Governor Tom Corbett confronted the state’s most powerful special interest when he asked lawmakers to send him, as part of the budget, bills reforming public pensions and privatizing liquor sales. The public sector unions have prevented both of these reforms from reaching his desk. As a result, the Governor announced today that he will blue-line-veto $65 million in General Assembly spending and an additional $7.2 million in legislative-designated spending. The remainder of budget has been signed, enacted, and will be implemented immediately.
Governor Corbett was victorious on the one issue he fully controlled: preventing a punitive surtax on Pennsylvania’s growing natural gas industry. Stopping that fiscal smash-and-grab will mean more business investment, more jobs, and lower energy costs for consumers.
This budget makes one thing clear: Tom Corbett continues his campaign against the cozy, insulated ways of doing business in Harrisburg. This includes taking on the public sector unions, which have inordinate influence over public policy, even with a Republican-dominated House and Senate.
By continuing to insist on pension and liquor reform, the Governor is pressing the unions to demonstrate some measure of accountability to taxpayers, but so far without result. The run-away pension systems that cover state workers (SERS) and public school teachers (PSERS) add $10 million a day to their $50 billion unfunded liability. This fiscal year, the unfunded liability will burn $600 million of the $900 million expected in additional General Fund tax revenue. That’s money that should go to kids through education programs, to the poor through welfare and to other core government services.
Things may get even worse. The credit rating service Standard & Poor’s warned Pennsylvania two months ago that it could downgrade the state’s bond rating if the General Assembly failed to approve some level of reform. A lower credit rating means higher interest rates, which further strains government services.
A hybrid-pension plan, which the Governor has endorsed as a compromise despite supporting stronger reforms, would establish a 401-k style plan for any monies a public sector employee earns above $50,000. This measure is still far more generous than most private sector plans. However, the public sector unions objected and the issue will be on the back burner until at least the fall.
Similarly, the liquor debate further underscores the same type unbalanced influence over public policy. Opinion polls are in line with the Governor, and many lawmakers, who want consumers to have the convenience, service, and cost savings that a private system would deliver. Yet Pennsylvania remains stuck with a system that, in practice, is just a few years removed from the era of The Untouchables.
With their infinite appetite for government spending, the public sector unions would be glad to sacrifice Pennsylvania’s future prosperity from energy development in order to rake in more money from higher taxes now. The natural gas industry employs thousands of Pennsylvanians, has in its short life paid nearly $3 billion in taxes and impact fees, and attracts additional businesses that employ thousands more. All the aforementioned tax revenue supports government programs, and those who administer the programs. The added jobs, which would be threatened by a new tax, have helped bring Pennsylvania the lowest unemployment level since 2008, a below-the-national-average rate of 5.6 percent.
But the biggest issue of all has yet to be addressed, although it is working its way to the forefront. Imagine for a moment that a pro-business advocacy group could use the state to collect contributions for their political action committee and then spend that money directly on the candidates collecting them. Picture a world where these same groups have the government collect money, then use that money to pay lobbyists and "issue advocacy campaigns" in an attempt to influence and cultivate their power. No need to imagine, this is real life – but it’s not pro-business group that receive this special treatment, it’s public sector unions.
That’s the practice in the public sector. The public sector unions use the deducted money, collected by the state, to elect the very politicians who will act as "management" in their contract negotiations – the ones they sit across from at the bargaining table. Past head of District Council 37 of the AFSCME in New York City, Victor Gotbaum, boasted forty years ago: "We have the ability, in a sense, to elect our own boss."
One House Republican leader said the caucus does not yet have the 102 needed to approve a paycheck protection bill that would end the practice. But this issue is not finished yet and many expect to hear more debate, caucus discussions, and public outcry before this fall.
What many thought would be a long hot summer with a delayed budget has turned into a stalemate of sorts. "Will the public sector be required to live under the same economic realities as the rest of us?" asked David N. Taylor, PMA’s Executive Director. "This is the central issue of our time and we will see how Pennsylvanians will respond."