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Democrats, Republicans Both Talking Delaware Loophole

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A group of House Democrats is displeased with the new Republican-led attempt to close the so-called Delaware Loophole, but the two sides appear to be getting closer in the process.  The Delaware Loophole essentially allows large, multi-state corporations to avoid paying Pennsylvania business taxes.    

Back in January, Republican Rep. Dave Reed (R-Indiana) introduced a bipartisan bill aimed at closing that loophole through the ‘expense add-back’ provision.  But Democratic Finance Chair Phyllis Mundy (D-Luzerne) calls it window dressing.  “The language is so broad and riddled with exceptions that it’s ineffective and meaningless in terms of closing the Delaware Loophole,” Mundy explained at a capitol news conference on Wednesday. 

Phyllis Mundy

State Rep. Phyllis Mundy (D-Luzerne)

Mundy still believes the best way to go about that is through a process called ‘combined reporting,’ but she recognizes the political will isn’t there, and now advocates what she calls a better version of the ‘expense add-back’ provision.  She contends the Reed bill would actually create a ‘loophole within a loophole’ by allowing companies to deduct expenses they deem to be for legitimate business purposes.  “Corporations would have little trouble finding a reason to claim a legitimate business purpose in order to avoid paying their fair share of taxes.” 

Rep. Reed sees the new developments as a positive step.  “I am just glad that Representative Mundy has finally come to the conclusion that there’s not support for combined reporting in Pennsylvania, and that an add-back provision is the better methodology of closing the Delaware Loophole, and that the revenue should be used for tax fairness across the board,” Reed tells Radio PA.   

Both lawmakers support plans that would use the newfound revenue to gradually lower the state’s corporate tax rate from 9.99% to 6.99% over the course of six years.

Reed says that unlike combined reporting, the add-back provision would target only the companies actually using the loophole.  He anticipates a House Finance Committee hearing to be scheduled on the topic later this month. 

Currently 35-states use either ‘combined reporting’ or ‘expense add-back’ as a way to promote business tax fairness.

Voter ID Issue Back on Front Burner

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As the state Senate Appropriations Committee was preparing to consider controversial voter ID legislation, the Protect Our Vote coalition gathered in the capitol rotunda to urge lawmakers to reject the proposal.  The group also unfurled a roll of petitions filled with 13,000 signatures of voter ID opponents.  Copies of those petitions were then delivered to all 50 state senators. 

“It is an unfunded mandate to be passed along to the cities, towns and taxpayers of the commonwealth, and will not result in curtailing so-called fraud,” said Michael Brunelle, executive director of the SEIU State Council.  The coalition and its supporters say HB 934 is unnecessary, and it will deprive citizens of their right to vote. 

But the state would provide free photo IDs to eligible voters who need them, according to Secretary of the Department of State Carol Aichele.  “It is my commitment to make sure that everyone who wants a photo ID in Pennsylvania is able to obtain one,” she told the Senate Appropriations Committee last week.  The photo IDs would be churned out through PennDOT’s 97 drivers licensing centers, and the governor’s proposed budget has even carved out $1-million for non-drivers ID cards for voting purposes. 

The legislation would effectively require all voters to produce an approved form of photo ID every time they go to the polls.  Supporters say it would ensure integrity in the vote process, but critics say there’s no evidence of widespread voter fraud. 

The bill passed the House (108 – 88) last June.  Then, an amended version was advanced by the Senate State Government Committee (6 – 5) in December.  The Senate Appropriations Committee passed it late Monday (15 – 11).

Lawmakers Near Final Approval of Congressional Maps

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Pennsylvania will lose a Congressional seat in 2012, as the Keystone State’s population growth didn’t keep up with other states over the past ten years.  The General Assembly must now act quickly to approve the new congressional maps.  “If a congressional redistricting plan is not enacted by the end of this calendar year, it will cause chaos in the 2012 election cycle,” said Senate GOP Leader Dominic Pileggi.  During Wednesday night’s Senate debate, Pileggi noted that the process of circulating nominating petitions begins on January 24th. 

