylvanians, and we will work with all related Commonwealth agencies to carry out this decision and ensure that all voters have access to free and fair elections,” said Kane.

James Schultz, the governor’s general counsel, said the state was studying the ruling.

“We continue to evaluate the opinion and will shortly determine whether post-trial motions are appropriate,” he said. It was also

unclear whether, if there is an appeal, the high court will be able to rule in time to allow the law to take effect for May’s primary.

Supporters of the law — which is intended to combat only one type of potential fraud, that of unqualified people trying to vote in person — have said it is needed to make sure the person who casts the ballot is the person who is registered to vote.

Opponents contend that such fraud is rare — in Pennsylvania’s case, the state could not point to a single incident — and that the laws were intended to suppress Democratic turnout, since those who do not possess a state-approved photo ID are more likely to be in groups that tend to vote Democratic.

“The type of problem that is addressed by voter ID laws is virtually nonexistent, which does raise the question of why they are passing these laws,” Witold Walczak, legal director of the A.C.L.U. of Pennsylvania, said after the ruling. “And the answer is that it is a voter suppression tool.” “[The Corbett administration] should not spend another penny trying to defend this unjust law,” said Senate Minority Leader Jay Costa, D-Allegheny.

Senate Democrats also panned the administration for “essentially wasting millions of dollars” on an ad campaign for the law and legal fees to defend the law in court. Michael Rubin, a lawyer who worked with the challengers, said Judge McGinley found the ad campaign “only served to confuse [voters]... led to disenfranchisement” and the “commonwealth never corrected the misinformation.”

The Voter ID law has been halted by the courts until the resolution of the constitutional challenge.

Judge McGinley said the commonwealth “attempted valiantly” to provide liberal access to compliant identification through what became known as DOS ID, an ID issued through PennDOT by the Department of State meant to provide a “safety net” for those who couldn’t get eligible ID. But Judge McGinley said the statute didn’t authorize continued on page 4

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JANUARY/FEBRUARY 2014 CAPITAL WATCH

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House takes baby steps toward addressing education funding So far both sides of the House took very incremental steps toward addressing how Pennsylvania funds basic education, an issue most poll say is not helping the governor as he seeks re-election.

The actions taken Jan. 14 were far from immediate: Democrats introduced a resolution calling for a study on the impacts of the reduced education funding and a GOPbacked bill set for final passage would establish a commission to develop a new formula that considers variables in setting increases to the state’s basic education subsidy.

Rep. Louis Bishop, D-Philadelphia, introduced the resolution to direct the Legislative Budget and Finance Committee to study the impact of cuts, and to move the state back in the direction of a so-called “costing out” formula – basic cost per pupil – laid out during Gov. Ed Rendell’s second term, which she says would be fair and produce adequate funding. From 2007-2010, the state used that funding schedule, but the Corbett administration did not follow the formula upon taking office in 2011 amid budget troubles that included a more than $4 billion deficit.

House Appropriations Committee Chairman Bill Adolph, R-Delaware, in

a statement knocked the Democrats for voting against the current budget, which “dedicate[s] a record $10 billion in state funds to basic education despite losing more than $1 billion in federal stimulus funds for basic education.”

“Ironically, every House Democrat voted against the current FY13-14 budget that contains record state funding for basic education. Calls to return to the costing out study are somewhat disingenuous because in FY09-10, the year after the costing out study was presented, Democrats disregarded the funding levels called for in the study,” Adolph said. “Democrats could not even meet costing out study funding levels with the inclusion of temporary federal stimulus funding. If the costing out study funding levels were in place today we would be spending $2 billion more on basic education than what we currently spend.”

Separately, House Republicans want a commission to look at a new formula to determine future increases in the state basic education subsidy.

“For many years, the formula has allocated to each school district at least the same level of funding as the school district

received in the prior year. However, this manner of distributing education funding fails to recognize the differing needs of school districts with increasing or decreasing enrollment levels,” wrote Rep. Bernie O’Neill, R-Bucks, in his co-sponsorship memo for House Bill 1738.

That bill is now set for final passage in the House, and it still needs Senate approval.

The commission would be tasked with developing a new basic education funding formula that considers each school district’s market value/personal income aid ratio, equalized millage rate, geographic price differences, enrollment levels, local support and other factors, according to O’Neill’s memo.

Similar to O’Neill’s commission to establish a weighted formula for special education funding, the 15-member basic education funding commission would consist of majority and minority chairs of the House and Senate Education committees, two appointees from each of the four caucuses, the Secretary of Education, the Deputy Secretary of Elementary and Secondary Education, and an appointee from the governor’s office.

Since Gov. Corbett came into office, temporary federal stimulus funds used instead of state funding for schools ran out.

Although school districts were warned late in Rendell’s term not to use federal stimulus dollars for recurring expenses, many did. But with the economic downturn and a new governor who pledged to not raise taxes, state money to replace the loss of federal dollars was scarce, Gov. Corbett’s administration has said. House Democrats cried foul over that claim, pointing to the billion dollars in corporate tax breaks.

Gov. Corbett also redirected some state education dollars from other public school programs to help pay public pensions for school employees. The Pennsylvania State Education Association, the largest teachers union in the state, and allies in the Legislature, disagree with the Corbett administration over whether the pension payments count as education funding. In the current budget, Corbett boasts that state (with an emphasis on state) funding for education is at its highest.

But that’s not enough for the eight Democrats running for the chance to go head-to-head with Corbett this fall, when voters decide whether to hire him for another four years. The Democratic Party line slams Corbett for cutting education, and the governor and his administration continues to struggle to overcome the narrative.

The latest Quinnipiac University poll from December showed only 28 percent of respondents approved Gov. Corbett’s handling of education.

Gov. Corbett’s budget address is Feb. 4. CW

4

NEWS

JANUARY/FEBRUARY 2014 CAPITAL WATCH

Restoring school funding needs to be a top priority says school employee union Restoring school funding for Pennsylvania’s public school students must be legislators’ top priority, the president of Pennsylvania’s largest school employee union said after state House members proposed a plan to do just that.

PSEA President Mike Crossey commended members of the state House of Representatives for urging Gov. Tom Corbett to begin reversing his nearly $1 billion in school funding cuts, pointing out that these cuts have caused a funding crisis in Pennsylvania’s public schools.

“When you ask Pennsylvanians about the issues that are most important to them, public education is at the top of the list,” Crossey said. “There’s a school funding crisis in Pennsylvania, and our students need legislators like these, who are making school funding the priority it needs to be.”

The governor’s annual state budget address, which marks the beginning of the General Assembly’s deliberations about the Commonwealth’s spending plan, is Feb. 4.

Since 2011, nearly $1 billion has been cut from Pennsylvania’s public schools, forcing

school districts to eliminate programs that work for students and cut nearly 20,000 educators from the public schools.

Learn more about how these cuts impact every school district at www.psea.org/ schoolcuts.

“Pennsylvania needs leadership to change the focus from doing just barely enough, to doing everything that’s needed to help students learn,” Crossey said. “Today, we saw that leadership, and I am eager to support their efforts to fund our public schools and the students who learn there.”

Crossey also pointed out that PSEA recently released “Solutions That Work,” a 100-page report which details 20 specific, research-backed, classroom-proven strategies that are proven to help students learn.

He added that many proven school improvement strategies, like smaller class sizes, tutoring programs, arts education, and extracurricular activities, have fallen victim to Gov. Corbett’s school funding cuts.

Read the full report at www.solutionsthatwork.org. CW

DePasquale to audit Department of Education Auditor General Eugene DePasquale has announced that his department will conduct a comprehensive performance audit to evaluate if the Pennsylvania Department of Education (PDE) has the structure, staff and resources to fulfill its oversight of schools.

“Our opportunities for economic prosperity are, in part, contingent on receiving a quality education,” DePasquale said. “I want to ensure that Pennsylvanians are getting the best value for our tax dollars and that our children are receiving the best education possible.

