PA Independent

Revenue from online purchases tied to PA taxpayer honesty, biz

PA Independent — Wed, 22 Feb 2012 00:23:36 +0000

Revenue department expects payment of use tax this year

By Stacy Brown | PA Independent

HARRISBURG — Pennsylvania is relying on businesses to ensure more than $40 million in sales tax revenue from online goods is reported, but the state is still holding out for taxpayers’ cooperation.

Pennsylvania Department of Revenue Secretary Dan Meuser said to the state Senate Appropriations Committee the state could be collecting an additional $42.8 million from online vendors and those who buy those goods online.

However, clarifications in the tax law are expected to help the state recoup some of that revenue.

Implausible projections

Meuser's projections are based on remote sales done outside of Pennsylvania and the percentage of companies registered in the state.

"In some states, there have been some agreements that were made years ago, where catalog sellers sent some states details of purchases by their residents, so that the state could send tax bills directly to the buyers," said Diane Yetter, president and founder of the Sales Tax Institute, a Chicago-based think tank, which focuses on sales and use tax.

"If Pennsylvania has entered into any of these type agreements, it would be the best way that they might have of tracking more exact data," Yetter said.

But, that isn’t the case, and collection "is largely dependent upon how diligent the state wants to be in finding out who purchased what," said John Eismann, senior accountant at the firm of Ryan-Eissmann in Peckville. "I would guess that the way the state has to track this is by checking with vendors, but right now they are still counting on the integrity of the taxpayer."

In a April 2011 study authored by economist Robert Strauss called "The Impact of Not Collecting Sales and Use Taxes from Internet Sales into Pennsylvania," Strauss projected the 2012 lost state sales and use tax revenue to range between $250 million and $400 million.

"There is no mechanism currently in Pennsylvania to track online and other remote sales being made into Pennsylvania," said Jerry Glynn, managing director of Grant Thornton LLP, a Philadelphia-based auditing and accounting firm.

Accountability efforts

Originally, the state relied on individual taxpayers to voluntarily report and pay taxes on their online purchases by recording it in the "other taxes" line on their state tax forms.

Beginning Sept. 1, after clarifying the Internet sales and use tax law, vendors are required to collect and remit to the state the taxes collected from Internet purchases. The state sales tax is 6 percent.

As part of the clarification of the law, a line item has been added to this year's individual tax forms, requesting that taxpayers identify how much they've purchased online. They must pay the tax by April 15.

However, lawmakers said at the Tuesday hearing they doubted many taxpayers would account honestly for the flowers, pair of shoes or music CD they purchased.

State Sen. Lisa Boscola, D-Northampton, said an accountant she spoke to in her district told her that of 80 clients who purchased goods online, only two planned to report Internet sales and use tax. She did not name the accountant.

Meuser said only that he was happy some taxpayers were complying now.

"The plan is to continue aggressive education on this to gain further taxpayer voluntary compliance," he said.

Tracking revenue through vendors

Collecting the tax revenue would be easier once out-of-state businesses with a nexus — or physical presence — in Pennsylvania begin complying with the newly interpreted Internet sales tax law, experts said.

"In that way, forcing vendors to collect the tax, you get vendors reporting all purchases and vendors also charging the state's 6 percent sales tax," said Liam Baker, a private licensed accountant at Baker & Associates in Hazleton.

"It would no longer be a voluntary thing, and it would no longer be something that hard-working and underpaid taxpayers would have to shoulder alone,” Baker said.

The delayed enforcement of the new tax law was timed to allow Congress to pass national legislation on collecting sales tax on online purchases.

Under the state tax law, out-of-state retailers with a physical presence in the state must collect the tax from consumers if they have affiliate marketers. These marketers are companies connected to Internet merchants and distribute their products or carry their advertising in exchange for a commission.

In 1992, the U.S. Supreme Court ruled that states cannot require out-of-state businesses to pay sales tax, unless the business has a physical presence in the state.

PA gov’s budget could kill pension oversight group

PA Independent — Tue, 21 Feb 2012 23:32:18 +0000

Consolidated within state pension plans, Dept. of Community and Economic Development

By Eric Boehm | PA Independent

HARRISBURG — As the state prepares to face a mounting pension liability in the next decade, a key commission that oversees that state pension systems is on Gov. Tom Corbett’s chopping block.

Since its inception in 1981, the Public Employee Retirement Commission, or PERC, also has given actuarial assessments when legislation is proposed to change those pension plans.

In addition, it files mandatory annual reports on the status of Pennsylvania’s more than 3,000 local pension systems, many of which are also in dire financial straits.

But that could change next year, at least according to Corbett’s newly proposed budget plan.

The plan calls for the commission to end, and its various responsibilities divided between the state’s two pension systems and the state Department of Community and Economic Development, or DCED.

“There won’t be anybody doing what we do, but there will be some people doing some of what we do,” said James McAneny, director of PERC. “But there won’t be a commission providing public hearings and actuarial notes to legislation.”

According to the budget proposal, PERC's municipal pension oversight responsibilities would be transferred to DCED.

The commission's “remaining activities” will be handled by the state’s two public pension systems, Public School Employees Retirement System, or PSERS, and State Employee Retirement System, or SERS, according to the budget.

Those activities include providing actuarial assessments of the pension systems and providing lawmakers with independent information on how proposed changes will affect the systems' funding.

According to the budget, the consolidation of PERC’s municipal pension responsibilities within DCED will “integrate the data and information relating to local property taxes and pensions — two factors driving local government budget challenges — with the policies and programs in DCED that support local governments.”

Susan Hooper, spokeswoman for the governor's Budget Office, said Tuesday that the consolidation was part of an ongoing effort to identify efficiencies in government, streamline operations and reduce overhead.

The realignment will allow the new version of PERC — within DCED — to focus solely on municipal pensions, she said.

