April – May 2017 TIME FOR TA XPAYERS— NOT SPECIAL INTERESTS— TO COME FIRST INSIDE: AFTER OBAMACARE SCHOOL CHOICE IN THE DEVOS ERA WHY WE NEED PAYCHECK PROTECTION NOW FEATURES NOTE FROM THE TEAM 3 The Commonwealth Foundation team is growing! Lenny McAllister was After Obamacare appointed director of entrepreneur engagement in western Pennsylvania, and Jeremy Baker joins Commonwealth Foundation as our new senior gov- 4 ernment affairs associate. But that’s not all! New babies and new moms have Time to End Special also delighted the staff in 2017. Interest Loophole 5 End Perks for the DID YOU HEAR? Politically Connected 6 The Pennsylvania House and Senate have been active on several Common- Double-Down on wealth Foundation priorities early this legislative session. The Senate passed Reinventing Government paycheck protection and the House passed school choice expansion already this spring. The Senate and House are both looking to enact substantive 8 pension reform in the next few weeks. Even Gov. Wolf has indicated a willingness to sign the bill this time (after vetoing pension reform in 2015). New Case from the House and Senate committees have each advanced versions of the Taxpayer Protection Act, which would limit the growth of state government spend- Fairness Center ing. Legislation banning ghost teachers has passed out of committee in the Senate and the House Labor Committee is looking to move legislation 10 enhancing the rights of religious objectors to unionism. Choice Is a Win As for the budget? The House GOP recently unveiled their 2017-18 budget, for Students which includes spending restraints, no tax hikes, and a reduction in corporate welfare—an encouraging starting point for negotiations. COMPENSATION COSTS PER STATE EMPLOYEE K K K K CHART K OF THE K K K MONTH K K SALARY BENEFITS 2 After Obamacare Repeal Myths vs. Facts 1. MYTH: ONE MILLION AMERICANS WILL for physician services. LOSE THEIR INSURANCE IF THE AFFORD- The Health Care Cost Containment Council found an ABLE CARE ACT (ACA) IS REPEALED. 8.6 percent decline of general acute-care hospital un- compensated care in 2015 compared to 2014. Yet, more FACT: MANY OF THESE PENNSYLVANIANS hospitals reported negative operating margins. Between WERE COVERED BEFORE THE ACA. 2012 and 2014, 34 hospitals realized average losses, but from 2013 to 2015, 46 hospitals realized losses. This myth erroneously assumes everyone purchasing insurance on the exchange or enrolled in Medicaid Reducing the cost of uncompensated care will lose all access to insurance. U.S. Census data through more taxpayer subsidies is a payment shows the number of uninsured Pennsyl- shift that will ultimately leave local econo- vanians declined by 469,000 residents mies weaker. from 2010 to 2015. This gap implies many Pennsylvanians on the ex- change or in Medicaid were 3. MYTH: REPEAL WILL insured before the ACA. In COST 137,000 JOBS fact, the state reports almost BY 2019 AND REDUCE 16 percent of newly eligible THE STATE GDP BY $76 Medicaid expansion enrollees BILLION. were previously enrolled in another type of health insurance. FACT: THESE FORE- CASTS ARE BASED ON It’s also important to note that the state shifted 73,000 DEBUNKED MODELS individuals already enrolled in Medicaid to the expan- sion Medicaid population. This was done entirely as an THAT ASSUME GOVERN- accounting gimmick to ensure the federal government MENT SPENDING CREATES JOBS. COMPENSATION COSTS PER STATE EMPLOYEE would pick up a larger portion of Medicaid costs. The job loss estimate comes from the Commonwealth Fund, which wrongly assumes any ACA alternative will K 2. MYTH: HOSPITALS WILL LOSE $1.6 BIL- eliminate all insurance subsidies. K LION IN REVENUES, LEADING TO POSSI- K BLE CLOSURES. In reality, Pennsylvania lost jobs due to the ACA’s man- K dates and taxes. The American Action Forum estimates K FACT: THE ACA DID NOT IMPROVE HOS- Pennsylvania lost 15,680 small business jobs due to the law in 2015. Statewide unemployment remained above K PITALS’ LONG-TERM SUSTAINABILITY. the national average throughout last year. In fact, we ex- K Hospitals are struggling because the cost of medical perienced the second largest increase in unemployment K care is rising. Focusing on redistribution schemes rather in 2016. K than driving down the cost of care is no solution. The K Department of Human Services (DHS) states health On the other hand, the ACA failed to live up to econom- ic projections. According to DHS, Medicaid expansion care providers received more than $1.8 billion dollars in created 15,500 jobs in 2015, but a 2013 RAND study esti- payments for serving newly eligible Medicaid expansion mated expansion would create about 37,500 jobs in 2015. enrollees. However, these payments aren’t covering the full cost of the care. Medicaid pays on average 61 percent SALARY BENEFITS 3 TIME TO END SPECIAL INTEREST LOOPHOLE By Jessica Barnett, Policy Analyst Public resources and political activity are like oil and water—they PAC contributions, however, capture