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Friday, September 04, 2009

Electric Choice Working in Texas and Michigan

Natural gas is at a 7 year low and consumers who have electric choice are cashing in. In Texas, consumers can shop for rates 25-40% lower than what they paid last summer.

The President of the Association of Electric Companies of Texas remarked:

The rates are "pretty competitive" in the deregulated market. Many of the rates are either comparable to, or lower than, rates charged by city-owned electric utilities, electric cooperatives or investor-owned utilities in traditional regulated markets.
In Michigan, the Chamber of Commerce in Grand Rapids points out the success of the state's limited electricity market and the need to remove competitive quotas that place 90% of businesses in each of the utility regions under monopoly control.
As expected, Chamber members are being negatively impacted by changes to PA 141, the Electric Choice and Reliability Act, that was repealed to re-regulate the electric energy market in 2008. The 10 percent cap enacted in the 2009 legislation limits the amount of business alternative energy suppliers can claim from Consumers Energy’s region. The 10 percent cap was reached last week [in the span of 10 months]. This means that any customer wishing to switch to a supplier other than Consumers will be put on a waiting list until another customer drops service from an alternative energy supplier. Many West Michigan commercial and industrial customers will be excluded from purchasing energy from alternative suppliers now that the cap is reached. Since Consumers’ rates are higher than the prevailing long term rates in the choice, this hurts their ability to compete.
Meanwhile, Citizens’ Electric Co. (whose rate caps have expired) has requested a rate decrease from the PUC. The rate adjustment will mean that a monthly bill for a residential customer using 500 kWh of electricity will decrease by $6.90 or 11.81 percent.

Economic Development Subsidies Fail

Today's Wall Street Journal writes on the failure of taxpayer-funded "economic development" grants - i.e. corporate welfare - in the state of Michigan.

The article relies heavily on a study by the Mackinac Center.

Thursday, September 03, 2009

No Correlation Between PA School District Spending and Performance

Tracie Mauriello of the Post-Gazette raises a source of dispute, via Twitter, on education spending vs. performance:

pgPoliTweets: Rendell: Ed achievement is correlated to ed spending. Senate Rs: Not so. Philly has high spending & low scores.
Correlation is pretty easy to test for (though mind you, it doesn't imply causation) using the newly released PSSA results from the Pennsylvania Department of Education for school districts and the latest data on Pennsylvania spending by school district (unfortunately 07-08 data).  For the record, I would have expected a small, but positive correlation; high-spending districts - or so the conventional wisdom dictates - have higher average income families, and higher incomes correlate very strongly with better academic performance.

But the correlation between total per-pupil spending and the percent of students proficient or advanced revealed remarkably little correlation - almost near zero in all age groups.

PHEAA Wrongfully Collected $92 Million from Taxpayers

PHEAA is being sued along with other student loan agencies for taking advantage of a federal government loophole allowing them to wrongfully collect $92 million. In the 1980's, the federal government enacted a subsidy program guaranteeing a 9.5% return on a limited class of student loans. By reusing older loans and packaging them with new ones, PHEAA reaped millions in profits at the taxpayer's expense.

When confronted with this serious case of fraud, the Department of Education didn't even attempt to recover the funds. A 2007 settlement with Nelnet--the worst abuser of the scheme receiving more than $400 million in over payments--did not require the loan company to repay the federal government. It was left to a DOE researcher, Jon Oberg, to bring the suit on behalf of the federal government.

PHEAA was among the first agencies to employ the scheme--clearing the path for other agencies to follow. The lawsuit implies PHEAA relied on the authority of the Education Finance Council to justify their practices; this is disconcerting since the group has close ties with the Department of Education and Republican staff on the House Education Committee.

It's amazing that such flagrant abuse of the system was disregarded for so long. This is a perfect example of why state and federal governments should not be in the student loan business.

What Does This Blog Post Inspire You to Do?

When I first heard of President Obama's planned speech to all students, I didn't think much of it. I imagined he'd say things like "Don't do drugs! Stay in school!" Of course, maybe I'm getting Obama confused with Mr. T.

But after reading more on this on blog posts from the Cato Institute, John Lott, and Charles Murray, watching the celebrity video with Ashton Kutcher and Demi Moore linking Obama to everything good, and especially after reading the lesson plans put out by the White House, I'm going to have to agree with the sentiment that this is "creepy."