"As a practical matter, PERC has relied on PSERS and SERS to support the bulk of any actuarial analysis that was originally intended to be part of the mission of PERC. Thus, this transfer of responsibility in some respects simply reflects the current practice and can be effectively absorbed and conducted by PSERS and SERS," Hooper said.

Eliminating the commission is not saving the state a lot of money.

This year, the commission has a budget of $690,000 and employs seven people. The entire budget and all but two of those positions would be retained, but they would be transferred to DCED, according to the governor’s proposal.

State Sen. Pat Browne, R-Lehigh, who is a legislative member of the PSERS board, said the governor is proposing the changes for reasons of efficiency.

“What’s going to be important in evaluating the proposal is whether the functions of PERC can be appropriately accomplished under the new umbrella,” Brown said. “We have to honor the fact that these agencies have a responsibility, and we have to make sure they are carried out in the new paradigm.”

McAneny said the end of the commission could result in less transparency, if legislative changes are made to the pension plans or benefits in the future, since the PERC holds public hearings when such changes are in the works.

Hooper said the changes would "alter the independent nature of the organizations."

This issue is important to the taxpayers who are on the hook for a massive increase in pension contributions on behalf of the state in coming decades.

This year, payments to SERS and PSERS will consume more than $1 billion of the state budget, up from $700 million last year. By the fiscal year that begins July 1, 2016, Pennsylvania will be making an estimated $4.2 billion payment to the two pension systems, an increase of 600 percent in six years.

Contributions continue increasing after that, and the administration has said the required pension costs will force cuts in discretionary spending.

David Fillman, president of the local chapter of the American Federation of State, County and Municipal Employees, which represents 31,000 Pennsylvania government employees, said the union is taking a look at how the proposed changes will affect its members and the pension plans.

Fillman said he would like to see the oversight responsibilities of PERC replicated within the systems themselves.

But the elimination of the commission may not have much of a practical effect on policy-making in the state Capitol, since the commission usually deferred to the General Assembly on matters of policy, said Richard Dreyfuss, a retired actuary and pension expert with the Commonwealth Foundation, a fiscally conservative think tank here.

“The other problem is that when they do come up with an analysis on something, it is generally ignored,” Dreyfuss said. “So what good is having PERC in place, if you’re going to ignore their advice?”

He pointed specifically to the passage of Act 120 of 2010, which delayed the state’s required pension payments between then and 2014. At the time, actuaries for PERC and the major pension funds told the General Assembly that the changes would cost more in the long run, but they were ignored.

The commission will remain in place at least until the end of the fiscal year, on June 30, and the Legislature must approve its elimination as part of the final state budget.

Corbett’s budget foreshadows surge in PA pension costs

PA Independent — Fri, 17 Feb 2012 22:30:12 +0000

Increases begin this year, but the big numbers are a few years away

By Eric Boehm | PA Independent

HARRISBURG — Gov. Tom Corbett’s second proposed budget contains an ominous warning about the state’s two major pension funds and the taxpayer contributions they will require in the coming years.

The state’s contribution to the two pension plans is increasing by more than $300 million in the newly proposed budget, up from $705 million last year to more than $1 billion in the fiscal year that will begin July 1.

Like debt service payments, the pension obligations are mandatory expenses of state government. In other words, tax dollars are required by law to pay for those costs.

And when mandatory payments increase at a rate that far exceeds expected revenue growth, it forces either taxes to increase for more revenue or spending on discretionary items to decrease.

Since Corbett has pledged not to increase taxes, discretionary spending will be targeted for cut backs, said state Budget Secretary Charles Zogby last week.

“That means that something has to get squeezed out,” Zogby said. “Just as families are making choices to maybe not buy a new car or not take a vacation … state government is having to make those same choices as well.”

But the increase this year is just the tip of the iceberg.

By the fiscal year that begins July 1, 2016, Pennsylvania will be paying more than $4.2 billion combined to the two pension systems. That’s an increase of 600 percent in just six years.

The higher contributions — due to increasing benefits and deferred payments to the system over the last decade — are detailed on the final page of a 22-page presentation given by Zogby to members of the media in the hours before Corbett’s budget address last week.

Though the pension data was buried on the back page, James McAneny, executive director of the state Public Employee Retirement Commission, which provides actuarial analysis on the state’s pension systems, said the pension problem will be front and center in future budgets.

“We have this current crisis, and we have to find a way to deal with it,” McAneny said. “But then the other side is: how do we address the circumstances that led to this crisis in the first place? There are no easy solutions to these problems.”

Presently, the State Employees Retirement System, or SERS, is funded at 75 percent and faces an unfunded liability of $10 billion.

The larger system, the Public School Employees Retirement System, or PSERS, is funded at 69 percent and has an unfunded liability of $26.5 billion, according to the latest official figures.

And the unfunded liability may be much worse than the official numbers suggest, as some studies estimate Pennsylvania’s combined pension liability to exceed $100 billion, thanks to accounting tricks.

But even if the official numbers are to be believed, the increase in the next six years is only the beginning. State contributions to the two funds are projected to top $5 billion

Ten years ago, the PSERS plan was funded at better than 114 percent, and there was a surplus instead of an unfunded liability.

Then, lawmakers approved two major changes to the pension plans.

A 2001 law increased the guaranteed benefits by 50 percent for lawmakers and 25 percent for most other state employees. The following year, another change granted a 25 percent increase to retirees in the system as well. Neither change was accompanied by a comparable increase in contributions because the pension funds, at the time, were running a surplus.

A 2003 law postponed making higher contributions that were necessary after the recession of 2001 in the hopes that the fund would grow enough over the next decade to make such contributions unnecessary.

“It’s one thing to say going forward you’re going to get a new rates, but it’s another thing to give more benefits retroactively without throwing in more money to cover it,” McAney said. “Then, you had this creation of an expectation that it was going to grow its way out. Unfortunately, the bottom fell out and here we are.”