“In my first year as auditor general, we performed more than 300 audits of schools across Pennsylvania. Most passed with minor, or no problems. In some we found problems complying with laws and regulations that fall under PDE’s oversight. In the worst cases, we found wasted money that should have gone toward classroom education,” DePasquale said.

“There have been major changes in education funding in recent years and taxpayers deserve to know that PDE can deliver on its mandate to ensure all students receive a high quality education.”

The performance audit will cover the period starting July 1, 2010. It is anticipated that the audit will be completed later this year. Initial objectives are to: • Evaluate the structure and authority levels between the State Board of Education and PDE in establishing education policy, rules, regulations, and procedures; and • Evaluate PDE’s organizational structure, staffing levels, and resources to determine if these areas are sufficient to ensure that PDE fulfills its statutory mandates.

The Department of the Auditor General audits all public schools, including charters, intermediate units and career/technical schools on a cyclical basis approximately every two to four years.

School audit reports are available online at: www.auditorgen.state. pa.us, “Reports Online,” then, “School Districts.” CW

Eugene DePasquale

Pennsylvania voter ID requirement ruled unconstitutional continued from page 1

the ID, which wasn’t provided to all who needed it, and said it “is fraught with illegalities and dubious authority.”

“This litigation illuminated a significant problem for which there is no proffered adequate solution: the photo ID provisions of the Voter ID Law de facto disenfranchise hundreds of thousands of valid voters,” Judge McGinley wrote.

The ACLU said that most voters would have had to travel to one of the 71 driver’s license centers to obtain state-issued identification, and argued during the trial last summer such a request was a hardship for many eligible voters.

“In the majority of applications, the Voter ID Law renders Pennsylvania’s fundamental right to vote so difficult to exercise as to cause de facto disenfranchisement,” Judge McGinley wrote.

The law created a controversy in the run-up

to the 2012 general election, as voting rights groups feared it would stifle minorities, the youth and the elderly from casting a ballot. In a speech, House Majority Leader Mike Turzai, R-Allegheny, suggested the law would assist Republican presidential nominee Mitt Romney. However, the law has been temporarily halted since the summer of 2012. “[The law] was a highly cynical attempt to undermine one of the basic freedoms of democracy which is free and fair elections,” said Sen. Daylin Leach, D-Montgomery, echoing the criticisms charged by legislative Democrats while the bill sailed through the Legislature in early 2012.

“Two years ago, the Republican majority and the governor jammed through an unconstitutional law in order to satisfy a right-wing political agenda. Not one Democrat voted for it and we are overjoyed that the state court has put a stop to it,” said

House Democratic Leader Frank Dermody, D-Allegheny, in a statement.

Marion Schneider, a lawyer with the Advancement Project, a voting rights group challenging the law, said Judge McGinley ruled against their claim that the law violated the equal protection clause of the Pennsylvania Constitution. ACLU’s Walczak said it’s very difficult to prove intentional discrimination.

“We hadn’t quite shown they discriminated intentionally against a specific class,” Schneider said.

There was no reaction from the Corbett administration or Republican leaders in the Legislature. But Rep. Daryl Metcalfe, R-Butler, who authored the law, blasted the decision.

“This judicial activist, partisan decision is out of touch with reality and the will of the people. One fraudulently cast vote is one too many. I expect this decision will

be appealed,” Metcalfe said in a statement posted to his Facebook page.

Pennsylvania GOP chairman Rob Gleason said he was “extremely disappointed” in the ruling.

“The overwhelming majority of Pennsylvanians support a way to protect their right to vote and combat voter fraud. While I am extremely disappointed with today’s decision, the Republican Party of Pennsylvania will continue to serve as a leading advocate for policies that ensure a fair right to vote for all Pennsylvanians,” Gleason said in a statement.

A provision in the law pertaining to absentee ballots will be in effect. Those provisions were not challenged in the lawsuit and Judge McGinley said the provisions can stand on their own. CW

A Whole Generation Thinks This Is What Manufacturing Looks Like.

That’s About To Change.

The natural gas we drill for in Southwestern Pennsylvania is more than a valuable source of domestic energy.

It’s also an important raw material used in the manufacturing of steel, paints, fertilizers, plastics, medicine, and more. History shows that manufacturing thrives where energy is abundant…and it doesn’t get much more plentiful than the natural gas we have right here.

Drilling is just the beginning.

6 NEWS

JANUARY/FEBRUARY 2014 CAPITAL WATCH

Lawyers for Corbett, Kane seek reversal of Voter ID ruling As Capital Watch goes to press, lawyers for the Gov. Tom Corbett and Attorney General Kathleen Kane, have filed posttrial motions asking Commonwealth Court Judge Bernard McGinley to reconsider his Jan. 17 ruling, which they said contained numerous errors in finding a photo identification requirement for voting to be unconstitutional.

“If the trial judge had employed proper constitutional analysis, he would not have seen the statute as a house of cards construct, but as a carefully integrated measure to protect the right of all to vote without having legitimate votes diluted by fraudulent votes cast by those who are not eligible to vote,” the 42-page motion states.

Corbett’s chief lawyer, Jim Schultz, said in a statement even if the administration is successful they will ask the court to suspend the law’s photo ID requirement for the upcoming May primary election and general election this fall.

A statement from Schultz reiterated the administration’s opposition to the ruling of McGinley, who said the photo ID requirement in the Voter ID law “vio-

lates the fundamental right to vote and unnecessarily burdens the hundreds of thousands of electors who lack compliant photo ID.” The motion found that McGinley, a Democratic judge, reached a different conclusion than Commonwealth Court Judge Robert Simpson, a Republican, on the issue

Pennsylvania courts ‘afford a substantial degree of deference to the judgment of the legislature’ in the context of state election laws – including the election regulation at issue here. Judge McGinley did not,” the motion states. “Had the trial judge properly accorded deference to the Legislature, he would have reached the

“If the trial judge had employed proper constitutional analysis, he would not have seen the statute as a house of cards construct, but as a carefully integrated measure to protect the right of all to vote without having legitimate votes diluted by fraudulent votes cast by those who are not eligible to vote.” of granting deference to the Legislature on the constitutionality of legislation.

“A primary reason that Judge Simpson and Judge McGinley differed in their approaches to the issues before them is that Judge Simpson acknowledged that

same conclusion that Judge Simpson reached in denying Petitioners’ request for injunction.”

The administration “has gone to great lengths to ensure that citizens are afforded the opportunity to get an ID in the unlikely

event they do not have one,” said Schultz in the statement.

During a 2012 hearing, administration officials testified they worked to create a Department of State-issued ID, known as a DOS ID, which was meant to quell concerns raised by civil rights groups challenging the law. McGinley noted in his ruling he found problems with the DOS ID, partially since it was a burden to obtain one because they were available only at 71 PennDOT driver’s license centers across the state.

The administration also asked the court to refrain from requiring an ID for the upcoming primary and general elections this year, “so as to avoid even the chance of confusion for voters.”

The Corbett administration has been criticized by the American Civil Liberties Union and other groups challenging the law, as well as state officials, for wasting $5.6 million on advertising and voter education materials for a photo ID requirement that was not actually in effect. (See page one for additional article about the voter ID ruling.) CW

NEWS 7

JANUARY/FEBRUARY 2014 CAPITAL WATCH

House panel drops pollution controls, keeps reporting rules for certain emergency generators

BY CHRIS COMISAC, CAPITOLWIRE

It’s difficult to enforce pollution controls when not enough is known about who or what is potentially doing the polluting.

That was the message from an overwhelming majority of the members of the state House Environmental Resources and Energy Committee, which approved, on a 22-2 vote, a significantly altered bill that seeks to regulate certain electric generators called “demand response” generators.

