- Pennsylvania Among 'Terrible 10' Most Regressive Tax States
- February 4 Non-Partisan Training: HOW TO RUN FOR ELECTION BOARD IN 2013: HOW TO RUN FOR COMMITTEEPERSON IN 2014
- Republican Governors Opt-In to Medicaid Expansion
- The Reports of Unions' Death Are Greatly Exaggerated
- Ask Allyson Schwartz to run for Governor
- Mind the gap: Opting Out of Medicaid Expansion Leaves Low-income Families Behind
- Jan. 14 Workshop:HOW TO RUN FOR ELECTION BOARD IN 2013; HOW TO RUN FOR COMMITTEEPERSON IN 2014
- Seth Williams on Guns, Jasmine Rivera on School Closures @PFC Meetup Wednesday
- PA Revenue Strong Midway Through Year; Tax Cut Could Have Big Impact
- What to Make of the Fiscal Cliff Deal?
By Mark Price, Third and State
Happy Sunny Friday, people! Now for the not so good news. The job numbers for Pennsylvania came out Thursday, and the overall picture was somewhat disappointing. The unemployment rate edged down slightly to 7.4% and nonfarm payrolls declined by 600 jobs. Focusing on the jobs data, the biggest loser in April was construction, which shed an eye-popping 5,400 jobs. That is a big swing at a time of year when construction projects should be ramping up. Odds are that loss is driven by sampling error rather than real trends in construction activity. Another troubling stat was the loss of 1,700 jobs in the public sector.
Because monthly data are somewhat erratic, you shouldn't make too much out of any one-month change in employment overall or within a sector. Looking at nonfarm payrolls since October, the jobs picture is somewhat brighter with Pennsylvania adding, on average, 3,900 jobs a month. So Pennsylvania's labor market, like the national labor market, is continuing to recover.
Now for the bad news: if you were hoping the Pennsylvania economy would finally return to full employment by 2015 (remember, the recession started in December 2007), nonfarm payrolls need to grow by about 10,000 jobs a month. So by that metric, we are a long way from fully recovering from the worst recession since the Great Depression.
By Mark Price, Third and State
On Tuesday Marty Moss-Coane, the host of WHYY's Radio Times, moderated a question-and-answer session with Governor Tom Corbett at an event sponsored by the Greater Philadelphia Chamber of Commerce. The Governor ran wild with analogies.
- Bob Fernandez, The Philadelphia Inquirer — With protesters nearby, Corbett sticks to message for Phila. Chamber:
Corbett repeated a folksy analogy to the business suit-and-tie audience, saying that state revenue amounted to an eight-inch pizza pie before the 2008 financial crisis. Now, he said, it’s a six-inch pie “but with the same mouths to feed.”
- Chris Brennan, Philadelphia Daily News — Corbett: Open to spending more, but not protesters:
Moss-Coane noted near the end of the hour-long conversation that Corbett could hear demonstrators beating drums and chanting slogans outside. What would he say to them, she asked.
“I understand that you’re upset because we’ve had to put the state on a diet, for want of a better description,” Corbett said. “I haven’t met anybody who likes to go on diets. It is not easy. It is not what we want to do.”
By Mark Price, Third and State
Room 148 of the State Capitol might as well double as a Capitol broom closet. That's where the House Consumer Affairs Committee this morning rushed out amendments to House Bill 2191, which legalizes predatory payday lending in Pennsylvania.
The amendments to HB 2191 were misleadingly pitched as adding more consumer protections to the bill. Even the Navy Marine Corps Relief Society took a look at these amendments and said they do "nothing to mitigate the already harmful aspects of HB 2191," and that one amendment "actually worsens the problem it claims to solve."
One focus of the amendments this morning was language banning renewals or rollovers of a payday loan, as if that was a solution to stopping the long-term cycle of debt. It is not.
By Sharon Ward, Third and State
Action on the state budget began in earnest Monday with state Senator Jake Corman, chairman of the Appropriations Committee, releasing important details on the Senate budget plan that will be advanced this week.