The bottom fell out with the Great Recession that began in 2008, during which the two pension systems lost nearly 30 percent of their value.

“We’ve weathered them before, but this was in a short period of time and you had two historic downturns,” said Evelyn Tatkovski, spokeswoman for PSERS.

Compounding the problem was 15 years of underfunding the plans — when state contributions were smaller than the amount of benefits earned, she said.

Taxpayers will be hit with a double whammy on the PSERS obligations, because school districts and the state split the contributions to that fund 50-50.

At Spring-Ford School District in Chester and Montgomery counties, business manager Timothy Anspach said the district is facing a $1.2 million contribution this year, which would be the equivalent of a 1.46 percent tax increase for all residents.

“This is a hardship, because no one wants to make cuts to force bigger class sizes, and you don’t want to cut support services either,” Anspach said. “But then the question becomes, how much can you tax?”

Looking forward, Anspach said Spring-Ford is anticipating a doubling of pension obligations in the coming years.

Because courts have ruled that benefits earned by workers cannot be taken away or reduced, the mountain of pension obligations coming due over the next two decades will have to be paid off one way or another.

Any changes to the systems only would affect future employees and would have to be done legislatively. Right now, there is little push in the state Capitol to do so.

Richard Welsh, executive director of the Senate Finance Committee, which would handle possible changes to the pension systems, said the required payments will be a larger part of the budget for years to come.

“It does limit our options with spending,” Welsh said. “Anytime you have an increasing level of mandated costs, that shrinks the available dollars and flexibility in the budget.”

Week in review: PA weighs budget, spending cuts, taxes

PA Independent — Fri, 17 Feb 2012 21:52:19 +0000

By PA Independent Staff

HARRISBURG — This week was all about the money in Pennsylvania politics.

Gov. Tom Corbett's $27 billion budget plan took center stage as legislators grappled with the phaseout of a business tax, tighter regulations on unemployment insurance benefits and cuts to nursing home care.

Corbett's proposed budget could be tempered, if lawmakers approve a bill that would allow the Pennsylvania Liquor Control Board to make more money, resulting in more tax revenue going into the state’s general fund.

The state House also approved a bill to increase the threshold for prevailing wage from $25,000 to $185,000 — matching inflation over the 50 years since the limit was set. The bill also would allow the threshold to increase with inflation.

In addition, Pennsylvania is developing its state-run, health-insurance exchange system, which requires people and businesses to buy health insurance by 2013 as part of the federal Patient Protection and Affordable Care Act of 2010.

PA biz tax phase out joins spending cuts, deficit in budget plan

By continuing to phase out a state business tax, Corbett aims to create jobs and bolster the economy, state Budget Secretary Charles Zogby said.

But some lawmakers argue the loss of an estimated $200 million in revenue translates into spending cuts. And an estimated $700 million budget deficit lurks in the background, threatening the state’s fiscal health.

“Sometimes we talk about the numbers, and we forget that there are real people attached to those numbers,” said state Sen. Vincent Hughes, D-Philadelphia, minority chairman of the Senate Appropriations Committee, which held a hearing Monday.

For years, business groups have been pressing for the elimination of the capital stock and franchise tax, which businesses pay on assets they are unable to sell. It was scheduled originally to phase out during Gov. Ed Rendell’s administration, which ended in 2010, but the process was put on hold.

The business tax is scheduled to phase out in 2013.

Corbett proposed a $27 billion budget with its $20 million in spending cuts and $1.4 billion in new required expenses, including debt service and pensions.

PA bills seek tighter regs for unemployment law

Collecting unemployment is about to get tougher for Pennsylvanians, particularly those who commit fraud and those who quit their jobs.

Lawmakers in the House Labor and Industry Committee took this hard line in the hopes of curbing overpayments to claimants that totaled more than $376 million last year and address the unemployment insurance fund's insolvency.

The bills, voted out of committee Monday, were House Bill 1852, which would eliminate the statute of limitations for unemployment fraud, and House Bill 1754, which would make those who quit their jobs ineligible for benefits.

However, lawmakers said they hope some relief would come to the state's unemployment compensation fund, which is insolvent. The state owes the federal government more than $3.7 billion from borrowed unemployment payments.

"While these bills today doesn't directly address the problem of solvency, it will have some impact in that it will save money from fraudulent claims and it will help prevent paying out false claims such as those paid to prisoners," said House Labor and Industry Committee Majority Chairman Ron Miller, R-York.

Cuts to nursing home care PA’s plan to balance budget

Corbett wants to cut $161 million from nursing home care through the state's medical assistance program to help balance this year's proposed $27 billion budget.

But, some say the funds are needed, because Pennsylvania’s senior population is among the largest in the nation — and rising — putting nursing home care in high demand.

"We understand that the administration is facing real revenue challenges, while at the same time the senior population in the state is growing exponentially, which means there is an even greater need," said Vicki Hoak, CEO of the Pennsylvania Homecare Association, a state trade association representing more than 400 organizations that provide care and support to individuals in their own homes.

Of Pennsylvania's more than 12.5 million residents, about 2 million are older than age 65, according to 2010 U.S. Census data. The state ranks third in the country for this senior population, following Florida and West Virginia.

PA Liquor Board could pour $150M into state coffers

The Pennsylvania Liquor Control Board, or PLCB, said it has 150 million reasons privatization talks should stop.

Joe Conti, CEO of PLCB, referred to an estimated $150 million in profits that would go into the state’s coffers annually under a bill sponsored by state Sen. Jim Ferlo, D-Pittsburgh.

“We want to be able to increase our revenue and return it to the General Assembly,” Conti told the state Senate Appropriations Committee during a hearing Thursday.

The board's proposal is outlined in Senate Bill 1287, which is in the Senate Law and Justice Committee.

