PA’s Prepaid Tuition Program Under Fire

State Treasurer Robert McCord announced yesterday he is delaying increased premiums on Pennsylvania’s Guaranteed Savings Plan, which allows parents to purchase college tuition credits at current prices and redeem them when their student enters college.

The program, which currently has over 89,000 enrollments and a $1.1 billion dollar budget, is facing a deficit of over $222 million dollars due to lower than expected returns.

Chairman of the Senate Education Committee, Sen. Jeff Piccola (R-15), released a subsequent statement calling for exhaustive reforms of the Tuition Savings Plan. "There is absolutely no way the taxpayers of this Commonwealth can be responsible for any deficit this program may incur," Piccola remarked.

Rendell Retreats from Natural Gas Tax

Yesterday, Governor Rendell took another of his proposed taxes off the negotiating table. His announcement perfectly demonstrates the points made in my new commentary on Rendell's mixed energy policy.

Governor Rendell's retreat is a good sign as the budget battle continues, but the his statement, "We should have a severance tax, but not at the beginning" foreshadows a similar showdown next year and implies that industries do not grow when they are taxed . . . interesting observation Governor.

Meanwhile the left wing PennFuture defends the tax saying it will hit big (evil) corporations. But the left-wing Pennsylvania Budget and Policy Center defends the tax saying that it will not hit corporations subject to the 2^nd highest corporate income tax rate in the nation, but mostly small businesses.

In reality the natural gas severance tax would have crippled an emerging industry inhibiting thousands of potential jobs and income for rural families in northern PA.

Is Individual Mandate Worse than "Public Option"?

Cato's Michael Cannon has a commentary on the effects of an individual mandate to buy health insurance. His poster child is chief spokesman critic of Obama's health care proposals, Mitt Romney, who signed Massachusetts' individual mandate into law:

In the three years since Massachusetts enacted its individual mandate, providers successfully lobbied to require 16 specific types of coverage under the mandate: prescription drugs, preventive care, diabetes self-management, drug-abuse treatment, early intervention for autism, hospice care, hormone replacement therapy, non-in-vitro fertility services, orthotics, prosthetics, telemedicine, testicular cancer, lay midwives, nurses, nurse practitioners and pediatric specialists.

The Massachusetts Legislature is considering more than 70 additional requirements.

Those requirements can increase premiums by 14 percent or more. Officials further increased premiums by imposing new limits on cost-sharing.

"The effect," writes the Boston Globe, "has been to provide more comprehensive insurance than in most other states but also to raise costs." Premiums are growing 21 to 46 percent faster than the national average, in part because Massachusetts' individual mandate has effectively outlawed affordable health plans.

Call to Action: Budget Must Keep PA Competitive

The Pennsylvania Prosperity Project has a new action alert on the Pennsylvania budget, with a form to contact your legislators and ask lawmakers to "focus on making Pennsylvania competitive again" with a a budget "holds the line on spending and taxes."

New Study Shows Devastating Impact of High Corporate Tax Rates

The Tax Foundation, came out with a new study this month on the negative impacts of high state corporate tax rates. The results have coincided with previous research, showing that states with lower corporate income tax rates substantially boost their worker productivity and real wage rates. Given that Pennsylvania has the 2nd highest corporate taxes in the nation, the findings strongly suggest we should reconsider our corporate tax rates.

According to the study, "between 1970 and 2007, a one-dollar increase in the average state-local corporate tax rate caused a $2.50 dip in wages 5 years later, compared with lower-taxed states." The reverse is also true; a one-dollar decrease in the corporate income tax this year would bring a $2.50 increase in real wages 5 years later. With the state budget at an impasse, some lawmakers are suggesting the opposite; actually delaying a reduction in the Capital Stock and Franchise tax in a desperate attempt to fill the budget gap. Delaying relief for Pennsylvania businesses hoping to climb out of this recession could prove to be a disastrous mistake.

What's Wrong with Medicare

Defenders of national health care proposals try to make the claim - in response to critics - that government-run health care is pretty good, citing Medicare (and Medicaid).  So what's wrong with "Medicare for All"?

• Medicare's coverage is not that good
  
• Medicare recipients spend more per household (and a much a higher share of their income) on out-of-pocket expenditures than do non-Medicare households
• Over half of all Medicare recipients buy supplemental health insurance, or get it from their employer.  An additional 22% are enrolled in Medicare Advantage, with additional benefits and costs (though Obama is looking to gut Medicare Advantage).
  

• Medicare has higher administrative costs per person than private insurance.

• Medicare is going bankrupt, with $89 trillion in unfunded liability.

• Medicare underpays doctors and providers, resulting in:
  
  
  • An increasing number of doctors who refuse to accept Medicare patients.
  • Cost shifting - Medicare shifts billions in costs on to providers, which results in increasing premiums for private coverage.

The final point would be extremely important to consider when discussing expanding the number on government programs - i.e. it will drive up the costs of private insurance (and of course, their will be fewer left to shift cost on to).

Baby Boomers Dominate in State Legislatures

Interesting, if trivial analysis from NCSL on the age of state legislators. Only 4% of legislators nationally are under age 34.

They also have a tool with demographic profiles of legislators in every state.  Pennsylvania matches the US average with 4% of lawmakers in the young category (and I define "young" as my age or less, a category which is every growing).  The tool also includes, gender, ethnicity, religion, and occupation  - not surprisingly, almost 80% of Pennsylvania lawmaker list their occupation as "full-time legislators".

Philadelphia Sales Tax Increase Bad for Business and for Pennsylvania

Chris Freind writes on how the proposed increase of Philadelphia's sales tax from 7% to 8% (6% state rate, local rate to double from 1 to 2%) will harm the Philadelphia economy, as well as Pennsylvania.

The reality is that people will simply cross the city line to make their purchases, from TVs to refrigerators to washing machines. So not only will the city fail to realize the anticipated revenue of its tax increase, it will lose the sales tax in its entirety. But this isn't just a Philadelphia issue. When people cross into New Jersey, or better yet, Delaware (where there is NO sales tax), Pennsylvania will lose its 6 percent. And more people will be incentivised to use the internet to shop, yet another way to avoid the tax.

When will elected leaders realize that you cannot tax your way out of a recession? Taxes never lead to prosperity. They simply result in people and businesses fleeing to a friendlier location.

But this obvious truth is lost on Philadelphia's leaders.

Study after study show what the citizens of Philadelphia already know: that our great city is being devastated because of politicians who care more about themselves than the people they serve.

Philadelphia ranks as one of the least desirable places to locate. It levies some of the highest taxes of any city in the country. Its educational product is horrendous. 

Between 2000 and 2007, Philadelphia lost 4.5% of its residents, the largest percentage drop of any Top 25 city. From 1990-2000, the City of Brotherly Love's population losses were the third largest of the 243 cities with more than 100,000 people. Since 1970, the city has lost 265,000 jobs and 450,000 residents.

2009 SAT Scores by State

The College Board has released data on 2009 SAT Scores.  I've compiled the data into a spreadsheet of mean SAT scores by state. Among states (including DC) with 60% of students taking the SAT, Pennsylvania ranks 12th out of 17 states



Here is the Pennsylvania SAT profile. As you can see, while Gov. Rendell an others tout Pennsylvania's gains on the PSSA exams, the state has not improved average SAT scores.  Of course, that is pretty similar to the trend in national SAT scores.

There is also an interesting trend that would seem to indicate grade inflation nationally - a higher percentage of students report "A" averages, but average scores are lower from 10 years ago.