The proposal would increase Governor Tom Corbett's budget proposal by $500 million, with total spending rising from $27.15 billion to $27.65 billion for 2012-13. The Senate plan rejects $191 million in fund transfers and new revenue and proposes new spending cuts of $165 million. Those spending reductions were not yet detailed.
According to a Capitolwire.com report (subscription required), the Senate budget plan:
By Sharon Ward, Third and State
Pennsylvania’s Independent Fiscal Office (IFO) released its revenue estimate this week, offering a more upbeat view of the economy moving forward. The official revenue estimate predicts a smaller revenue shortfall for the current year and more robust revenue collections for 2012-13.
The IFO estimate leaves the General Assembly with as much as $800 million available to restore cuts proposed by the Governor. This is clearly good news, but both the Corbett administration and legislative leaders are already dampening expectations about the scale of funding restorations.
A Look at the Numbers
In the current 2011-12 fiscal year, the Corbett budget pegged revenue at $27.1 billion, with a revenue shortfall of $719 million. The IFO estimates revenue collections will be $419 million higher, at $27.5 billion and a shortfall of $300 million for the fiscal year. With $700 million in current-year reserves, this leaves an actual year-end surplus of around $400 million.
In the 2012-13 fiscal year, the IFO predicts revenue at $28.7 billion. This is approximately $404 million higher than the Corbett budget (the IFO excludes $142 million in new revenue sources proposed by the Governor in his budget plan, since those measures have not yet been enacted). See a table with more details.
By Chris Lilienthal, Third and State
U.S. funding of infrastructure has declined dramatically since the 1960s, and Congress appears to be moving in the direction of even more cutbacks in the years ahead.
There is a bit of irony to this. With borrowing costs still very low and the market still somewhat depressed, now would be an ideal time for government to step up investment in infrastructure. In other words, it costs a lot less to build roads and bridges today than it might down the road if we hold off on the billions of dollars in needed repairs.
Sam Pizzigati laments this irony in a recent op-ed in The Star Ledger of Newark, N.J. And he has an interesting take on why infrastructure is getting short shrift: blame income inequality:
The cost of borrowing for infrastructure projects has hit record lows — and the private construction companies that do infrastructure work remain desperate for contracts. They’re charging less.
Yet our political system seems totally incapable of responding to the enormous opportunity we have before us. Center for American Progress analysts David Madland and Nick Bunker blame this political dysfunction on inequality.
The more wealth concentrates, their research shows, the feebler a society’s investments in infrastructure become. Our nation’s long-term decline in federal infrastructure investment — from 3.3 percent of GDP in 1968 to 1.3 percent in 2011 — turns out to mirror almost exactly the long-term shift in income from America’s middle class to the richest Americans.
By Mark Price, Third and State
The Pennsylvania Department of Labor and Industry released new data for March on Pennsylvania's employment situation. According to the household survey, the unemployment rate edged down slightly to 7.5%, and the survey of employers showed healthy growth in nonfarm payrolls of 7,800 jobs.
As always, caution should be exercised in interpreting a month change in employment statistics.
In terms of levels, there were big gains in Leisure and Hospitality (7,000), Trade Transportation and Utilities (4,000) and Manufacturing (2,100). We will not have full information until the fall whether the job losses in the public sector will put a drag on employment growth in 2012, but the March data shows we are off to an uncomfortable start, with 2,500 jobs lost.
Over the last several months, Pennsylvania nonfarm payroll counts have been particularly volatile, showing big one-month gains and losses thanks to a combination of unusually warm weather and some technical issues. On average over the last six months, Pennsylvania has added just under 6,000 jobs a month. We need about 10,000 jobs a month to move back to full employment by March 2015 (three years from now).
While unemployment remains high today and for the foreseeable future, the distance between CEO pay and the pay of the typical worker reached an all time high in 2011.