“Demand response,” or DR, refers to an effort to reduce electrical consumption at the end-user – 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 power consumption by system users.

House Bill 1699 focuses on stationary reciprocating internal combustion engines (RICE) normally used to provide electricity in emergency/backup situations.

“This is legislation that is designed to take a look at and try to get a better handle on the subject of the kinds of pollution that might be coming from demand response diesel generators that aren’t currently regulated,” said bill sponsor Rep. Chris Ross, R-Chester.

While the bill would exempt any standby emergency generator that is only used for emergency purposes, there are generators that are being employed in nonemergency situations. In such situations, owners of the generators are able to receive payments as they sell the electricity they

generate to electrical utilities as part of demand response programs. However, they are selling to utilities that must adhere to far more stringent pollution standards when they generate electricity.

Supporters of House Bill 1699 argue state-imposed controls are 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.

As originally written, House Bill 1699 would have imposed pollution controls on some of these DR generators, but the committee, with the unanimous approval of an amendment offered by Committee Majority Chairman Ron Miller, R-York, removed those provisions during a Tuesday morning meeting in the state Capitol.

Ross said currently there’s not enough known about the use of the DR generators to appropriately impose new pollution standards upon them.

“This amendment continues to focus in on the core issue, which is to make sure that we understand clearly what the actual generators are that are participating in the [DR] program,” said Ross.

He said “it has been confusing” for all involved to determine “how much of the demand response program is, actually, supplied by diesel generators that do not have existing [pollution] controls on them today.

“Until we understand fully, through registration, what is out there and what is actually being turned on, it would be impossible for DEP to clearly understand what they need to do to meet EPA regulations, and also for us to make sure that we’re being fair to all the [power generating] entities that are currently operating under controls and control their emissions.”

Miller’s amendment also changed the registration requirement from every five years to every two years (starting in the current calendar year) and requires generator owners to supply information deemed necessary by the Department of Environmental Protection, with any proprietary information protected by a confidentiality clause included in the legislation.

Left unchanged, though, are penalties to be imposed on those who do not comply with House Bill 1699’s provisions, penalties most on the committee – even Ross – said were now excessive given the substantial changes made to the bill’s requirements.

Rep. Donna Oberlander, R-Clarion, attempted to address those penalties with her own amendment, which was ultimately defeated on a 10-14 vote.

“I appreciate the maker of the underlying bill’s position on the penalties being excessive, it is excessive,” said Oberlander.

“You’re talking about registration and reporting requirements for a demand response generator, that if they forget to send it [registration or reporting] in, they are now subject to [penalties] from

the PUC [Public Utility Commission], DEP, FERC [Federal Energy Regulatory Commission] and the attorney general – that is excessive.

“Nobody else is required to do that, and I think that moving forward with this bill, it does make it better to remove that stringent penalty … my goodness, these people aren’t murderers, they’re generating electricity and putting it into the grid when it’s necessary.”

Rep. Kathy Rapp, R-Warren, echoed Oberlander’s comments, saying she has been contacted by business owners in her district that operate DR generators. Rapp said those business owners expressed serious concerns regarding requirements Rapp said represented an “undo burden” upon DR generator users.

Oberlander and Rapp were the only votes against reporting the amended House Bill 1699 to the House floor.

Ross said Oberlander’s amendment, while well-intentioned regarding penalties, went far beyond simply addressing the penalties within House Bill 1699, and would have weakened the bill.

Both he and Miller said they planned to draft an amendment that deals solely with the penalties within the bill, and offer it on the House floor when the bill comes up for consideration.

Asserting the DR generator situation is an important one to address, Committee Minority Chairman Greg Vitali, D-Delaware, said the amended version of House Bill 1699 “isn’t perfect, but it’s a good first step.” CW

Senate panel approves changes to Environmental Good Samaritan law A bill aimed at enticing oil and gas companies to use polluted acid mine drainage water for hydraulic fracturing has passed the Senate Appropriations Committee.

Senate Bill 411, sponsored by Sen. Rich Kasunic, D-Fayette, amends the state’s Environmental Good Samaritan Act to give natural gas operators the same civil liability protections as volunteer landowners and other groups that clean up abandoned mine lands and abate acid mine drainage pollution.

It’s an incentive sought after by the natural gas industry, but opposed by many environmental groups.

“It incentivizes taking polluted water and moving it to unpolluted watersheds without requiring anything be done to clean it up – and that’s a bad thing,”

said Jordan Yeager, an environmental lawyer who has represented the Delaware Riverkeeper Network, one environmental group opposing the legislation.

The bill eases the liability for anyone using the drainage water for “beneficial purposes,” which the bill defines as any use of water for a purpose that results in an economic or environmental benefit, including use by an industrial or commercial facility following state laws.

Drillers want to use the acid mine drainage to frack wells – and some already do – but many are reluctant to do so because of potential liabilities associated with the clean up of the constant source of pollution. Acid mine drainage, caused by past mining activities, contains high-

ly acidic water containing heavy metals and has contaminated over 4,000 miles of Pennsylvania waterways, according to the federal Environmental Protection Agency.

The bill moved to the floor unamended on a 16-9 committee vote. Four Democrats and five Republicans voted against the bill.

Minority Leader Jay Costa, D-Allegheny, originally voted in favor of the bill, but asked for a reconsideration of the vote and switched to oppose the bill.

Sen. Vince Hughes, D-Philadelphia, supported the bill to move the process forward, but noted there are still some lingering questions about the bill.

Sen. Jim Ferlo, D-Allegheny, who represents part of Pittsburgh, which banned fracking, said the bill would afford natural gas

drillers too much protection and could have “significant unintended consequences.”

David Spigelmyer, president of the Marcellus Shale Coalition, a trade group of natural gas drilling companies, called it “common sense legislation.”

A recent study by Duke University could also boost the legislation’s prospects moving forward. The study found that blending acid mine waters with frack wastewater – which Duke researchers say contains high concentrations of salts, naturally occurring radioactive material and metals such as barium, that pose environmental and public health risks – could be “an effective management practice” to remediate radioactivity levels and use acid mine drainage water. CW

8 NEWS

JANUARY/FEBRUARY 2014 CAPITAL WATCH

Liquor Control Board approves Metzger as acting executive director The Pennsylvania Liquor Control Board unanimously approved the appointment of John E. Metzger as the acting executive director of the agency, filling a vacancy created when former CEO Joe Conti retired in February 2013.

In naming Metzger, the Board changed the title from chief executive officer to executive director.

In his new role, Metzger will be responsible for directing the administrative and business operations of the agency and the management of the executive team. He will provide leadership and strategic planning recommendations for agency initiatives and be a conduit to the Board.

Since 2010, John Metzger has been the PLCB’s supply chain director.

“As chairman of the board, I want to thank John for taking on this new role while, for the time being, continuing his current duties,” said Joseph. E. Brion,

PLCB chairman. “The Board will continue to be very actively involved in the day-today operations of the agency. However, having an executive director will allow us time to focus on the larger policy issues facing the Liquor Control Board in the months ahead.”

“I appreciate the Board giving me this opportunity,” Metzger said. “I’m looking forward to working with the great team we have in place to continue to improve efficiencies within the agency and service to consumers.”

As the PLCB’s director of supply chain, Metzger lead the implementation of a new bailment warehouse inventory system that saved the commonwealth more than $100 million in inventory costs. In addition, he is responsible for improving product forecasting, in-stock levels at Fine Wine & Good Spirits stores and the warehouses and streamlining overall warehouse operations.

Prior to joining the PLCB, Metzger was the executive vice president of administration for Great Atlantic& Pacific Tea Company, an $11 billion grocery retailer with more than 700 stores in the U.S. and Canada. He was responsible for restructuring the company and simplifying processes to reduce the company’s overhead by more than $70 million in one year, reduced supply and logistics expenses by $40 million and successfully led the company’s return to business following Hurricane Katrina.