The bill estimates that PLCB would generate $70 million a year in new state revenue on top of the $80 million it will give the state this year, money that could be used to stall some of Corbett's proposed budget cuts, Conti said.

Highlights of the proposal include expanding Sunday hours from noon to 5 p.m. to noon to 9 p.m. and allowing up to 50 additional stores to open on Sunday, which could add $10 million more in annual revenue.

"Sunday is a sacred day made by God," said the Rev. Earl Watkins, of Grace Baptist Church in Scranton. "It's a day of rest, a day God has declared holy and a day that one should not have the option of partaking in joy juice."

PA divided over prevailing wage reforms

When a local government has to fill in a pothole or rebuild a culvert, taxpayers foot the bill.

And local government leaders, who are facing lean budgets and less state assistance, are stretching those tax dollars as far as possible.

In Polk Township in Monroe County, township Supervisor Nancy May said municipal governments could save money if the state would repeal, or at least adjust, the so-called prevailing wage law that determines wages for all public projects above a threshold of $25,000.

“We try to do more with less, but it really ties the hands of local municipalities,” May said of the prevailing wage laws. “It’s really an unfunded mandate from the state.”

Although the prevailing wage varies by county and occupation, it is 50 percent higher, on average, across the 10 most common construction occupations, according to the Pennsylvania State Association of Boroughs, which represents local governments.

For example, a cement worker in Monroe County would make a prevailing wage of $27.83 per hour, which exceeds the local average occupational wage by 43 percent.

PA moves forward with health-care exchange despite unknowns

Pennsylvania is developing a state-run health insurance exchange system, but plenty of questions remain.

The state is required to set up an exchange by 2013 for people and businesses to buy health insurance as part of the federal Patient Protection and Affordable Care Act of 2010.

While the future of the law itself remains in question, the state has decided to work on establishing its exchange, rather than having the federal government step in. If a plan is not in place by 2014, the federal government will impose one on Pennsylvania.

“We’re now taking those initial baby steps, working with the General Assembly and figuring out what a state-based exchange would look like,” said Michael Consedine, commissioner of the state Insurance Department, which will oversee the exchange. “We have to figure out, as part of this exchange model, how to fund the exchange going forward.”

But the major question sits with the U.S. Supreme Court, which is expected to rule on the constitutionality of the federal Patient Protection and Affordable Care Act later this year.

“We should have that judicial guidance within the next six to nine months,” Consedine said. “We don’t expect to have gone that far down the road in terms of having a full functioning exchange in the next six months.”

PA Liquor Board could pour $150M into state coffers

PA Independent — Thu, 16 Feb 2012 22:56:30 +0000

Bill used to push down privatization efforts

By Stacy Brown | PA Independent

HARRISBURG — The Pennsylvania Liquor Control Board said it has 150 million reasons why privatization talks should stop.

Joe Conti, CEO of the Pennsylvania Liquor Control Board, or PLCB, referred to an estimated $150 million in profits that would go into the state’s coffers annually under a bill sponsored by state Sen. Jim Ferlo, D-Pittsburgh.

“We want to be able to increase our revenue and return it to the General Assembly,” Conti told the state Senate Appropriations Committee during a hearing Thursday.

The board's proposal is outlined in Senate Bill 1287, which is in the Senate Law and Justice Committee.

"Given the commonwealth's current fiscal challenges, this proposal should be given careful consideration," Conti said.

The bill estimates that PLCB would generate $70 million a year in new state revenue on top of the $80 million it will give the state this year, money that could be used to stall some of Gov. Tom Corbett's proposed budget cuts, Conti said.

Additionally, PLCB made a cash transfer of $105 million to the state's general fund last year, and transferred more than $391 million in tax revenue last year.

PLCB will transfer $80 million this year, but the general fund could see an almost 100 percent increase under the board's proposal.

The bill also would allow PLCB to operate like a modern, wholesale and retail business and deliver a greater return for all Pennsylvania taxpayers, he said. PLCB recently launched app for iPhone users. A similar app for Android users is launching soon, he said.

Highlights of the proposal with anticipated annual revenue include:

Providing the board the authority to adjust its markup on specific products: $25 million;
Allowing the board to charge manufactures a fee to store inventory at a warehouse operated by someone under state contract: $12 million;
Assessing a $700 administrative fee for all license renewal and validation applications: $14 million;
Increasing fines on those who are found to have violated the state Liquor Code: $2 million;
Allowing lottery tickets to be sold at state wine and spirit stores: $8 million;
Expanding Sunday hours from noon to 5 p.m. to noon to 9 p.m. and allow up to 50 additional stores to open on Sundays: $10 million.

For some, expanding Sunday hours and opening more wine and spirit stores is almost blasphemous.

"Sunday is a sacred day made by God," said the Rev. Earl Watkins of Grace Baptist Church in Scranton. "It's a day of rest, a day God has declared holy and a day that one should not have the option of partaking in joy juice."

The PLCB’s proposal is the latest example of why state involvement in alcohol is a conflict of interest, said Michael Geer, president of the Pennsylvania Family Institute, a socially conservative organization.

"On the one hand, the PLCB is supposed to enforce laws related to alcohol and, on the other hand, they are looking to find more ways to sell it to more people. Add the lottery and that's encouraging people to drink and gamble. They shouldn't do it," Geer said.

Proponents of the board's proposal said tough economic times are a cause for such action.

"This is just plain old common sense and now is the time for lawmakers to support modernizing this valuable public asset," said Wendell Young, president of the United Food and Commercial Workers Local 1776, which represents 24,000 workers including clerks in state wine and spirit stores.

"It makes a lot more sense to generate $75 million more each year in revenue than it does to cut higher education, basic education and the safety net for vulnerable Pennsylvanians," Young added.

Young said PLCB already provides the commonwealth with more than $500 million a year in revenue — after paying all expenses for the agency's operation — and employs more than 5,000 Pennsylvanians.