By Michael Wood, Third and State
In the news today, a couple of instances of CEOs being taken to task by shareholders over excessive pay.
USA Today reports that at Citigroup, 55% of shareholders rejected or abstained from rubberstamping a $25 million payday for their CEO Vikrom Pandit. The vote is only advisory, unfortunely, but is still described as being "historic" for Wall Street firms in the aftermath of the recession. The report notes:
Wall Street's massive compensation packages have raised the ire of shareholders for years, especially when they appear to have little relation to the performance of specific executives. ...
"Citigroup is one of most egregious example of disconnect between incentives of top management and value creation of shareholders," said Mike Mayo, bank analyst at brokerage firm CLSA and author of the book "Exile on Wall Street."
"The owners of the big banks, namely the shareholders, are finally taking a greater amount of responsibility by speaking up."
Closer to home, the Pittsburgh Post-Gazette has a story this morning about discontent at Pittsburgh-based EQT's annual shareholder meeting. Again, executive compensation seems to be at the heart of this dispute — as well as unease about natural gas production.
By Jheanelle Chambers, Intern, Third and State
While many middle-class Americans are still struggling in a down economy, the 1% is doing quite well.
The Center on Budget and Policy Priorities has an eye-popping chart (right) showing that in 2009, despite the weak economy, the top 1% of households captured $1.32 trillion in gross income while the bottom 50% earned $1.06 trillion.
Economist Chuck Marr explains further at Off the Charts:
The long-term trend in the United States has been towards much greater income concentration at the top. But the trend isn’t perfectly smooth: high-income people tend to benefit more from economic expansions than other income groups but tend to get hit harder by recessions. The swings are particularly pronounced in financial booms and busts...
At the height of the previous expansion, in 2007, the top 1 percent had 87 percent more total [adjusted gross income] than the bottom 50 percent. But even the 2009 gap of “only” 25 percent — the difference between the $1.32 trillion earned by the top 1 percent and the $1.06 trillion earned by the bottom 50 percent — is pretty staggering.
By Chris Lilienthal, Third and State
Right now in Harrisburg, there is a debate going on over whether the state should make more cuts to schools, universities and protections for our children and grandparents. Unfortunately, the Governor has put forth a budget that would do just that.
The chart below from Better Choices for Pennsylvania compares existing tax loopholes with funding cuts that could be restored by closing loopholes. In each case, additional revenue could help fund vital services without raising taxes on the middle class.
By Stephen Herzenberg, Third and State
I've got an idea: let's employ low-wage, low-skill, and sometime out-of-state workers on small and medium-sized state-funded construction projects, with no benefit to taxpayers and negative impacts on local economies.
Sound like a stupid idea? That's because it is.
Here's the backdrop: Pennsylvania's prevailing wage law requires that workers on state-funded construction projects be paid a wage in line with what most other workers in their trade are paid within a certain geographical area.
Research in peer-refereed academic publications shows that the law could be called the quality construction law because it helps ensure the use of skilled workers on state projects. Where prevailing wage laws exist, training investment, worker experience, wages, benefits, and safety levels are all higher than where these laws do not exist.
Overall construction costs are the same with or without prevailing wage laws. The prevailing wage law, however, makes it impossible for contractors that employ low-wage, out-of-state workers to win bids on state projects: it ensures that jobs go to local workers, who spend their money at local businesses.
More middle-class jobs, stronger local economies, higher quality construction, no cost to taxpayers: what's not to like?
Unfortunately, some members of the Pennsylvania Legislature seem unwilling to leave well enough alone. Through House Bill 1329, these lawmakers want to make the prevailing wage law to apply to less state-funded construction work. How so? By exempting projects of less than $185,000 from prevailing wage standards. Currently, the law applies to all state-funded projects of $25,000 or higher.
In the first two posts of this series, I explained why the numbers being tossed around by advocates of repealing prevailing wage don’t add up. I explained that the claims of cost-savings are not based on any actual experience and that they represent the result of laughable hypothetical, or “what if,” calculations.