only a portion of tax- don’t mix. payer-aided government union political spending. Since 2007, government union leaders spent an additional $55 million on That’s what we’re told, but the truth might surprise you. politics from a portion of union members’ dues explicitly dedicat- Because of a legal carveout for special interests, Pennsylvania ed to “political activities and lobbying.” These union dues fund TV has been mixing public resources and politics for years. But that and radio ads, lobbying outlays, PAC solicitations, donations to carveout could soon end. SuperPACs, and political communication with members. It has long been illegal for elected officials to mix political business For example, Pennsylvania State Education Association (PSEA) and the people’s business. Even sending a costless fundraising members’ dues fund the union’s magazine, The Voice. The email from a state-owned computer will land any elected official in magazine regularly endorses politicians, including Katie McGinty, hot water. Barack Obama, and Hillary Clinton, and calls on members to lobby against policies like pension reform. Who can forget former Supreme Court Justice Joan Orie Melvin and former House Speaker John Perzel, both of whom violated The United Food & Commercial Workers union, which represents the bright line between politics and public resources? They went liquor store clerks, infamously spent more than $1 million on TV to jail for essentially forcing taxpayers to help them maintain polit- and radio ads opposing liquor privatization—a highly popular ical power. The downfall of such high-profile politicians shows that reform that has the backing of most union households. Union subverting public resources for political gain will not be tolerated. members, as well as taxpayers, were forced to help promote this political activity, even if they ideologically disagree. Except when it is. All told, government unions have spent an astonishing $96 million Pennsylvania government regularly collects and distributes tens of on politics over the past decade, collected with taxpayers’ aid. millions of dollars earmarked for politics on behalf of one special Clearly, public resources and politics are, indeed, mixing. interest group: government union leaders. Not coincidentally, these leaders also happen to be one of the state’s biggest political Paycheck protection would fix this ethical blind spot. spenders. In February, the state Senate passed SB166, which prohibits using This political money, both union dues earmarked for political public resources to collect money earmarked for politics. Under activity and political action committee (PAC) contributions, is the bill, government union leaders would still be able to collect deducted from workers’ paychecks—just like taxes—then forward- money and spend it on politics; they would just do it like everyone ed to government unions and their political organizations. else—without government help. In turn, union leaders have used PACs to give more than $40 Polling shows two-thirds of Pennsylvania registered voters support million directly to political candidates in the last ten years. In the paycheck protection, and 80 percent of union households agree 2016 election alone, they donated over $400,000 to successful that taxpayer resources should not be used to collect campaign Democratic candidates for State Treasurer, Attorney Gener- contributions. al, and Auditor General; in 2015, they directed $340,000 to With the support of the public and the Senate, state House mem- Democratic judicial candidates; and in 2014, $3.4 million went to bers must now take the next step by passing this bill and sending Governor Wolf’s campaign. it to the governor. If Wolf is serious about improving ethics in A comparison of government union spending with that of the Harrisburg and reforming state government, he will sign it. natural gas industry—often criticized for its heavy influence in Public resources and politics were never meant to mix. It’s time to Harrisburg—offers some crucial perspective. The eight largest close this legal loophole, once and for all. natural gas PACs spent $1.1 million during the 2016 Pennsylvania elections. The top eight government union PACs spent more than six times that amount—$7.1 million. 4 4 END PERKS FOR THE POLITICALLY CONNECTED By Bob Dick, Senior Policy Analyst The saying, “Third time’s the charm,” may need revising. Scranton RACP isn’t the only example. Commonwealth Foundation has is now on its fifth economic recovery plan and charmed hardly identified more than $800 million in corporate welfare in this year’s describes the results. For decades, Scranton residents have been state budget. promised solutions to the city’s long-standing economic struggles, but job growth and fiscal stability remain elusive. One of the biggest winners is the horse racing industry, receiving about $250 million each year from the Race Horse Development One of the most damaging of those false promises is govern- Fund.