While state House lawmakers have wrestled with legislation to privatize Pennsylvania’s state-owned liquor stores, but the effort appears to have slowed since last year.

Unlike in 2011, Corbett made no mention of the privatization effort in his budget address last week, though he has a commission working on privatizing some elements of state government, including, possibly, the liquor store system.

A study commissioned by the Corbett administration last summer found the sale of the liquor stores could net the state a one-time $1.6 billion windfall.

And previous attempts by the PLCB to modernize have not always been successful. The board admitted that it lost $1.5 million between 2009 and 2011 on the ill-fated wine vending machines before pulling the plug on the program last August.

Thursday, state senators said they are focused on making the existing system more competitive.

“We’ve taken a wait-and-see approach. If they pass something out of the House, we’ll address it," said Senate Appropriations Committee Chairman Jake Corman, R-Centre, of the privatization plan. “Since it’s been a year and it hasn’t gotten through the House, people are just going on the assumption that it’s not going to happen until it does.”

Ferlo said privatization is mostly pushed by the media, particularly newspapers who want the advertising dollars that could come from a private industry.

"When the state is getting this much money in the general fund, it would make no sense to privatize it and take that money away," Ferlo said. "Privatization is media driven for ad dollars."

Privatization, however, is still on the table, said Senate Law and Justice Committee Chairman John Pippy, R-Allegheny.

"We have a parallel responsibility to make sure the system works better, said Pippy, whose panel has legislative oversight of PLCB.

PA moves forward with health-care exchange despite unknowns

PA Independent — Thu, 16 Feb 2012 21:39:42 +0000

Legislation should be passed by June

By Eric Boehm | PA Independent

HARRISBURG — Pennsylvania is moving forward with the development and implementation of a state-run health insurance exchange system, but plenty of questions remain.

The state is required to set up an exchange by 2013 for people and businesses to buy health insurance as part of the federal Patient Protection and Affordable Care Act of 2010.

While the future of the law itself remains in question, the state has decided to work on establishing its exchange, rather than having the federal government step in.

“We’re now taking those initial baby steps, working with the General Assembly and figuring out what a state-based exchange would look like,” said Michael Consedine, commissioner of the state Insurance Department, which will oversee the exchange. “We have to figure out, as part of this exchange model, how to fund the exchange going forward.”

The department and lawmakers are aiming for a June deadline to pass the enabling legislation, which would keep the exchange on schedule to debut in early 2013, after gaining federal approval.

The enabling legislation also will address how to fund the exchange after a $33 million start-up grant from the federal government runs out.

But the major question sits with the U.S. Supreme Court, which is expected to rule on the constitutionality of the federal Patient Protection and Affordable Care Act later this year.

And if the court rules the law unconstitutional, it would be a “complete reset,” Consedine said.

To protect the state from future costs, Consedine said any legislation that is introduced should have a sunset clause that would repeal the law if the Supreme Court rules the federal law unconstitutional.

With the exceptions of Massachusetts and Utah, state-run health exchanges are new entities that will function as marketplaces for health insurance. Residents who do not have health insurance coverage through their jobs will be required to buy insurance under the federal law or face penalties.

Ideally, the exchanges will operate like online travel sites by allowing consumers to compare and shop for insurance while leveraging the power of mass purchasing to keep costs low, Consedine said.

Based on various studies, the Insurance Department is estimating between 2 million and 2.2 million Pennsylvanians will use the exchange when it becomes operational in 2014, although it admits the exact number is difficult to determine.

An estimated 1.5 million Pennsylvanians are without health insurance.

According to the draft plan for the implementation of the health insurance exchange, Pennsylvania could use multiple exchanges operated by private contractors and overseen by the state. Some could be directed at providing insurance to individuals, and others could provide insurance to small businesses.

That approach has drawn its share of opponents, including the Pennsylvania Health Access Network, a coalition of organizations working to improve access to affordable health care in the state.

Erin Gill-Ninehouser, an education and outreach coordinator for the group, said the state’s decision to use multiple providers to run the exchange will not ease the confusion and frustration faced by people who want to buy health insurance.

“The whole point of an exchange is to make it easier for people who do not have insurance to get coverage,” she said. “It would be an enormous waste of time and resources to create a system that is no better than our current one.”

The state also would risk losing the power of mass purchasing with that approach, she said.

In a letter to the federal Department of Health and Human Services in December, Gov. Tom Corbett indicated his support for an exchange that “promotes the free market, fosters competition and retains ample choice of health insurance options for all Pennsylvania consumers.”

As attorney general, Corbett in January 2010 signed onto the lawsuit challenging the constitutionality of the individual mandate contained in the federal health-care law. He was running for governor at the time.

During his time as governor, Corbett has said it makes sense for the state to move toward establishing the exchange while waiting for the case to move through the courts.

Corbett’s letter was part of the state’s application for a $33 million grant from the federal government to begin implementing the exchange.

After 2014, the exchange is expected to be self-sufficient. How it will be paid for will be addressed by the enabling legislation, which the General Assembly must pass before the exchange can go online.

Other states further along in the process than Pennsylvania have imposed an assessment on health insurers to cover the ongoing costs of the exchange.

In Illinois, a state roughly the size and population of Pennsylvania, the average annual cost to providers is expected to approach $90 million to cover an estimated 1 million users.

So far, no legislation to implement the health-care exchanges has been introduced in the General Assembly, although hearings have been held on the issue.

The state Insurance Department would receive $123 million in state taxpayer funds in the budget proposed by Corbett last week, about a 2 percent boost from last year.

The increase is the result of an additional $4 million being directed to the Children’s Health Insurance Program, which provides coverage for 195,500 children in the state.