Metzger began his career with Nabisco Foods Group before moving on to Darden Restaurants, the operator of Red Lobster, Olive Garden and Bahama Breeze restaurant;CS Integrated LLC-Pro Logis Trust; and Great Atlantic & Pacific Tea Company.

Metzger was a visiting professor at the Penn State Smeal College of Business. He received his Bachelor of Science degree

in Business Logistics from Penn State University and went on to get his MBA at Rollins College in Winter Park, FL, graduating first in his class.

“When we hired John Metzger a little more than three years ago, we knew he would be an incredibly valuable asset to the Board because of his extensive knowledge of supply chain management,” said PLCB Board Member Robert S. Marcus.

“With his retail business experience and leadership abilities, I have no doubt he will be very successful leading the agency and increasing revenue to benefit the General Fund.”

“John is very well respected among his colleagues at the agency and in the business community,” said Tim Holden, PLCB board member. ” He is perfectly suited for this new role, and I look forward to working with him as we move forward.” CW

Corbett administration floats liquor privatization ideas hoping to reach compromise

BY KEVIN ZWICK, CAPITOLWIRE

The Corbett administration has floated some liquor privatization ideas to the House and Senate to receive feedback from Republican leaders with the hope of reaching a compromise.

The administration’s suggestions include leasing wholesale distribution rights, transforming beer distributorships into liquor stores, eliminating state-run liquor stores when they are replaced with privatelyowned stores and imposing a 6-percent tax on wholesale gross profits.

Lt. Gov. Jim Cawley has been leading negotiations between the administration and GOP leaders in the Legislature. The latest suggestions from the Corbett administration are not seen as a hard-and-fast proposal, but an effort to get a feel from

Republican leaders what can be supported in the General Assembly.

Senate sources indicate that there has been no agreement on anything with regard to liquor privatization, and that discussions have not progressed much beyond where they ended in June.

Sources said the following components are simply a starting point of discussions, prepared by the governor’s office.

However, at least from the Senate’s perspective, discussion can continue but not much has changed: Senate Republicans need a proposal that can garner 26 votes - without much, if any, help from the other side of the aisle - and proposing any dramatic changes to Pennsylvania’s current system of liquor sales will be a

tough sell in that chamber.

The administration is suggesting imposing a 6 percent tax on wholesale gross profits, sources confirmed. And wholesale distribution contracts would go to those who already have existing contracts with the Pennsylvania Liquor Control Board, but under a sort of leasing system would only be good for 10 years and returned to the state.

The proposal also includes a 6 percent tax on wholesale gross profits, while keeping the 18 percent Johnstown Flood Tax. The Corbett administration is also suggesting allowing grocery stores and convenience stores to sell wine and beer, while retail beer distributors would be able to sell liquor in unlimited quantities.

Retail wine and spirits stores operated by the Pennsylvania Liquor Control Board would shutter as the number of private stores increases; once there’s twice as many private stores, the remaining LCB stores would close.

Shutting down liquor stores means putting about 3,500 unionized workers on unemployment rolls, so the proposal is likely to not garner any support among union allies in the Legislature.

Proponents say the Legislature in June came the closest in three decades to passing a bill privatizing the state’s wine and liquor system. Senate support for the liquor privatization proposal in June got tangled with the fate of a failed transportation proposal in the House. CW

The Swarthmore Group’s Becker named to head SERS Governor Tom Corbett has named the Swarthmore Group’s Glenn Becker as the new Chairman of the State Employee Retirement System (SERS) replacing Nicholas Maile who had served as chair for the last 20 years..

“Glenn Becker has a great record of fiscal responsibility in Pennsylvania,” Corbett said. “I am confident in Glenn’s ability to perform the duties of this posi-

tion to the highest of standards.”

Becker is currently employed by The Swarthmore Group of Philadelphia as a member of both the Executive Committee and the firm’s Investment Policy Committee. Prior to joining The Swarthmore Group, Becker was director of Skippack Investment Advisors.

His professional experience also includes Morgan Stanley Investment Management,

where he served as managing director and director of client services, Miller, Anderson & Sherrerd, where he was a partner and served as director of client services, and Provident Capital Management, where he was a senior vice president and director of marketing and client relations.

“Glenn Becker brings a significant record of accomplishment in developing strong fiscal plans,” Corbett said. “I am very pleased

to have his expertise in leading our State Employees’ Retirement System.”

Becker currently serves as trustee and head of the Investment Committee for Germantown Academy and is co-founder and Chairman of Impact Thrift Stores Inc., a non-profit organization dedicated to raising funds for local charitable organizations.

He holds a B.S. in Business Administration and an M.B.A. from Drexel University. CW

NEWS 9

JANUARY/FEBRUARY 2014 CAPITAL WATCH

Marijuana bill continues to gain steam A bill recently introduced in the state Senate would make Pennsylvania the 21st state to legalize the use of medical marijuana.

But supporters aren’t holding their breath since Gov. Tom Corbett has refused to sign any such bill until the federal Food and Drug Administration approves cannabis for medical purposes.

However, the 34-page bill’s sponsors, Sens.

Daylin Leach, D- Upper Merion, and Mike Folmer, R- Lebanon continue to actively lobby for its passage.

Leach has launched a social media campaign highlighting children who could benefit from medical marijuana. Folmer plans to hold a public hearing designed to educate his fellow legislators on the benefits of medical cannabis.

Medical marijuana, the senators argue, particularly would benefit children who suffer from severe epilepsy. They cited accounts of medical cannabis reducing seizures among children with epilepsy. The drug would be prescribed in liquid drops.

“This is a drug we need to get to these kids,” Leach said. “If it were a derivative of a yucca plant, it would be in every CVS in the country.”

Leach said the drugs will not contain any tetrahydrocannabinol — the psychoactive compound found in cannabis. The drugs only will include the non-psychoactive compound cannabidiol.

“We can’t even get you high,” Leach said. “You’re not smoking it. You put it under the tongue. It’s a no-brainer.”

Leach has long supported legalizing marijuana for medical use, but this marks the first time he has had bipartisan support. He and Folmer initially announced their intentions last year.

“This is a people issue,” Folmer said. “This is a health issue.

This is about making sure people have every weapon in their arsenal to do battle with their disease.”

Folmer, who is recovering from Non-Hodgkin’s lymphoma, said government should not stand in the way of people’s ability to combat diseases. He said it is hypocritical to permit doctors to prescribe drugs like Oxycodone, but not medical cannabis.

“I still think there is a mass of misinformation on what my bill is trying to do,” Folmer said.

“My bill isn’t about rolling up a marijuana cigarette for a child to smoke.”

Leach also supports legalizing marijuana for recreational purposes, but said that is a battle for another day. Folmer declined to discuss his views on recreational marijuana, saying the debate clouds the push for legalizing medical marijuana. Only Colorado and Washington have legalized recreational marijuana.

Despite the efforts of Folmer and Leach, the bill is unlikely to be brought to the Senate floor for a vote.

“We don’t have any plans to consider it in 2014,” said Erik Arneson, spokesman for Senate Majority Leader Dominic F. Pileggi, R-Chester.

Corbett has said he will not sign any bill legalizing medical marijuana, respecting FDA regulations. The FDA labels marijuana as a Schedule 1 controlled substance, a status that restricts the clinical trials necessary for approving drugs.

The bill would create the Medical Cannabis Board and an enforcement arm within the state police.

The bill has not yet been assigned to a committee. CW

10 NEWS

JANUARY/FEBRUARY 2014 CAPITAL WATCH

Harrisburg schools on right path state recovery officer says In the year since he was appointed as the state’s Chief Recovery Officer (CRO) for the cash-strapped and debt-ridden Harrisburg School District, Gene Veno has met head-on the challenge of what many might consider a thankless and near impossible task. Untangling the School District’s finances, including auditing and evaluating past practices while coming up with an on ongoing, sustainable plan that will ultimately lead to a healthy, better functioning and academically successful school district would be a heady challenge for anyone.