The Republican-drawn maps were unveiled earlier in the week, cleared the Senate on Wednesday night, and advanced out of the House State Government Committee on Thursday afternoon.  Up next is consideration by the full House. 

Democrats are lining up to criticize SB 1249 as blatant gerrymandering.   “I ask anybody who looks at these maps, are these districts contiguous or are they torturous?” said Rep. Babette Josephs (D-Phila.), the Minority Chair of the House State Government Committee. 

Appearing on Radio PA’s monthly Ask the Governor program, Governor Tom Corbett said this is the situation every ten year, no matter which party is in the majority.  “It’s incumbent upon the congressmen who represent those districts… to make sure that they pay attention to their constituents no matter where they are.” 

Corbett says the process is particularly difficult when one congressional district must be drawn out of existence.    In this case, the proposal would combine the districts of Democratic Congressmen Jason Altmire and Mark Critz. 

“We knew that the Republicans would use their control of the process to draw a map that that benefitted Republicans, but we did not expect them to abuse their power to this degree,” said Pennsylvania Democratic Chairman Jim Burn.

Tough New Abortion Clinic Regulations Could Soon Become Law

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Ever since a Philadelphia grand jury uncovered abhorrent conditions at the Women’s Medical Society clinic in West Philadelphia, state lawmakers have been working on response.  They’ve come up with an amended version of SB 732, a bill that would hold abortion clinics to the same licensing regulations as other surgical health care facilities.  “If they’re going to do a surgical procedure, they should be subjected to the same regulations as the other 212 ambulatory surgical centers,” says State Rep. Matt Baker (R-Bradford), the leading proponent of this language in the House. 

But critics say the regulations that govern ambulatory surgical facilities were intended for clinics that perform high-risk procedures.  “Abortion doesn’t have nearly the complications that other procedures do,” says ACLU of Pennsylvania Legislative Director Andy Hoover. 

The bill’s opponents argue that the would-be regulations are too onerous and costly – likely forcing many women’s health clinics to close their doors for good.  “As is said so often about other issues, we need to enforce the laws we already have,” State Rep. Dan Frankel (D-Allegheny) said in a statement.  Frankel’s amendment, which he says would have addressed the so-called ‘house of horrors’ clinic in Philadelphia, was defeated.  Frankel says the state simply failed to do its job inspecting that clinic. 

SB 732 passed the House, Tuesday, with a vote of 151 – 44.  It is expected to receive a concurrence vote in the Senate on Wednesday, its last scheduled day of session in 2011. 

The House also passed HB 1977, which would prohibit health insurers from covering abortions under forthcoming health insurance exchanges that are being created by the federal health insurance reform law.  It advanced out of the House with a 146 – 45 vote, and currently awaits Senate committee action.

Cash-strapped Cities Take Center Stage

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As PA’s list of financially distressed cities continues to grow, some say the system is broken.  “Fiscal distress is inevitable under existing state laws that govern municipalities,” says York Mayor Kim Bracey, while testifying before a joint panel of House and Senate committees.  Bracey was one of a group of mayors that converged on the capitol to urge lawmakers not just to tweak Act 47, but to take the necessary steps to keep cities out of it. 

State Senator Jane Earll (R-Erie) knows that governments of all shapes and sizes are under pressure.  “Really the discussion comes back to, what are the cost drivers forcing municipalities into the distressed status that we see increasing numbers falling into,” says Earll, who chairs the Senate Community, Economic and Recreational Development Committee. 

Many officials told the panel that difficult and unpopular decisions need to be made.  Reading Mayor Tom McMahon tells Radio PA that cities need a menu of local options to support municipal services.  “You can cut, cut, cut, and we can reduce our expenses, but at some point we need to diversify our revenue – not increase it necessarily – but diversify.” 