PA’s redistricting issue could affect U.S. Senate race

PA Independent — Wed, 15 Feb 2012 23:09:09 +0000

Primary unlikely to move from April 24

By Stacy Brown | PA Independent

HARRISBURG — Candidates for the U.S. Senate scrambled to meet Tuesday’s petition filing deadlines while redistricting continued to threaten a date change for the Pennsylvania primary election scheduled April 24.

Republican candidates trying to unseat U.S. Sen. Bob Casey, D-Pa., are concerned that delaying the primary could result in spending more campaign funds then planned. And they worry whether too many voters would simply not participate in the primary.

Since the Pennsylvania Supreme Court threw out recently approved redistricting maps and instructed the state Legislative Reapportionment Commission to redraw them, questions persist as to whether the state's primary would go on as scheduled even though the state House and Senate maps were thrown out and the congressional map remains unchallenged.

However, Ron Ruman, press secretary for the Pennsylvania Department of State, said the primary election is set for April 24.

"We haven't been told otherwise, and changing the date would have to come from the Legislature," Ruman said.

While voter turnout is always a concern, candidates said they will remain busy rallying voters.

"We have a strong volunteer base. We're doing very well in raising money, and we're ready for a long primary season," said Zac Moyle, spokesman for Republican U.S. Senate candidate Sam Rohrer. "The general couch-potato voter might be affected by a change in the primary date, but we still have quite a bit of time to motivate them.”

Joseph Vodvarka, an Allegheny County small businessman and one of the lesser known candidates for U.S. Senate, said moving the primary to an earlier date would hurt him.

"We need all the time we can get, the longer the wait the better so that people can get better acquainted with me and my message," said Vodvarka, whose campaign staff consists of his wife as secretary and son as manager.

Another candidate, Chester County entrepreneur Steve Welch, anticipates voters will be prepared to make a decision whenever the primary election is held, Welch's spokesman Peter Towey said.

"Our supporters will be ready, and we will have the funds necessary to win in April and defeat Casey in November," Towey said. "(Welch) is on the road six or seven days a week attending events, meeting voters and getting his message out."

Further, since voters will be motivated for change in the White House, they will be motivated to help remove Casey, who has been associated with President Barack Obama, said Randy DeSoto, spokesman for Senate candidate Marc Scaringi, who was a staff member for former U.S. Sen. Rick Santorum of Pennsylvania.

Santorum is running for president in the GOP primary.

Casey endorsed Obama in 2008 and campaigned for the president in Pennsylvania, including making stops in Scranton, Pittsburgh and Philadelphia.

"We intend to make the case, whether the date is pushed back or not, that Marc Scaringi is the best candidate, and we think the voters will be motivated because this election is one of the most important ones in (some time)," DeSoto said.

Jim Conroy, spokesman for candidate Tom Smith, an Armstrong County farmer, said Smith wasn't concerned about how a prolonged primary would affect his campaign.

"We believe voters will turn out … because a lot is at stake and we don't see that moving the date will be a problem," Conroy said.

Messages left for the remaining GOP candidate, Vietnam War veteran David Christain, were not returned Wednesday. A message left for Casey also was not returned Wednesday.

Whenever Pennsylvanians cast their votes for the primary, voter turnout is shaping up to be low, said Terry Madonna, a polling expert and professor of political science at Franklin and Marshall College in Lancaster.

"Republican voters haven't been turning out so far for this campaign season," Madonna said. "The turnout is a lot less than it was in 2008, and in the U.S. Senate race, Casey already has a big advantage because the Republican party did not field a top-tier, big name candidate."

Madonna said redistricting shouldn't greatly complicate the primary even if the date is moved.

"I'd say probably 90 percent of voters could not tell you what's going on with redistricting," Madonna said. "It's not something that voters follow. The primary, whether it's April or May, is early anyway, and it shouldn't have any effect on campaign money either because most candidates who win in the primary are able to raise money in the fall for the general election."

Republicans in Harrisburg — who control both the decision to move the primary and the redistricting process for the House and Senate — have tossed around the idea of postponing the primary, but it looks less likely now than it did a week ago.

"The goal is to have a primary on April 24," said Steve Miskin, spokesperson for House Majority Leader Mike Turzai, R-Allegheny.

Among the offices that faced Tuesday filing deadlines were president, U.S. Senate, U.S. House of Representatives, state attorney general, state auditor general and state treasurer.

Thursday is the deadline to file petitions for candidates for state senator and state representative and for filing nominating petitions for delegates to the national Republican or Democratic conventions.

The deadline for General Assembly races was extended by the state Supreme Court in its recent order rejecting the legislative district maps.

PA divided over prevailing wage reforms

PA Independent — Wed, 15 Feb 2012 22:41:33 +0000

House comes up short on raising threshold to $185,000

By Eric Boehm | PA Independent

HARRISBURG — When a local government has to fill in a pothole or rebuild a culvert, taxpayers foot the bill.

And local government leaders, who are facing lean budgets and less state assistance, are stretching those tax dollars as far as possible.

In Polk Township in Monroe County, township Supervisor Nancy May said municipal governments could save money if the state would repeal, or at least adjust, the so-called prevailing wage law that determines wages for all public projects above a threshold of $25,000.

“We try to do more with less, but it really ties the hands of local municipalities,” May said of the prevailing wage laws. “It’s really an unfunded mandate from the state.”

May has been the supervisor in Polk Township for 23 years, and her experience shows.

She rattles off the township’s exact population figures from the most recent U.S. census — 7,874 — as casually as if she were discussing her phone number. She laments how the region has changed during her tenure on the township’s Board of Supervisors, and is reluctant to raise taxes on her neighbors to pay for services and maintenance that has become more costly in the past few years.

When a culvert in the township — long in need of repair — was further damaged by flooding last summer, she said the prevailing wage law made the reconstruction more expensive than it otherwise would have been.

