Arlen Specter's Responsibility for the Pennsylvania Budget Crisis

Yesterday, the PA Senate finally started the process of approving Philly’s pension change and sale tax hike that will keep the infamous ‘plan c’ from happening. Good. It is sort of hard to cheer such a basic thing, which should have been done a lot earlier, but, good.

Still in front of us, however, is the PA Budget. And, if Senate Republicans get their way, the State budget would arguably have an even greater impact on Philadelphia than the city’s own budget disaster. Cuts in everything from social services to parks to nursing homes for veterans to legal services for the poor are on the Senate chopping blocks. Basically, if the Senate gets its way, civil society in Pennsylvania fundamentally changes, for the worse.

And although we rightfully focus on Senate Republicans, especially Dominic Pillegi, for their current stance, the Joe Sestak campaign has reminded us of one guy who really has not gotten enough ‘credit’ for the huge gap in Pennsylvania’s budget: Arlen Specter. In fact, Arlen Specter is largely responsible for the entire gap between Ed Rendell’s original budget proposal and the infamous Senate Bill 850. How? With his ‘courage’ in the battle over President Obama's Recovery Act.

Back in May, the Pa. Senate Republicans released Senate Bill 850 (SB 850), which slashed every program imaginable to the bone or simply totally killed its funding. The difference between the Senate and Rendell’s budget was about 1.7 billion dollars. In effect, the Senate GOP was using the crisis as a chance to make an ideological stand to gut and gut and gut our civil society. But, guess what? That huge gap would barely have existed at all, except for the work of a couple ‘moderate’ Senators, led by our own Arlen Specter.

Nationally, most economists knew at the time of the stimulus that the original package proposed by the Democratic House was a good bill, but probably not big enough given how fast our economy was shrinking. And then, in a battle that echoes the global warming and health care fights, the Senate took the package and made it much worse. In the interest of ‘compromise,’ an Arlen Specter led group of Senators slashed 100 billion from the package, and shifted a lot of the funding towards tax cuts. Specter in fact lamented that we couldn’t have slashed all spending from the Recovery Act:

The agreement we reached was the best one we could under the circumstances. We were able to cut out $100 billion from the package and include 35% in tax relief in the overall bill. My preference would have been John McCain’s proposal, which I voted for, to have the stimulus package of $421 billion in tax cuts alone. I voted for the Reagan tax cuts back in 1981 and that would be the best course, but in a legislative body you don’t have exactly your own choice.

So, Specter didn’t get all of the cuts he wanted, but he was sure happy he was ‘able to cut 100 billion from the package.’ And what was one of the cuts he was successful in getting? 40 billion dollars for the state stabilization fund. In other words, 40 billion dollars in direct payment from the Federal Government to the states to help them with their huge budget problems.

According to Pa’s share of the national population, Arlen Specter’s Recovery Act cuts cost Pennsylvania about 1.6 billion dollars, or almost the entire gap between Rendell’s original budget proposal, and SB 850. Since then, the budget gap has grown. But even now, it would be halved if Arlen Specter didn’t slash the Recovery Act.

So the next time Specter brags about his vote on the Recovery Act, just remember what he was bragging about a couple months before he switched parties, and how that potentially could endanger Pennsylvania civil society as we know it.

Dan, Thanks for this

Dan,

Thanks for this analysis. This certainly motivates me to get out my check book and contribute to Sestak.

Like Sean, I am totally confused by all this reconciliation stuff and would also appreciate some clarification

Nah. You are sort of

Nah. You are sort of confusing two things that are related but not the same.

First, on a Federal and State level, bills must match exactly. Each house passes a bill, and usually they are not the same. So, there is a conference committee between the two houses, where they must make the bills the same, and then re-vote on them. (If the bills already are the same, then there is no conference.) So, nationally, after the Senate is done, each House will vote out its final version of the bill, and it will go to conference. This is where the public option is probably in biggest danger- because it will all depend on who the leadership chooses to negotiate.

Then, there is reconciliation, which comes from the Congressional Budget Act in the 1970's. It says that if an act effects the budget, it only needs a simple majority in the each House.

Reconciliation is immune to a filibuster because debate is limited to 20 hours by the statute. That's why we are considering using reconciliation to pass health care reform, or at least the public option. With out the filibuster threat, the Democrats only need to muster 50 votes plus the vice president's tie breaker for passage.

The health care reform bill was included in both the House and Senate budget resolutions for fiscal year 2010. More on the process of this below. The important point is that reconciliation was included in the budget resolutions, so the reconciliation process may take place this year.