On December 10, 2013, Veno told the school board and city residents that the plan was, in fact, working. That the discovery of understated revenues coupled with the cuts and strict savings guidelines were having the desired effect. An amended recovery plan under the state’s Act 141 guidelines is now in the works.

In the year since the Pennsylvania Department of Education said the school district was in “moderate financial recovery” and named Veno the CRO, the nationallyrecognized consultant has convinced the school distinct to implement a 5 percent reduction in operating costs that included some salaries and day-to-day spending. In

the course of exhaustive financial reviews it was also discovered that the District had more than $11.4 million in cash on its books than originally thought. But the overstated revenues were resultant mainly from nonloan funds and overestimates in operating costs resultant from school closings and furloughs. In fact, in his initial review Veno warned that such savings in salaries, supplies and operations, were unrecognized when he was presented with budget estimates.

cation of our students in ways that will create many new life changes and rewarding experiences to best prepare them for college and the workplace environment,” Veno told the district in his first annual report. “We want them to succeed, to go on to college or to trade school, and to secure good jobs. Our students are the key to the future,” he said.

Admittedly, it is a complex and involved effort that Veno says not only includes accounting forensics that will meet the

“The bottom line is that we are making progress.

We can do better and we will.”

The larger goal of the Recovery Plan remains the improved education of Harrisburg School District students. While the stated goal of the recovery plan is long term financial stability for the district, Veno is quick to note that the overall goal is, “to grow and foster excellent education in the context of financial recovery that is sustainable over a period of years.”

“While the District is still in “Moderate Financial Recovery” status, we should look at this as an opportunity to improve the edu-

state’s Act 141 requirements, but also the full involvement of all parties to succeed.

That includes school administrators, the school board, teachers and their unions, other staff, parents and even students in order to succeed. At this writing, Veno was, in fact, meeting with many of the stakeholders involved, including the teachers, professional staff and their unions.

“When we drafted the Recovery Plan, we established a team of experts to study all aspects of the District, from academ-

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ics to extracurricular programs to building functions and viability, labor contracts, technology, and security, along with revenues and expenses. The goal was to offer a sustainable road map for the Harrisburg School District to go forward to success,” Veno said in his Dec. 10 statement.

Veno’s original Recovery Plan presented last April focused on the long term financial challenges facing the Harrisburg School District, including limited revenue growth, large anticipated increases in health care and retirement benefits for employees and the increasing challenge to compete with charter schools for students. Additionally, the plan noted that Harrisburg ranked among the lowest performing districts in the state, calling for both financial and academic improvements necessary to succeed.

At year’s end, the plan is emerging to reflect the progress made, with near term financial status better than it was a year ago, including: • A 2012-13 fiscal year appears to have ended with a higher than expected positive operating balance; • While awaiting final results it appears there will growth in the fund balance in 2012-13; • With the overstating of current expenses and understated non-loan revenue, the district may well face another positive operating balance in 2013.

Nonetheless, the District continues to face long-term financial challenges including: • Revenues that are stagnant with a decline in federal funding; • Known expenses, including retirement, health care and debt service, expected to grow significantly in the next several years; • Continued strong competition from charter schools for Harrisburg students.

In fact, the4 district faces an 18 percent growth in charter enrollments in 201314, with an application for a large new charter school anticipated.

While a myriad of other issues continue to face the district, including absenteeism, administrative processes related to book and supply purchases, an inventory of vacant buildings and improved enrollment through the district’s Cougar Academy, including high school curriculum in order to compete with cyber schools.

The important “takeaway” from Veno’s Recovery Plan and Next Steps report is that the School District as able to “hold the line” on any tax increase for 2012-13 and, if the Recovery Plan is able to continue moving forward, may avoid tax increases for the next several years, all the while making both long and short-term improvements to the district’s financial stability and academic success.

“The bottom line is that we are making progress. We can do better and we will,” Veno concluded. CW

NEWS 11

JANUARY/FEBRUARY 2014 CAPITAL WATCH

Gov. Corbett proposes another increase in funding for domestic violence, rape crisis services

BY CHRIS COMISAC , CAPITOLWIRE

Gov. Tom Corbett has announced his state budget will include a $2.2 million increase in funding for domestic violence and rape crisis services, money advocates said has been sorely needed for some time.

“This second year of extraordinary funding leadership by the governor restores much of the momentum of the domestic violence movement that has been hamstrung for more than a decade in the depressing state and federal funding environment,” said Peg Dierkers, executive director for the Pennsylvania Coalition Against Domestic Violence (PACDV).

Last year, Corbett proposed and later signed into law a state budget containing an increase in financial resources for domestic violence and rape crisis services funded through the Department of Public Welfare. The 2013-14 state budget includ-

ed $2.35 million - $1.4 million for domestic violence and $900,000 for rape crisis – in additional funding.

The governor said he plans to propose a 10-percent increase of those funds in his 2014-15 state budget, with $1.4 million for domestic violence services and $800,000 for rape crisis services. The services’ line items have been mostly flat-funded since the recession hit Pennsylvania, and prior to that had not received the level of funding proposed by Corbett the last two years.

The governor said he hasn’t yet spoken with legislative leaders regarding his spending requests since the budget discussions thus far have focused on the revenue side of things. According to the state Budget Office, Pennsylvania is facing a projected $1.4 billion budget hole going

into the coming 2014-15 fiscal year.

“We’re calling for this increase because we understand that these programs are just not simple line items – they change and they save lives everyday,” said Corbett during the state Capitol news conference to announce the proposed funding hikes.

“That Pennsylvania funds services for victims of sexual assault makes us the object of envy of many of our colleagues from other states, not all states have governors and legislatures who demonstrate their commitment to victims and the prevention of these crimes by providing funding in the state budget,” said Delilah Rumburg, CEO of the Pennsylvania Coalition Against Rape (PCAR).“We do know how tight things are right now; the funding levels for these services have been stagnant for more than 10 years, so, governor, we thank you for the

10 percent we received last year and again for recognizing the value and the need for rape crisis services with your current proposal.”

The additional $1.4 million for domestic violence services, which would push total funding to $15.3 million in state dollars, will be used to help support emergency services such as a 24/7 hotline, victim advocacy, emergency shelter and financial aid.

The $800,000 increase proposed for rape crisis services will bring total state spending to more than $8.7 million, which is distributed among 50 rape crisis centers throughout Pennsylvania. Those centers serve more than 30,000 individuals annually, and also operate more than 25,000 school-based prevention programs and nearly 3,000 community prevention programs. CW

Feds allow Medicaid-eligible CHIP kids to stay until end of year

BY CHRIS COMISAC , CAPITOLWIRE

Many of the families who have the free version of health insurance coverage through Pennsylvania’s Children’s Health Insurance Program (CHIP) will be able to keep it at least until the end of the year if they want to keep it.

State Insurance Commissioner Mike Consedine has announced an agreement Pennsylvania has reached with federal officials to delay the planned 2014 move of families with household income between 100 percent and 133 percent of federal poverty from CHIP to Medicaid.

“If I’m one of those parents, I’d really welcome the news that at least for this year, I have the option of keeping my doctors and my coverage – we know that’s really important to those Pennsylvania families,” said Consedine.

The federal Affordable Care Act contains a requirement that all children in households having incomes at or below 133 percent of the federal poverty level be enrolled in Medicaid. Children from families earning more than 133 percent of the federal poverty level, or $31,322 for a family of four, are not affected by the ACA or this agreement and will remain in CHIP. Gov. Tom Corbett and his administration have fought to allow the families of the 30,000 or so children impacted by the ACA’s requirement to make their own decision to stay with CHIP or move to Medicaid. Corbett has repeatedly noted that Medicaid’s health care provider participation isn’t at the same level as CHIP, and children could end up losing their providers if moved to Medicaid, a disruption

in care he would prefer to not occur.