The wages generally are higher than the average occupational wages paid for the same work in the private sector. Although the prevailing wage varies by county and occupation, it is 50 percent higher, on average, across the 10 most common construction occupations, according to the Pennsylvania State Association of Boroughs, which represents local governments.

For example, a cement worker in Monroe County would make a prevailing wage of $27.83 per hour, which exceeds the local average occupational wage by 43 percent.

Across the 10 most common construction occupations, the prevailing wage ranges from 30 percent higher than the average wage — in Fayette County — to 75 percent higher than the occupational wage in Huntingdon County, according to the State Association of Boroughs.

May said she wants to see the state raise the threshold for the prevailing wage, so local governments can afford to complete more small projects with the same amount of tax revenue.

She soon may get her wish, as the state House moved closer this week to approving a bill to increase the threshold for prevailing wage from $25,000 to $185,000 — matching inflation over the 50 years since the limit was set.

The bill also would allow the threshold to increase with inflation.

Republican leadership in the state House spent Tuesday afternoon in closed-door meetings cobbling together the votes to pass the measure, but they came up short and pulled the bill from the calendar Wednesday.

The bill is on hold until March 12 when the state House returns to the state Capitol.

The proposal has the backing of Gov. Tom Corbett.

“We think that a responsible increase in the threshold would be prudent to account for inflation,” said Eric Shirk, Corbett spokesman.

Labor unions oppose the attempt to raise the threshold, because it chips away at the prevailing wage law that guarantees higher wages for workers on public projects.

Frank Sirianni, president of the Pennsylvania Building and Construction Trades Council, which represents 115 local construction unions in the state, said the threshold should not increase with inflation, because wages are not tied to cost of living and have not kept pace.

“It really does not create one job and it in no way guarantees any savings of any amount on any public project,” Sirianni said.

Because labor costs account for about 20 percent of most construction projects, the savings from raising the threshold have been overstated, he said.

Even with the $185,000 threshold, construction of new schools or large renovations would require the payment of prevailing wage. Likewise, any project that gets at least $2,000 in federal funding would qualify for the prevailing wages guaranteed by the federal Davis-Bacon law.

Bob Thomas, a Franklin County commissioner for 17 years, said the proposal to raise the threshold for prevailing wage was “a good first step,” but he encouraged lawmakers to consider repealing the law entirely, so more expensive construction projects also could be included.

“The bottom line is that it results in higher costs for these public projects, and with the pressure that is being put on all tax dollars, it is just lunacy that we’re required to pay more,” Thomas said.

The prevailing wage varies for each construction occupation in each of Pennsylvania’s 67 counties and is determined by the state Department of Labor and Industry, which relies on data from collective-bargaining agreements to set the wages.

The prevailing wage is then used for all public projects, regardless of whether union or non-union workers do the work. The result is higher costs for school districts, local governments and state government on taxpayer-funded projects.

For example, an electrician working on prevailing wage in Cambria County would make 78 percent more per hour than the average occupational wage for an electrician in that county. In Montgomery County, a plumber would make 56 percent more on prevailing wage than the average occupational wage.

According to U.S. Census Bureau data, Pennsylvania state and local governments spent more than $10 billion on construction in 2009, the most recent year for which data is available.

Proponents of changing the prevailing wage argue that it could result in savings of up to 20 percent on public building projects, representing a possible annual savings of $2 billion to taxpayers.

Local government groups say the savings, even if only on small projects, would be welcomed.

May said her township is trying to find a way to pay for a similar project that will be tackled this summer.

But the Pennsylvania AFL-CIO, a coalition of labor unions, argued in an email to supporters Wednesday that raising the threshold would "effectively slash the wages of thousands of workers."

Pennsylvania is one of 32 states with prevailing wage requirements.

Cuts to nursing home care PA’s plan to balance budget

PA Independent — Tue, 14 Feb 2012 23:21:09 +0000

Zogby says the redirections will be permanent

By Stacy Brown | PA Independent

HARRISBURG — Gov. Tom Corbett wants to cut $161 million from nursing home care through the state's medical assistance program to help balance this year's proposed $27 billion budget.

But, some say the funds are needed, because Pennsylvania’s senior population is among the largest in the nation — and rising — putting nursing-home care in high demand.

The cuts proposed would affect nursing homes and care provided by nurses in the private homes of senior citizens. The latter generally includes providing two or more hot meals per day, laundry, cleaning, housekeeping and other incidental care.

"We understand that the administration is facing real revenue challenges, while at the same time the senior population in the state is growing exponentially, which means there is an even greater need," said Vicki Hoak, CEO of the Pennsylvania Homecare Association, or PHA, a state trade association representing more than 400 organizations that provide care and support to individuals in their own homes.

Of Pennsylvania's more than 12.5 million residents, about 2 million are older than age 65, according to 2010 U.S. Census Bureau data. The state ranks third in the country for this senior population, following Florida and West Virginia.

Pennsylvania also ranks fourth in the nation for its residents aged 85 and older, who are the most intensive users of nursing-home care, according to PHA.

Further, the state could see a boom in nursing-home construction by 2020, said Paul Bach, an executive with Chester County-based Genesis Healthcare Corp., which provides long-term, nursing-care facilities in 13 states.

Pennsylvania has about 725 nursing homes with almost 90,000 beds, according to Genesis numbers.

Research by the company showed those facilities are filled to more than 90 percent capacity, Bach said. As the aging population grows, extra capacity will be required within the next 10 years, if not sooner, Bach said.

"We need to preserve funding for programs that allow our seniors to remain in their own homes, where they want to be, for as long as they want to be there," Hoak, of the PHA, said.

Messages left for Corbett spokesman Kevin Harley was not returned Tuesday.

Corbett's Budget Secretary Charles Zogby defended the governor's proposal to redirect the funds to the general fund and said the administration is "proposing those as permanent redirections."