Under the rules of reconciliation, the budget committees direct the authorizing committees to submit their pieces of the reconciliation bill. It is up to the budget committees to combine these bills into one omnibus bill to be reported to the full chamber with fiscal reports from the Congressional Budget Office and the Joint Committee on Taxation. (Honestly, I cannot make heads or tales of the current reports on the reform bills. However, I do see a few key Blue Dogs, including Max Baucus and Kent Conrad on the committee.) The work of the Budget committees, however, is largely administrative since they are not allowed to make substantive changes to the bills that make up the omnibus. If the public option, for example, is in one bill, then it will be in the omnibus.

From there, the bill goes through the normal floor votes and conference report process with the exception of the 20 hour limit on debate in the Senate and the possibility of points of order outlined next.

I would check out Congress Matters for more.

Reconciliation is basically

Reconciliation is basically as strict as the Senate makes it. (Look up the Byrd rule, etc, and def check out what David Waldman has written on DailyKos and Congress Matters.)

link bad

hey dan, you have a bad link:
"we couldn’t have slashed all spending from the Recovery Act" is messed up, it's a file not found. I think there's some extra text by mistake.

Thanks. Links should be

Thanks. Links should be fixed.

Great point, Dan

Your biggest vote when you're in Congress is on the budget.

It defines who you are, what you stand for, and what you'll use your power (over the nation's pocketbook) to do.

That a Democrat in the '10 Senate race (currently polling behind the presumptive Republican) would define himself thusly is telling (sorry to copy your quote, but it bears repeating).

My preference would have been John McCain’s proposal, which I voted for, to have the stimulus package of $421 billion in tax cuts alone. I voted for the Reagan tax cuts back in 1981 and that would be the best course, but in a legislative body you don’t have exactly your own choice.

A Senator has enough choice in a budget to reveal his preferences regarding taxes and spending, regarding the practices of McCain, Reagan & Obama, for that matter.

Specter has shown his.

The question is:

Why would ANY Democrats from the center to the left consider voting for Specter when we have a viable alternative in Joe Sestak?

I just posted this everywhere I could think of

Facebook. StumbleUpon. Delicious. Digg. I put it everywhere that came to mind. Good work, Dan. this is a point that needs to get out there further and further.

---
This Too Will Pass, for the guts in your cerebrum.

This provision was specially crafted, Luigi

to cure Philadelphia (and Pittsburgh), or more accurately... to wipe out pension fund obligations that had been inserted into decades of union contracts as concessions over the years.

The 25% wipeout in the cost structure dramatically boosts Philadelphia's funding responsibility and makes the City Pension Fund a grade-A retirement plan once more, which is what the Commonwealth wants and heads off insolvency. Brilliant move by the Caucus of The Distinguished Gentleman from Chester.

We both know the unions will not tolerate this, but given the fact that state employees have a hard enough time negotiating with their own Governor, the city's little unions will not have a voice anywhere in the Burg about this and will probably have to just eat this, and at the same time Philadelphia will have to deal with the 1-cent tax increase, which I think is a fair deal given the other debt obligations we have to pay off. And by that I'm talking about all the older City bonds that are still accruing plus the NTI bond deals that were added on top of it.

Yeah, but

the building trades people MOSTLY live in South Jersey. They contribute and organize here in Pennsylvania a lot [can't keep them away from our polling stations]

Delco is also full of building trades people as well but these are Delco residents. They aren't affected much at all by a problem that's mostly contained within Philadelphia county. They may drive into the City to work, and they need contracts from the City and from city employers, but the relationship ends there.

City workers live in the city... that's not where most of the building trades folks are.

I think you've watched too much J.F.K.

"I don't think it will sail through anywhere else in PA once municipal workers in those places get a whiff of what the bill expects them to give up without negotiation - never mind Philly. I am honestly a little suspicious at my most paranoid that "the plan" is for the bill to stall out, for Philly to be hung out to dry - in order to derail Nutter as mayor through a total fiscal meltdown, urged on by an unlikely and unholy alliance of building trades kingmakers and local Republicans who vainly hope this is their chance to "stage a comeback"."

While this would NOT surprise me, and I know Delco is basically our sister Tammany Hall, except operated by Republicans; I am not sure that Mr. Chester has the wherewithal to create a Fumoesque fiefdom where a large chunk of Pennsylvania's resources get sucked into Eastern Delaware County while Philadelphia gets hung out to dry.

Both the City's backup budget plan and the one crafted by the Senate are both tough pills to swallow, but the Senate version is much more taxpayer friendly IMO than Plan C.

Do you think Dwight and Babbette would be so diametrically against pension reform as to reject ANY pension reform at the state level to be totally off the table and non-negotiable? The House knows if they tank this measure, Philadelphia has no choice but to start mass layoffs and create a much bigger taxpayer uproar.

1,500,000 pissed-off people is still a lot of pissed-off people.