Mayor McMahon is President of the Pennsylvania League of Cities and Municipalities, which points to its 2010 Core Communities in Crisis Report.  That report lists multiple ideas for supporting municipal services, including a county option 1% local sales tax.  “We have not been able to get that for third class cities,” McMahon says, referring sales tax flexibility in Philadelphia and Pittsburgh. 

Other unpopular revenue options the report suggests to preserve Pennsylvania’s cities, include: a 10% local tax on the retail sales of alcohol, which could be tied to public safety services, and a “sugared drink” tax, which could be tied to local health programs.  Stakeholders are already lining up in opposition.  For instance, the Pennsylvania Beverage Association says the last thing we need in a down economy is higher taxes on our groceries. 

Beyond revenue, state law governing arbitration proved to be another hot topic at Thursday’s hearing.  The state Supreme Court recently told the city of Scranton that it must pay arbitration awards for police and fire unions, despite its Act 47 status.  Scranton Mayor Chris Doherty called the ruling a slap in the face.

High-Profile Immigration Bill Reaches House Floor

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Designed to keep public dollars out of the hands of illegal immigrants, SB 9 would require proof of citizenship before individuals can receive state welfare benefits.  Democrats on the House State Government Committee complained that it was drafted on anecdotes, not facts. 

Rep. Greg Vitali (D-Delaware) questioned Chairman Daryl Metcalfe (R-Butler) on whether there are any cost studies to justify the bill.  “My answer is we are spending hundreds of millions of dollars a year on illegal aliens in Pennsylvania, and we should stop spending hundreds of millions of dollars a year on illegal aliens,” Metcalfe shot back.  Metcalfe estimates there are 140,000 illegal immigrants currently living in the Keystone State. 

Committee debate got even more heated, Tuesday, when several Democratic members described the bill as “xenophobic.”  Metcalfe cut-off Democratic Chair Babette Josephs mid-sentence: “Representative Josephs, you’re out of order in using that term,” he chided. 

The committee amended and advanced SB 9 via a party line vote, with all Republicans voting for it.  The so-called ‘Proof of Citizenship for Receipt of Public Benefits Act’ passed the Senate (40 – 9) earlier this year, with some Democratic support.  It’s now poised for state House action.

PA’s Fiscal Watchdog Opposes Liquor Privatization Bill

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Auditor Genral Jack Wagner

Auditor General Jack Wagner addressed the media on Wednesday.

The proposal to privatize Pennsylvania’s wine & spirits stores is a bad deal for taxpayers and customers alike, according to Auditor General Jack Wagner.   “Would you sell a reliable asset that brings in a profit of at least $100-million dollars a year… losing 5,000 jobs during tough economic times?”  Wagner asked.  “I don’t think so.”  Wagner shared his concerns with reporters in Harrisburg before traveling to Philly to testify before the state House Liquor Control Committee. 

Wagner calls the Pennsylvania Liquor Control Board one of the few profit-making ventures in state government, and balked at estimates that Pennsylvania could generate an up-front windfall of $1 – $2-billion dollars by divesting its liquor stores.  “Wouldn’t it be an embarrassment if this legislation passed and we got virtually nothing for the LCB?”

While he’s not opposed to the concept of privatizing certain state operations, Wagner doesn’t think it makes sense in the case of the state-run liquor stores.  Wagner suggests modernizing the system as the preferred option, noting that state lawmakers need to take the handcuffs off of the PLCB. 

While the Auditor General doesn’t see the logic behind this privatization movement, Governor Tom Corbett says it starts with philosophy.  He says the LCB’s dual role of selling and regulating alcohol is a conflict of interest.  “We are enforcing the liquor laws, we are enforcing the drunk driving laws, we are enforcing the drinking laws, yet we have the main agency when it comes to liquor saying drink more,” Corbett told a recent Pennsylvania Press Club luncheon.  “Get out of the business.” 

The state House Liquor Control Committee is in the midst of two days of hearings on the privatization bill in Philadelphia.  HB 11 is scheduled for a committee vote in mid-December.