Pennsylvania's Constitution requires a balanced operating, or general fund, budget. The expenditures covered through the general fund include public education, transportation, public assistance and Medicaid.

Other fund redirections proposed by Corbett include:

$20.5 million in state cigarette tax earmarked for the Agricultural Conservation Easement Fund, which enables the state to pay farmers for agreeing to limit the use of their land to agricultural production, commercial equine activities and certain other uses, diverted tο the general fund.
$38.6 million frοm the Keystone, Recreation, Park and Conservation Easement Fund, which funds nature preserves and wildlife habitats and improvements to and expansion of state parks, community parks and recreation facilities, historic sites, zoos, and public libraries, tο the general fund.
$71.6 million frοm the Lottery Fund that supports long-term care programs to the general fund.
$69 million frοm the Oil and Gas Lease Fund, which is used to purchase land for many of Pennsylvania’s state parks, tο the state Department οf Conservation and Natural Resources.
$6.5 million frοm the Alternative Fuels Incentive Grant Fund, which helps to create new markets for alternative fuels, tο the general fund.

Nathan Benefield, director of policy analysis for the Commonwealth Foundation, an independent conservative think tank here, described the shift in funds as a “principled move.”

For instance, Benefield said, subsidizing the horse racing industry is not a core function of government. Using funds for other programs would not be so much as raiding other funds as prioritizing how taxpayer dollars are spent, he said.

"However, we caution against temporary shifts or using excess fund balances for one-time revenue, as that sort of spending is unsustainable," Benefield said.

PA bills seek tighter regs for unemployment law

PA Independent — Tue, 14 Feb 2012 00:54:22 +0000

By Stacy Brown | PA Independent

HARRISBURG — Collecting unemployment is about to get tougher for Pennsylvanians, particularly those who commit fraud and those who quit their jobs.

The bills voted out of committee on Monday were:

House Bill 1852, which would eliminate the statute of limitations for unemployment fraud. This bill would increase the fines for incarcerated individuals illegally receiving unemployment benefits. The bill’s sponsor is state Rep. Seth Grove, R- York.
House Bill 1754, which would make those who quit their jobs ineligible for benefits. HB 1754 would allow victims of domestic violence who work with their abuser or fear the abuser will attack them at their workplace to leave their jobs and collect unemployment. The bill’s sponsor is House Labor and Industry Committee Chairman Ron Miller, R-York.

Both bills will go to the full House for consideration and a vote as early as this week.

In Pennsylvania, there is no statute of limitations for charges of murder, vehicular homicide and conspiracy to commit murder. The statute of limitations, which can differ from state to state depending on the crime or offense, is the time limit for prosecuting a crime.

But unemployment fraud, like burglary, kidnapping and assault, has a statute of limitations. Currently, unemployment fraud allows up to four years for reporting fraud and up to six years for prosecution.The legislation would eliminate the statute of limitations for unemployment fraud.

Also, HB 1852 would levy fines of 15 percent of the amount paid on false claims by inmates and make them ineligible for any future claims.

Earlier this month, Pennsylvania officials learned through news reports that some state inmates illegally collected as much as $3,000 in unemployment insurance benefits.

That raised the ire of lawmakers who had been working for months to try and address the unemployment insurance compensation problem in the state, House Labor and Industry Committee Minority Chairman William Keller, D-Philadelphia, said.

Lawmakers also are seeking to prevent those from quitting their jobs to obtain unemployment benefits, unless the claimant is a victim of domestic violence who may fear going to work.

HB 1754 could save the commonwealth about $376 million, based on last year's overpayments calculated by the U.S. Department of Labor's Benefit Accuracy Measurement program. This program determines the accuracy of paid and denied claims in the state-provided unemployment insurance programs.

The measure allows the claimant to produce a letter from a clergy member as proof of domestic violence. Currently, a restraining order filed with the court or a police report is required.

The proposal would allow any priest, pastor or member of a church's governing body to write a letter supporting a domestic violence victim's claim of abuse.

Lawmakers said they hope some relief would come to the state's unemployment compensation fund, which is insolvent. The state owes the federal government more than $3.7 billion from borrowed unemployment payments.

"The No. 1 thing with unemployment is trying to fix the solvency issue," said House Labor and Industry Committee Minority Chairman William Keller, D- Philadelphia. "These two bills don't do that and they are just making it harder for people to collect during these tough economic times. No, we don't want inmates collecting, but this doesn't address the fact that the fund is insolvent."

Since July 2008, the state has paid out more than $1 billion, or about 10 percent, in overpayments as a result of fraud or clerical mistakes, according to the U.S. Department of Labor's most recent statistics.

Of the nearly $3.33 billion in unemployment compensation the state paid out between July 2010 and June 2011, an estimated $376 million, or 11 percent, were erroneous payments, according to the U.S. Department of Labor.

Only California and Indiana had higher totals of benefits paid in error last year than Pennsylvania. Indiana paid out an estimated $567 million in overpayments, more than 59 percent of all payments, while California’s $455 million in overpayments accounted for less than 6 percent of the state’s total.

"While these bills today doesn't directly address the problem of solvency, it will have some impact in that it will save money from fraudulent claims and it will help prevent paying out false claims such as those paid to prisoners," said House Labor and Industry Majority Chairman Ron Miller, R-York. "These bills also puts clarity into whether a person is eligible for unemployment compensation."

The Pennsylvania Chamber of Business and Industry, which represents businesses in the state, was pleased with the bills because they make it tougher for those who quit their jobs to receive benefits, said Sam Denisco, the chamber's vice president of government affairs.

"We are fully in support of these bills because right now, people who are terminated for cause or those who quit their jobs are getting unemployment benefits," Denisco said. "We need to rein (unemployment abuse) in and develop reasonable standards for claimants and employers."

Messages left for Rick Bloomingdale, CEO of the Pennsylvania AFL-CIO, a coalition of unions in the state, were not returned Monday.