Consedine said the U.S. Department of Health and Human Services (HHS), in a Jan. 13 email, outlined provisions of an agreement - with which Pennsylvania

made some changes at a moment’s notice, and that’s also true of Congress, which has already expressed an interest in what’s going on with the CHIP programs,” said Consedine. “We’ve made the agreement

“If I’m one of those parents, I’d really welcome the news that at least for this year, I have the option of keeping my doctors and my coverage – we know that’s really important to those Pennsylvania families,” said Consedine. agreed in a Jan. 17 letter to HHS - to allow the state to extend CHIP as a health insurance offering through the end of 2014 to those low-income families currently in the program.

Those provisions allow families within the aforementioned household income population and currently enrolled in CHIP to have the option to remain in CHIP or switch to Medicaid now. Also, upon the renewal period of their CHIP coverage, families will likewise be given the option to stay in CHIP or go to Medicaid. However, at the end of 2014 – unless the agreement is altered – all families having incomes of 133 percent of the federal poverty level or below are to be transferred to Medicaid.

Consedine said federal officials are looking at this agreement as “kinda a pilot project for Pennsylvania,” so there’s always the possibility that when 2015 rolls around, the question about a required move to Medicaid could be reconsidered.

“A lot can happen over the course of a year as we have seen from HHS; they’ve

we made for this year, but we’re certainly hopeful that HHS will look at what happens in Pennsylvania’s program and CHIP programs across the country and maybe take some lessons learned away from that

in terms of the importance of this program going forward.”

“I think we should take a look at where we are come November and December, and if the vast majority of Pennsylvania families have made the informed decision to stay in CHIP, I would hope that would count for something,” he added.

“I would hope that they [HHS] would make that observation on their own, and at that point we would talk about what’s in the best interest of Pennsylvania families,” Consedine said. “If their position is that the law requires them [families] to move - whether they like it or not – into Medicaid, then that’s something we’ll have to work through per our agreement” with HHS. CW

12 OPINION

JANUARY/FEBRUARY 2014 CAPITAL WATCH

Good-bye Wisconsin, hello Pennsylvania

BY DAVID FILLMAN

The snake-oil salesmen from Wisconsin, Ohio and Michigan have packed up their union-busting wares and taken residence in Pennsylvania. Laying low and working fast, they are beginning to infiltrate the capitol and pitch the first ingredient to silence workers. By introducing House Bill 1507 and Senate Bill 1034 – the gears are in motion to make it illegal for union dues and voluntary political contributions to be deducted from workers’ paychecks.

Their rhetoric claims taxpayers are paying too much for this service, but they know the cost is nil. In fact, a provision to reimburse the state for costs associated with deductions has existed in our contracts for years, but there has never been any measurable cost whatsoever. So what is this really about?

As working families and their unions increasingly speak out on important political and legislative issues, a coordinated, nationwide campaign to silence them is mounting. It’s a nationwide anti-union effort being pushed by the same big corporations and CEOs who boost their profits by sending American jobs overseas and off-shoring their profits to avoid taxes. Outside parties funded

and fueled by anti-worker groups headed up by the Koch Brothers and ALEC are parachuting in to fuel the fires of Pennsylvania anti-worker groups such as the Tea Party and the Commonwealth Foundation. Efforts by these groups to silence PA voters have failed. Efforts to outsource our state assets have failed.

Now, it’s payback time.

So, like other states, these groups are now focusing on squelching unions in Pennsylvania entirely. Like other states, the plan of attack begins with an attempt to eliminate automated deductions exclusively for union dues. Of course, this is a blatant discrimination case against union members. Other state supreme courts have already ruled similar laws unconstitutional.

And, once again, we’ll find ourselves wasting tax payer money in courtroom after courtroom fighting the constitutionality of yet another discriminatory attack on workers.

These politically motivated attacks on payroll deduction would force public service workers to go back to pre-digital age payment methods, making it harder for workers to advocate for themselves in the workplace. No other corporation, CEO,

David Fillman

or organization has similar restrictions.

And caught in the crossfire would be Pennsylvania charities that depend on the convenience of 21st century automation. In 2013 union members donated over $3 million to the United Way through paycheck deduction. And what about deductions for supplemental health care, Medicare and Social Security? What about automated deductions for child support and retirement

contributions? Or even the convenience of direct deposit?

When workers have a voice that is silenced rather than a voice that is heard, big money rejoices, public safety is jeopardized, more jobs go out of state and overseas, and the local economy crumbles. In states with right-to-work-for-less laws ALL workers make an average of $5,000 less per year, 21 percent more people lack health insurance and workplace deaths are 51 percent higher than states without the law.

It’s time for politicians to stand up to corporate bullies and stand beside the folks who voted for them. They were elected to protect our rights, not take them away.

They were elected to tackle real issues like creating good jobs, and supporting good jobs that are here. Issues like improving our schools, growing our economy and keeping us safe.

It’s time to govern for the people, not the profits. Let’s send these snake-oil peddlers packing. We don’t want them here.

Pennsylvania is better than this. CW David Fillman is the Executive Director of AFSCME Council 13.

Colleges to experiment with tuition models The board of the Pennsylvania State System of Higher Education (PASSHE), as part of the approval of its new strategic plan, has given the go-ahead for two-year pilot projects at five of the commonwealth’s 14 state-owned universities to allow those universities to charge different tuition rates based on program costs.

California University of Pennsylvania plans to reduce tuition charged to active members of the military, their spouses and dependents (to match the amount students with military ties are reimbursed through G.I. assistance programs). Clarion, East Stroudsburg and Edinboro will establish new course- or program-specific fees to more appropriately cover the costs of offering their nursing programs, and Clarion will establish a similar fee for its Communication and Speech Disorders program. Edinboro will also reduce its nonresident, undergraduate tuition rate to 105 percent of the resident rate (it’s currently at least 150 percent of the resident rate). And West Chester will reduce by 10 percent the tuition charged to students who take courses it offers at the PASSHE Center City location in downtown Philadelphia. CW

OPINION 13

JANUARY/FEBRUARY 2014 CAPITAL WATCH

Editorial

Harrisburg on the rebound Ever since the turn of the 18th century, when John Harris Jr. conveyed by deed “4 acres and 13 perches to be held in trust until the Legislature sees fit to use it,” Pennsylvania’s capitol and its capital city have been inextricably linked. This point has been reinforced over and over in recent years as the city found itself in a fiscal morass and the Harrisburg School District faced similar financial disaster.

Now, as the city welcomes its new Mayor, Eric Papenfuse, the Harrisburg School District continues to progress under a state-appointed recovery and the city moves forward as a distressed municipality to take the difficult – yet necessary – steps toward financial solvency. We at Capital Watch thought it time to highlight some of these important efforts. This issue of Capital Watch is the result. Through interviews with Mayor Papenfuse, coverage of his swearing-in and review of the plans offered up by state-appointed school recovery officer Gene Veno and others, we hope to spell out some of the highlights of what we view as ”Harrisburg on the rebound.”

In fact, Christmas may have come early for the city of Harrisburg when in midDecember the city’s receiver, Gen. Lynch signed documents closing a restructuring of $558 million in debt. The deal, agreed to by a myriad of parties, included the sale of the city’s long-troubled incinerator

and the leasing of its parking garages to a private operator.

Political pundits, other media outlets and many observers have long – and correctly - note that what happens to Harrisburg as a city has a direct impact on the Capital Region, the surrounding municipalities and even state government itself. That is quite true. Recent developments reinforce

to use so-called “ interest rate swaps” as part of their debt financing. Such a maneuver was, in fact, just one of the factor’s that led to the Harrisburg financial debacle.