State Capitol Facing North Office Building

Words Do Matter

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Demonstrating that ‘words do matter,’ Governor Tom Corbett has signed legislation that updates Pennsylvania’s Mental Health and Mental Retardation Act of 1966.  The new law changes the words “mental retardation” to “intellectual disability.”  The bill passed both the state Senate and House with unanimous support.

This is the result of a self-advocate movement, according to Maureen Wescott, Public Policy Advocate at The ARC of Pennsylvania.  “This is what they choose to be called and identified by, and refuse to be identified by a negative terminology.” 

Executive Director of The ARC of Pennsylvania Maureen Cronin says Pennsylvania is joining the federal government and other states in striking ‘the R word’ from its statute.  “Because retarded, as you know, has turned into a derogatory, slang insult,” Cronin explains. 

The bill was sponsored by state Senator Andy Dinniman, a Chester County Democrat, who says it makes the language changes in all 34-pages of the act.  “Words do matter,” Dinniman said in a statement.  “They can either convey disrespect and ignorance or respect and understanding.” 

The new law takes effect immediately.

House, Senate Pass Marcellus Shale Bills

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A wide-ranging Marcellus Shale impact bill, similar to what Governor Tom Corbett proposed in October, passed the state House on Thursday afternoon.  The bill includes both a per-well impact fee and a series of new environmental regulations, but Democrats like Mike Hanna (D-Clinton) say it’s not enough.  “We must vote no on Governor Corbett’s tax bill because it is completely inadequate and can be more accurately characterized as a massive giveaway to the multimillion dollar oil and gas industry,” Hanna said during floor debate.  Hanna, however, was on the losing end of a 107 to 76 House vote.

The impact fee that passed the Senate on Tuesday (29 – 20) would charge drillers more money, over a longer period of time.  It would amount to an effective tax rate of 3%.  “We’re not the lowest in the country and we’re not the highest,” explained President Pro Tem Joe Scarnati (R-Jefferson).  “But we’re in competition; we’re in competition for jobs.”  In 2012, Senate Republicans say the impact fee would raise a minimum of $155-million. 

House and Senate Republicans must now iron out the differences between the two bills.  “What we have to do is get everybody sitting down at the table to talk about it, but we’re finally moving,” Corbett told a gaggle of reporters earlier in the week. 

Meanwhile, former Governor Ed Rendell is still backing a more significant severance tax on natural gas drilling.  “To my colleagues, both Republicans and Democrats in southeast Pennsylvania, if you vote for either of these bills and don’t insist on a real tax, you are courting political suicide,” Rendell said at a recent capitol appearance.  “Because you should see what the feeling is in southeast Pennsylvania.”

Cash

Bill Would Block House Members’ COLA

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Each winter state lawmakers cash in on a pay raise thanks to a 1995 law that grants legislators, judges and the governor annual cost-of-living adjustments.  Multiple bills have been introduced to block these pay raises over the years, but none has seen the light of day.  This year State Rep. Brad Roae (R-Crawford) hopes to change that with a bill so narrowly focused, he believes it can pass.  “My legislation would stop that COLA for state House members just for this year,” Roae tells Radio PA. 

State Rep. Brad Roae (R-Crawford)

State. Rep. Brad Roae

“I just think that as state House members we should lead by example and help save a little bit of tax money by doing the same thing that a lot of other government employees are doing.”  Roae’s referring to the new state worker union contracts that call for a one-year pay freeze and the voluntary pay freeze that some school districts accepted this year.  Non-union state workers, meanwhile, haven’t seen a pay hike in several years. 

HB 1952 has been referred to the House State Government Committee, where Roae thinks it has enough votes to advance.  If the bill can pass the House, Roae doesn’t foresee any problems with the Senate or administration, since it only affects state Reps’ pay.  Pennsylvania state lawmakers currently earn just under $80,000 a year, before pocketing any per diems.   

The COLA’s, which are tied to the consumer price index, would take effect on December 1st.