Let's make it much more

Let's make it much more simple: The biggest employers in Philadelphia are the Federal Government, the City, the State and Penn.

People are much more pro government worker than anyone really hears about in the media. These are not mysterious people stealing money with a nefarious pension- they our neighbors, our families and our friends, who have collectively bargained for a decent retirement.

And our unions are often supportive of reform

I happened to be in the room a few years ago when Tom Cronin practically begged Mayor Street to get the reinventing government initiative going again. Tom believed, rightly in my view, that city workers in DC 47 had lots of good ideas that would save the city money and improve their work lives.

Mayor Street said yes. And then nothing happened.

In preparation for my Council campaign, I talked to lots of union members to see what ideas they had for making the government work better. I learned a great deal about how tough it is for them to get their views heard.

So any implication that unions in this city resist efforts to make the city more efficient is simply untrue.

Then why...

does Bob Brady have to swoop down every time we have a contract negotiation over at the Crowne Plaza? For a Congressman who's effectiveness has always been in doubt, I often wonder why he's always been necessary at the bargaining table. My only guess is that it's an effort at constituent service.

Reality is often absurd, Sean

>>"1,500,000 pissed-off people is still a lot of pissed-off people."

>>Thats an absurd comment. The folks mad about city workers receiving a pension they negotiated is at most in the range of 15-20% of Philadelphia. And they don't tend to agree with eachother about what to do about it, some of them just don't vote.

The pissed-offness that I mention, which you know why I made that comment... has to do with how immediately visible Plan C will be to the local population, and it begins with the Trash pickup and the absence of street cleaning. That will discourage and demoralize everyone in the City on both ends of the political spectrum, and it will lead to anger as you further delve into in your comment.

>>I've seen municipal unions be sometimes be tremendously effective at stopping even quite reasonable reforms because somebody merely talks about making a real >>effort city government a better buy for the buck. I can't believe they will sit down and be bushwacked by a heavyhanded and innately unfair and >>unconstitutional >>power grab. If they are bushwacked now by this bill, the poltical reaction will be worse ultimately for Philadelphia's future politics. >>Think Mayor Jannie Blackwell.

This is why I keep harping on the "Nuclear Option". The largest city in Pennsylvania making a run for BK, even if it does get dismissed, will cause extreme damage to every municipality in the Commonwealth because it puts every public bond in the state in serious doubt with the investing public. It will also paralyze the legislature.

Suppose Plan C kicks in and we see a mass exodus in the next 5 years of 20,000 wage tax residents which also triggers a massive wave in property value decreases because they leave. That kicks both the City and the SRC in the pants, hard, and insolvency and missed debt payments occur as a result. This could mean the City's checkbook gets taken away from City Council anyway, or worse, City administration is totally paralyzed by the state ala Camden.

So even if Jannie did somehow come on top in this dystopia you imagine, she'd be ineffectual at best and nothing more than a 6'o clock TV personality while the rest of the City burns.

City Bankruptcy is illegal, period

The PICA legislation bars the City filing for bankruptcy without the Governor's approval, no ifs ands or buts. It was one of the options the City was contemplating, although barely, when it almost went belly up under Goode. It's off the table now.

You Fail to Recognize

That is a States Rights issue.

This is analogous to Harrisburg declaring Bankruptcy illegal for all Pennsylvanians, which we all know to be preposterous. When you declare bankruptcy you do not do it in a Commonwealth court. So, why exactly could Philadelphia NOT go to a Federal court (over state objection) and file for Chapter 9 protection under Federal jurisdiction?

My argument with this here, is that the PICA law is meaningless when it comes to barring any entity, be it a person, a corporation, or a government, from seeking bankruptcy protection.

Pennsylvania has no right to enjoin.

If that assertion proves true

Then the City can also choose to become derelict if we wind up in Plan C and that turns out to be a failure, anyway.

Creditors have to sue SOMEONE to get repayment, or obligations have to be voided by someone.

Well, Doomsday has to arrive sometime or another...

if you don't ensure long term revenue >= expenses.

Plan R (in whatever form) is a better attempt at solving the lion's share of City outlay... which is what the City's biggest problem is when it comes to paying its bills.

Plan C is an amputation effort aimed at basic public services that does nothing with the pension system.

Total insolvency is the same thing as if Plan C or Plan R fail because of an exodus of taxpayers that may come as a result (see: Detroit).

In either case, any failure to pay the bills means a sharp cut in services and Rip Van Winkle (the general populous) could waken at any time and do serious damage to the City's political landscape as a result.

Or, the more likely case, people who still have money pack up and leave the city and leave behind the people who can't afford to leave (again, see: Detroit).