This leads to the most important point that the Pennsylvania School Boards Association, the Pennsylvania State Association of Boroughs, the Harrisburg Patriot-News Editorial Board and others keep missing: we can do much better than a hypothetical when assessing the impact of prevailing wage laws.
There is a body of research that examines construction costs (and other construction outcomes, like safety, training investment, wages, benefits, etc.) in states with and without prevailing wage laws as well as in states that eliminated prevailing wage laws. We don’t have to conjecture what “might” happen: we can look at what did happen. The preponderance of the evidence shows that prevailing wage laws do not raise construction costs.
Back in the late 1990s, Pennsylvania actually ran this real-world experiment itself — we lowered our prevailing wage levels, particularly in rural areas. That means we can look at what happened to construction costs. What happened is the same thing that has happened in other places — lower prevailing wages did not translate into lower construction costs.
The overwhelming weight of evidence based on the actual cost of public construction projects shows that prevailing wage laws do not raise costs. Therefore, advocates of repealing the law in Pennsylvania ignore this evidence. Instead of “evidence-based policy,” we have “lack-of-evidence-based policy.” Go figure.
Repeal advocates use a hypothetical calculation that makes assumptions about cost, rather than empirically examining the relationship between higher wages and total construction costs. (As discussed here, even these hypothetical cost estimates don’t make sense once you apply real world data to how much labor costs represent of total construction cost.)
Another key ingredient in the hypothetical calculations used by proponents of repeal is the claim made most recently by the Pennsylvania State Association of Boroughs (PSAB) that “the prevailing wage is 30 percent to 60 percent higher than the average wage for the same occupation.”
Part One of a Three-part Series on Prevailing Wage by Mark Price and originally published at Third and State.
Prevailing wage laws have long operated nationally and in states as a check against the tendency of the construction industry to degenerate into destructive wage and price competition. Such competition can drive skilled and experienced workers from the industry, reduce productivity and quality, and lead to poverty-level jobs, all without saving construction customers any money.
In an exhaustive review of the research on the impact of prevailing wages on contracting costs, Nooshin Mahalia concluded:
At this point in the evolution of the literature on the effect of prevailing wage regulations on government contract costs, the weight of the evidence is strongly on the side that there is no adverse impact. Almost all of the studies that have found otherwise use hypothetical models that fail to empirically address the question at hand. Moreover, the studies that have incorporated the full benefits of higher wages in public construction suggest that there are, in fact, substantial, calculable, positive benefits of prevailing wage laws.
Although the weight of evidence suggests prevailing wage laws do not raise costs, advocates for repealing the law in Pennsylvania continue to repeat some version of the following:
The Philadelphia Inquirer reports this morning on the impact of Pennsylvania Governor Tom Corbett's proposed budget cuts on the lives of people in Southeastern Pennsylvania. Who is getting hit? Adults with disabilities, the homeless, people with mental-health illnesses, HIV patients needing hospice care, children aging out of foster care, and seniors, among others.
Miriam Hill, The Philadelphia Inquirer — People who will be affected by Corbett's cuts:
Brittany Stevens doesn't talk a lot, but she's a bit of a social butterfly. She was a prom queen and, after a recent performance of the musical Fela!, she spontaneously hugged the dancers, nearly tackling them in excitement.
But Brittany, 21, who is disabled and suffers from seizures, incontinence, hearing loss, and other problems, spends most of her days alone in her North Philadelphia home, while her mother, Harlena Morton, goes to work as a high-school counselor.
Morton had hoped to find Brittany a job in a workshop that employs disabled adults. Now that Gov. Corbett has proposed large cuts to social services programs, Morton fears that Brittany and thousands like her will never get off waiting lists for those spots and for other services...
In Philadelphia, the cuts total about $120 million, not including reductions in medical care, city officials say; across Pennsylvania, $317 million, according to state officials.