(I would also agree that Obama's sentiments don't reflect the policies he is pursuing at the demand of the NEA, including killing the DC opportunity scholarship program)

According to the White House, younger students should ask:

Why is it important that we listen to the president and other elected officials, like the mayor, senators, members of congress, or the governor? Why is what they say important? ... What do you think the president wants us to do? Does the speech make you want to do anything? Are we able to do what President Obama is asking of us?
High school students are instructed to think about:
Why does President Obama want to speak with us today? How will he inspire us? How will he challenge us? ... Is President Obama inspiring you to do anything? Is he challenging you to do anything?
In that vein, I would like to pose the following questions to PolicyBlog readers:
  • How did Nathan Benefield inspire you today?
  • Does this blog post make you want you to do anything?
  • What do you like best about me?

A Missed Opportunity for Pension Reform - Continuing Generational Theft

Analysis of HB 1828 - the so-called Pennsylvania municipal pension reform bill (which includes a Philadelphia sales tax increase) facing the PA General Assembly - by Commonwealth Foundation senior fellow Rick Dreyfuss

CF Analysis of HB 1828

Wednesday, September 02, 2009

HB 80 Will Increase Energy Costs

Clean energy proponents are attempting to reignite the fire under HB 80, which would increase the amount of electricity utilities must produce from alternative energy sources. In a letter to the Inquirer, PennFuture claims that solar energy is free, while ignoring the cost of intermediate power sources when the sun doesn't shine.

Last week DEP Secretary John Hanger published a laundry list of alternative energy projects as proof that HB 80 would be beneficial, but if people and businesses are already investing in alternative energies, why do we need a mandate to force electric companies to use more alternative power sources?

Here is my response:

Mr. Hanger believes that mandating an increase in the amount of electricity produced from certain alternative energy sources Pennsylvania will attract more private investments and produce green jobs, creating a more competitive energy economy. These claims fail to distinguish between market competition, which responds to consumer demand, and competition for a growing pot of taxpayer funds.

More specifically, it is almost impossible to verify the promise of green jobs because there is no concrete definition of this widely used term. The phrase can be used for any position that is remotely related to alternative energy, including administrators in the DEP itself. In reality, jobs will be destroyed by increasing regulations on disfavored energy sources.

Passing House Bill 80 will cause either a reduction of the current energy supply, given that alternative energy produced only 5.7% of Pennsylvania's power in 2007, or dramatically raise the costs needed to fund new infrastructure and alternative energy sources that are expensive to produce. As a result, energy rates will increase just as consumers are bracing for the expiration of PA's energy rate caps.

The only way to ensure that clean technology is affordable is to keep the market flexible and open to innovation. Propping up the alternative energy industry with a plethora of government handouts and mandates is not sustainable, even if it does provide advantages over traditional energy producers.

Counting All Pennsylvania State Employees

A state lawmaker sent along a Patriot New article, in which Gov. Rendell cites the relatively low number of Pennsylvania state employees compared to other states, to find out where the numbers came from:

[Rendell]: I found it amusing when Governor Sanford was going through his problems, that he apologized to 65,000 state employees in South Carolina, a state half our size, and they have 65,000 employees and we have 77,000.
It is true that Pennsylvania ranks low among state in term of state and local government employees per capita - 478 per 10,000 residents, vs. U.S. average of 546 - but not so low as Rendell makes it out to be, as he is not using an apples-to-apples comparison.

The "77,000 employees" Rendell refers to is the current filled positions in the Pennsylvania state complement - but only positions under the Governor's control. According to the Census Bureau data on government employment, which has a nifty chart maker, Pennsylvania had 192,000 state employees as of 2007 (160,000 in full-time equivalent).  This is well more than twice South Carolina's total of 87,000.

Rendell's figure excludes the legislative and judicial branches, independent state agencies and authorities (like the Turnpike Commission), and employees in higher education institutions (85,000 according to the Census - I'm not sure if that includes the state-related schools like Penn State, or only the State System and Community Colleges).

Pennsylvania August Revenues Come in a Bit Short

The Pennsylvania Department of Revenue released the preliminary collections report for August - the state collected just over $1.6 billion, $19 million (or 1%) below estimate.

The consensus projection is 0-growth in revenue from last year, and it is still too early to evaluate this.  While both July and August were down slightly from last year, neither is a big collection month (September is), and the economy didn't really bottom out until last October. 

As mentioned here before, we probably can't make a good re-evaluation on revenue expectations until October or November - which may be about the time we actually get a state budget.