If there’s one word that can describe Tom Corbett’s 2013-2014 budget it would be “failure.” The governor’s 2013-2014 relied on a 3 legged stool which consisted of lottery privatization, liquor privatization and pension reform. This legislative package was designed to generate revenue to fund education and a transportation funding bill by the June 30th deadline, but this package was too large of a package for the General Assembly to take on in a 6 month span – which is really a 4-5 month period if you consider all the breaks the Assembly goes on.
The lotto privatization scheme was hung up in the courts. the liquor privatization plan passed the house but didn’t come up to a vote in the senate thanks to the lack of political will and the lobbying work of UFCW 1776 and the beer distribution industry. Pension reform wasn’t even considered.
Last year I spent some time in Harrisburg and after meeting with Democratic representatives one of the main issues they took up was to just vote “NO” on every policy proposal without really fighting for their own narrative. This idea worked because it was too much work to get done in too little time. With Governor Corbett’s upcoming 2014-2015 budget proposal at the end of the month, the Democratic caucus MUST go on the offensive for a shale tax, closing the Delaware Loopholes, fully restore public education and public higher education funding and other public initiatives because of the upcoming election. These policy initiatives must be taken up by House Minority Leader Frank Dermody, Senate Minority Leader Jay Costa and every Democratic gubernatorial candidate that is still in the race during this time.
Why should Dermody, Costa and the gubernatorial candidates be taking the lead? They should be taking the lead because Pennsylvania Budget Secretary Bill Lumberg – ERRRRR, I mean Charles Zogby – is already laying out the rhetoric that Pennsylvania’s budget deficit is the faults of greedy school teachers and retired state employees. Instead of allowing Zogby and Corbett to dominate the pension reform argument, Dermody, Costa and the gubernatorial candidates should bring up the fact the Commonwealth has neglected its legal obligations to contribute to the state’s pension funds (SERS and PSERS), and on top of that, they MUST argue that the shift from defined benefits plans – or pensions – to defined contributions plans – or 401k’s – over the past 30 years will trigger a massive retirement crisis for retiring baby boomers.
A recent Associated Press article on the impending word wide defined contribution plan crisis states:
Governments aren’t alone in cutting pensions. Corporations are, too. The traditional defined-benefit pensions they long had provided are vanishing. Companies don’t want to bear the risks and costs of guaranteeing employees’ pensions. They’ve moved instead to so-called defined-contribution plans, such as 401(k)s in the U.S., which shift responsibility for retirement savings to employees.
The problem with these plans is that people have proved terrible at taking advantage of and managing them. They don’t always enroll. They don’t contribute enough. They dip into the accounts when they need money.
They also make bad investment choices, often buying stocks when times are good and share prices are high and bailing when prices are low. Investment returns from defined-contribution plans are typically 0.76 percentage points lower than returns on defined-benefit plans, according to the consulting firm Towers Watson. That difference adds up: At a 5% annual return, $100,000 becomes $432,000 after 30 years. At 5.76%, it’s 24% higher — $537,000.
Many have raided their retirement accounts to pay bills. In the United States, 26% of workers with 401(k) and other defined-contribution plans take loans or make hardship withdrawals before they reach retirement, according to a study by HelloWallet, which offers online services that help people with their finances. Working Americans withdraw $70 billion annually from retirement accounts — an amount that’s 40% of the $175 billion put in. Employers add an additional $118 billion.
The next item on the governor’s probable 2014-2015 budget proposal will be liquor privatization. This item has liberals and others on the fence. Jon Geeting at Keystone Politics is in favor of privatizing the state liquor systems and having the state tax liquor transactions. I am on the other side of that issue because why kill the golden goose. Putting those differences aside, rushing to privatize a major state entity in a 5 month period as a potential revenue raiser is a really dumb idea because this is something that should take a year or two of actually thinking it through. Last year, the governor didn’t have the political capital to get this done and privatizing the state stores won’t get done this year, especially when moderate republican senators from Southeastern PA are up for reelection. If liquor privatization was to ever get passed, it won’t be until 2015 or it won’t be part of a logical budget plan.
The last item on Governor Corbett’s 2013-2014 budget was the lottery privatization debacle, which was killed in the courts by Attorney General Kathleen Kane. Governor Corbett tried to sell the lotto system to a British firm without seeking approval by the General Assembly and Kathleen Kane challenged that deal. It was ruled unconstitutional and hung over Corbett’s head for the whole year. A few weeks ago, the Governor’s office claimed that they will not be seeking to privatize the lottery system.
Since I don’t see the Governor pulling a rabbit out of a top hat, that leaves Governor Corbett’s office with two options. Governor Corbett can propose to raise taxes on the natural gas industry and close the Delaware Loophole or the governor can sustain his attacks on education by continuing the cliff funding of public education or higher education or actually try to cut their budgets for a third time in his first term. This is why Frank Dermody, Jay Costa and the gubernatorial candidates are important players in this upcoming budget battle. They can show registered democrats why they’ll remain a minority party for four more years or they can get ahead of the curb and fight for a referendum on Governor Corbett’s disastrous 4 years.