I think it would be better for everyone who lives here, not just the ones who are paying taxes, but everyone, that we do something about the City's expenses. If that means the state comes in with a chainsaw to the pension plan to rescue the City from mass layoffs, well.... "them's the breaks."

We could implement Pay-Go

... with a Court of Financial Responsibility and have it sit in the Judicial branch entrusted with the power to void appropriations that throw the budget out of balance.

Or some other lock-step method that strangulates PA legislature so new spending measures that are inserted into bills have to have an offset of some kind at the other end (an increased tax or a deleted/reduced spending item).

We have computers and fancy software. We could theoretically eliminate annual budgets and replace it with a continuous ("live") budget that has a forward looking window and gets updated at the end of every accounting period.

Wasn't this a feature the Clinton Administration was trying to implement along with Congress before GW Bush came in and wrecked everything?

There is no states' rights issue here

because all states (and that would include Pennsylvania) have been given power under federal bankruptcy law to decide if their municipalities can declare bankruptcy. Congress is completely within its right to give this power to the States as there is no constitutional right to bankruptcy protection. Pennsylvania has exercised its power to rule that Philadelphia can't go that route without the Governor's OK. There are no legal issues here, no ambiguities, no ifs ands or buts. This is a nonissue, and you're really wasting everyone's time by bringing it up.

Here's the relevant language from the PICA statute, at 53 P.S. Section s 12720.211 (b):

[N]otwithstanding any other provision of law, no city of the first class [i.e. Philadelphia] shall be authorized to file a petition for relief under 11 U.S.C. Ch. 9 or any successor Federal bankruptcy law, unless such petition has first been submitted to, and the filing thereof has been first approved in writing by the Governor.

Laws didn't Stop Nutter from trying to pass...

illegal gun restriction laws in the face of municipal restrictions on legislation, now does it?

We should file just for fun in hopes the credit rating agencies that score PA state bond debt take notice.

Just the big scary headlines "PHILADELPHIA FILES FOR BANKRUPTCY" would be enough to send a message, even if it gets dismissed and no creditors committee is formed.

The real McCoy

This hardly sounds like Doomsday to me:

Provides special provisions for cities of the first class. Provides a 30 year “fresh start” for amortization of unfunded actuarial accrued liability.

Philadelphia

Allows a first class city to defer pension payments in lieu of being subject to the Level III distress provisions. In order to be eligible for deferral, the city must adopt a revised collective bargaining plan for new hires by September 9, 2009. The plan may cost no more than 80% of the existing plan.
Establishes contribution rates for new hires.

Allows the city to defer a portion of its minimum funding obligation as follows:
1. For 2010, deferral of up to $155,000,000.
2. For 2011, deferral of up to $ 80,000,000.
Repayment shall include 8.25% interest. The city shall repay $90,000,000 plus interest by June 30, 2013. The balance of amounts deferred shall be repaid by June 30, 2014.

In order to retain the authority to utilize the deferrals, the city must freeze pension benefits for existing employees, adopt the required plan for new hires, appeal arbitration decisions inconsistent with the plan and make scheduled repayments. If the city fails to comply, it will be subject to the levels of distress applicable to other municipalities.

Authorizes the city of the first class to impose a 1% sales tax. In order to retain the authority to impose the tax, the city must freeze pension benefits for existing employees, submit the required plan for new hires and appeal arbitration decisions inconsistent with the plan. If the city fails to comply, it shall lose the authority to tax. If it fails to repay all deferred amounts as required, the State Treasurer shall withhold other funds that go to the city in the amount owed and deposit those funds in the city’s pension account. Excludes welfare, human service, and debt service payments.
Beginning January 1, 2006, the city shall be subject to the three distress levels provided for other municipalities.

The tax expires in 2014.

Self-control?

The unions could have offered an option to allow employees to forego the pension in totality and redirect contributions into their own IRA if they chose. I understand the difference between the tradeoffs of pension employment vs. private employment, and public workers go into it not for altruistic sake, but for the dream of a fixed income coming out the other end funded by workers further back in the system.

But where was everyone when pension obligations increased in magnitude over the last 10 contract cycles?

Asleep?

Maybe I'm wrong

But HBG could have just amended the scripture that brought us PICA to suspend the September deadline and push it out pending a complete enacted budget from Harrisburg and while that's being sorted, continue distribution payments as normal.

I guess that was too much to ask.

A cue from Allyson Schwartz...

Washington, D.C. – Today, July 31, 2009, the House of Representatives unanimously passed a resolution marking National Save for Retirement Week, sponsored by U.S. Representatives Allyson Schwartz (PA-13) and Sam Johnson (TX-03).

I think Allyson's on to something.

Maybe next month she'll get "National Live Within Your Means Awareness Week" passed, in time for the Holiday shopping season.

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