Overall, however, it is important to note that Harrisburg City and its School District continue to move forward under new leadership and with specific plans on how to regain financial health. State appointed

Political pundits, other media outlets and many observers have long – and correctly note that what happens to Harrisburg as a city has a direct impact on the Capital Region, the surrounding municipalities and even state government itself. that premise. As the legislature considers revisions to Act 47 – the Distressed Municipalities Act, what happened in Harrisburg – and what continues to happen are directly intertwined. For example, the legislature, in its consideration of Act 47 has before it a number of “reforms” including limiting the ability of municipal authorities

receiver General Frank Lynch has worked long and hard to advance the city recovery plan, including divesting itself of the major debt that strangled the city. And notably, as Veno noted in a report to the School District and residents in early December, while the district is in “moderate financial recovery” status, that requires no tax

increase this year. He also succinctly told all parties, “we can do better”.

That’s a theme seemingly taken up taken up by the new mayor. As Mayor Papenfuse said pointedly and repeatedly during his campaign, it will take the active involvement of all parties, including residents, business and even state government in order for the city to continue to move ahead in its recovery. The late football coach Vince Lombardi once said, ”It takes to things to win: teamwork and leadership.”

With a new city administration, a refreshing spirit of cooperation with City Council and the efforts of many others like Gen. Lynch and Veno, Harrisburg now stands poised with an abundance of both.

A strategic location for business, commerce, transportation, education, and government, Harrisburg has long been at the center of various factors that contribute to economic health of the entire region.

As the sixth most populous city in the Commonwealth and the home to more than 20,000 households, as well as hundreds of businesses, this seat of state government with a strong Federal government presence, Harrisburg remains a vital hub. Capital Watch wishes the new Mayor, the City, the Harrisburg School District, and all parties involved continued success on the long hard road to financial recovery. It’s in all our best interest to support that goal. CW

Climate Change Action Plan is woefully inadequate

BY REP. GREG VITALI

Pennsylvania’s new Climate Change Action Plan was recently released by the Pennsylvania Department of Environmental Protection. It is woefully inadequate because it fails to set greenhouse gas reduction goals, fails to provide clear, quantifiable recommendations to meet those goals and fails to sufficiently incentivize renewable energy. Regrettably, this plan is consistent with Gov. Tom Corbett’s total lack of leadership on climate change.

Climate change is the most important environmental problem facing this planet. Richard Alley, a professor of climatology at Penn State University, recently testified that greenhouse gasses have caused temperatures across the globe to rise by one degree. He said if temperatures continue to rise, it will be more difficult to grow crops, there will be more floods and droughts, stronger storms, and sea levels will continue to rise.

Pennsylvania produces 1 percent of the

world’s greenhouse gases. It is mentioned just nine times has a responsibility to develand alternative energy is op a climate change action mentioned just 14 times. plan to address its share of Natural gas is a fossil fuel this problem. and still produces a signifiThe very essence of a clicant amount of greenhouse mate change action plan is gas. We cannot achieve the the setting of target greenCO2 reduction goals needhouse gas reduction goals ed to stabilize earth’s climate and a clearly defined stratwithout greatly expanding egy to meet those goals. It’s Rep. Greg Vitali our use of renewable energy hard to believe the Corbett like wind and solar. administration would subPennsylvania’s utility secmit a plan without these basic elements. tor relies heavily on fossil fuels such as coal The first plan, submitted by the Rendell and natural gas to produce electricity, and administration in 2009, called for a 30 per- as a result, contributes 38 percent of the cent reduction in greenhouse gas emissions greenhouse gas emissions in Pennsylvania. by 2020. Act 70 of 2008 requires DEP to The best way to increase renewable submit a plan every three years. energy production in the utility sector is to Not surprisingly, Corbett’s plan empha- expand Pennsylvania’s Alternative Energy sizes the expansion of natural gas use and Portfolio standard. Yet the plan does not pays insufficient attention to renewable recommend this. energy. In fact, natural gas is mentioned Pennsylvania›s AEPS now requires elec184 times in this plan. Renewable energy tric companies to purchase 8 percent of

their power from renewable sources by 2020 – far short of neighboring states. New Jersey›s AEPS, for example, calls for 17.88 percent of its energy to come from renewable sources by 2021.

Last February, I introduced H.B. 100, which would amend the commonwealth›s AEPS to require Pennsylvania electric companies to obtain 15 percent of their power from renewable sources by 2023.

Regrettably, this bill has not advanced.

For Pennsylvania to meet its climate change responsibilities its governor must provide leadership. As this climate action plan reflects, leadership is sorely lacking in the Corbett administration. CW State Rep. Greg Vitali (D-Delaware) is Democratic chairman of the House Environmental Resources and Energy Committee and a member of the Climate Change Advisory Committee which was charged with advising DEP on the preparation of the Climate Change Action Plan.

14 OPINION

JANUARY/FEBRUARY 2014 CAPITAL WATCH

SHOULD PENNSYLVANIA RAISE THE MINIMUM WAGE? Yes.

Increase the state minimum wage to $10 an hour immediately.

It’s the Republican thing to do.

BY TONY MAY

Minimum wage hikes may make good copy for political brochures but they are bad public policy.

No.

BY CHARLIE GEROW

One of the things that Congress Proposals to raise the miniaccomplished while Jack mum wage may sound invitKennedy was President was to ing, but they inevitably end up raise the federal minimum wage harming those they are ostensi– to $1.25 an hour. The world bly intended to help. didn’t come to an end. The As Nobel Laureate econoLongtime TV partners, Tony May and Charlie Gerow provide commentary and analysis on political cost of Big Macs did not rise mist Milton Friedman observed matters every Sunday on WHPTV-CBS 21’s program, “Face the State,” in addition to being regularly beyond affordability. The stars nearly a half century ago, “ The featured on the Pennsylvania Cable Network (PCN). In their other lives, May is a partner at Triad stayed in the firmament. Logic rise in the legal minimum wage Strategies, and Gerow is CEO of Quantum Communications. suggests that if $1.25 was susrate is a monument to the power tainable 50 years ago, we could of superficial thinking.” Dr. handle a minimum wage today that’s adjusted for inflation.

Friedman pointed out that minimum wage increases “have effects exactly the opposite of those According to InflationData.com, that would be $9.52 an hour today. Let’s round that up to which their well-intentioned sponsors intend them to have.” an even $10 an hour since government doesn’t get around to adjusting the minwage that often.

Dr. Friedman concluded that the result of raising the minimum wage “will be and Raising the basic work wage would be good state policy to pave the way for federal must be to add to the ranks of the unemployed.” He further believed that this especially action and to cover jobs not addressed by federal law. And doing so would honor basic hurt minorities. “I am convinced that the minimum wage law is the most anti (African Republican principles and values while giving a real boost to the working poor.

American) law on our statute books--in its effect not its intent.”

Why should the GOP welcome a 38 percent increase in the minimum wage? Because That’s because many good hearted people hold the mistaken belief that minimum wages it would create a major incentive for people to seek out jobs that now go begging. More are a lifeline for the poor. It is a confusion of wage rates with wage income. people would be incentivized to experience the dignity of work. Turnover so prevalent The majority of employers who would be forced to pay additional wages are small busiin the fast food industry would be reduced. Consumers would get better service and the nesses, the major job creators in our economy, who would take a significant hit to their abilpressure on food stamps and other government anti-poverty programs would be reduced. ity to create and sustain certain jobs. In 2008 when the minimum wage was last dramatically In fact, increasing the minimum wage would be a much more Republican solution than Richard raised stories of hiring freezes, reduced hours, price increases and layoffs abounded.

Nixon’s proposal to create a “negative income tax” where the federal government would subsidize Countries with minimum wage laws--especially artificially high ones--invariably have low wage workers with cash payments from the federal treasury as a way to reduce poverty. higher unemployment rates than those who don’t. Supporters of the economic model that As it is, an artificially low minimum wage – as we have today – becomes, in essence, a embraces high government mandated wage levels often point to Europe as their utopia. huge form of corporate welfare where we, the taxpayers, underwrite the ability for major So let’s take a look: Switzerland, with no minimum wage law at all has an unemployment retailers and chain store through food stands, Medicaid and other government anti-poverty rate around 2 percent (its five year high was 3.9 percent). Meanwhile those European programs. That’s a reality that should infuriate Republicans everywhere because the gov- countries with high minimum wages and mandated job benefits have unemployment rates for younger workers that hover around 20 percent or higher. ernment propping up private enterprise is something that everyone can oppose.

The fact is that we’re not being told the whole story when advocates of higher minimum While we pause for a moment to allow all good Republicans to climb aboard the “livable minimum wage” bandwagon, let’s take a moment to think about how difficult it is for wages claim those living below the poverty level need, indeed are entitled, to a “liveable anyone in America to survive on the current minimum wage – even as an individual living wage.” The truth is that most minimum wage earners not only don’t live below the povalone (or, maybe, especially as a single-member household). That $7.25 minimum wage erty line, they are nowhere near it. More than half live in households with incomes of translates to a gross pay of $290 a week or $15,080 for a 52-week year. Let’s assume that $50,000 or more--the average annual income of small business owners. One third live in we’re lucky enough to have an employer that provides a generous fringe benefit package households with income greater than $75,000.

Previous increases in the minimum wage have not only contributed to unemployment and – a decent health care plan, paid life insurance, two weeks paid vacation and sick leave.

Let’s project that the boss withholds 30 percent or so of gross pay to cover our share of underemployment, they have failed to deliver what they promised. A recent study by Joseph the fringe benefit package plus local and school district wage taxes and state taxes. That Sabria of American University and Richard Burkhauser of Cornell found that “minimum wage increases between 2003 and 2007 had no effect on state poverty rates.” If previous minimum leaves us with a net, spendable pay of $10,556 for the year (or about $880 a month).

How far will that go? Let’s say we got really lucky and own a one bedroom apartment wage hikes failed to make much of a dent in the poverty level, why would another?

Only a tiny fraction of Pennsylvania workers are minimum wage earners. Nearly three quarwith all utilities paid at $500 a month. Let’s say we got really lucky and own a good used car with low mileage that we picked up from an old aunt that we purchased with a very ters of them are part-time. Most are younger than 24. The vast majority don’t support families.

While a minimum wage increase will result in a pay raise for a few, for many others small loan from our credit union and we drive very little. Let’s say it only costs $250 a month for the loan payment, gas, oil and upkeep. Oh, and add another $75 a month for it would mean a lost job, fewer hours (and decreased pay) or no opportunity to enter the minimum auto insurance coverage. We’re already up to $825 a month and we haven’t set workforce at all.

Minimum wages are designed, their architects tell us, as an entry level wage from which aside a dime yet to eat or a few bucks a month for clothing, laundry and personal hygiene workers can earn more and more. Transforming them into a government mandated “livproducts. Are you beginning to get the picture?

In fairness, this little exercise suggests that even $10 an hour as a new minimum wage is able wage” with the extra burden it places on job creators in a shaky economy is bad for cutting it rather thin. If you’re a true conservative and the cost of the government-run social business, bad for the economy ad bad for workers.

The goal should be to give these largely younger workers a handhold on the first rung safety net is driving you batty, then you should cheer for a minimum wage of more like $15 an of the ladder of economic opportunity. Why put that initial rung out of the reach of those hour and push, as did economist Milton Friedman, to trade social programs with higher wages.

As it is, even my numbers above are unrealistic because many people can’t find full- who need and want it the most?

Proposals to raise the minimum wage are a political Fool’s Gold--political theater time work at minimum wage because fast food outlets and other retailers try to limit worker shifts to under 30 hours a week to avoid the necessity of providing fringe benefits. To get designed, in an election year, to make the left look compassionate and caring and the by, the working poor have to work multiple jobs and scrounge for whatever government right as being insensitive to the needs of the working poor. Minimum wage hikes may make good copy for political brochures but they are bad public policy. They hurt more benefits programs they can identify. CW than they help. CW

NEWS 15

JANUARY/FEBRUARY 2014 CAPITAL WATCH

Mortgage Rules Change and What You Can Do To Prepare For It.

BY SCOTT C. WEAVER, CFP, CFS, CAS

The Dodd-Frank Wall Street Reform and Consumer Protection Act will change the debt-to-income (DTI) for both the first-time homebuyer and the homeowners who want to refinance their mortgages. This change will take effect on January 10, 2014.

The current system covering traditional conventional conforming loans, like those under the Fannie Mae and Freddie Mac programs, enjoy an automated underwriting of up to 45% total DTI ( Debt to Income). The new DTI ratio under Dodd-Frank will be 43%. This two percent difference does not sound like a lot, but it will surprise many people and prevent them from getting a loan. It will be more difficult for the self-employed and retired who have a harder time with documentation of income. Dave Dell, an experienced real-estate agent from REMAX in Harrisburg Pa. says “anything that makes getting a loan more difficult will certainly have a direct effect on buying and selling real estate, and will be particularly problematic with this real estate market as it struggles to get a foothold on recovery”. Gregory Zembower a Senior Loan Officer with Tideway Morgtage Services Inc. in Camp Hill Pa. adds, “Dodd-Frank will have a very sobering effect on thousands of first-time home buyers that are on a tight budget and struggling to save every dollar to get into a new home. Making sure the lender calculates your debt and income correctly is more important than ever. Using an experienced lender is more crucial in this ever changing landscape. These new rules will require some first-time home buyers to wait longer and save more before they buy that first dream home”.

Refinancing a conventional loan will be affected by the coming Dodd-Frank rules. Common sense would indicate that once you refinance and lower your monthly debt obligation from your previous lender, getting a loan would be easy.

After all your payment is lower than before. Right? Not so fast! A lower payment may not qualify you for the loan.

Some borrowers may have to pay down their mortgages to a certain amount to fit the loan.

Scott C. Weaver, CFP, CFS, CAS

A good offense can be your best defense. Preparing in advance can improve your chances of qualifying for your new mortgage or refinance. To lower your DTI, you have to either make more money or owe less. Paying down debt is typically the easiest and fastest way to lower your DTI. How to calculate your DTI? Add all your monthly debt together such as present or future housing debt, credit cards, car payments etc… then divide that all your debt by your gross monthly income and multiply that number by 100. Once you figured it out, make a plan to reduce it.

In addition, long-term interest rates have risen 1.25% percentage points over the past year, and promise to go even higher now that the Fed will be winding down the program responsible for keeping 30 year rates low. Rising home prices along with increased interest rates are having a negative effect on the affordability index. According to NAHB (National Association Of Homebuilders), 69.3% of homes sold in the 2nd quarter of 2013 were considered affordable, while 3rd quarter 2013 numbers show affordability decreasing to 64.5%.

The Agency’s director Richard Cordray has commented that most new mortgages already comply with the new rules.

Other options, such as the 100 percent financing programs of the USDA and VA are unaffected by the rules because required DTIs are already below 43%. Streamline programs including conventional, FHA, VA and USDA mortgages don’t require reviewing DTIs. On the other side of this argument is the Conservative Heritage Foundation they argue the rules will “unleash predatory regulators” and unfairly restrict borrowers choices without dealing with what it says are the real cause of the housing bubble and bust –namely loose monetary policy and various rules promoting home-ownership for low-income families. Also, significant number of loan programs allowing for more than 95% LTV (loan to value) and low-midFICO scores were either discontinued or or transitioned into programs with lower LTV maximums and higher minimum credit scores.

Time will tell if more legislation helped or hurt this fragile real estate recovery and restore confidence to the lending industry.

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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