PA Budget Negotiations Continue Without FMAP Money: Lawmakers believe they can reach agreement by Wednesday’s deadline.

PA Budget Negotiations Continue Without FMAP Money: Lawmakers believe they can reach agreement by Wednesday’s deadline. 

 

With just 3 days left (6/27/10) until Pennsylvania’s Constitutional June 30 annual budget deadline, last Friday’s (6/25/10) announcement of the loss of Pennsylvania’s FMAP money makes it highly unlikely that PA Lawmakers will pass the State’s budget on-time. Negotiations continued through the weekend. Lawmakers still believe they can make Wednesday’s budget deadline. 

FMAP Money: On June 16, 2010 Pennsylvania’s Governor Ed Rendell warned that the State would begin laying-off as many as 1,000 of its 71,000 government employees, including teachers, as early as July, 1 if the additional $850 million in federal Medicaid assistance money (FMAP) was not approved in the new Federal Job‘s Bill. The Governor was counting on that money to limit the state’s FY2010-11 budget deficit to $1.2 billion– which would otherwise have to be made up with sharp budget cuts. 

The Jobs Bill: On June 24, 2010 the US Senate failed to approve the $23 billion American Jobs and Closing Tax Loopholes Act, (H.R. 4213) known as the Jobs Bill, or the extenders package. The bill provided for federal extension of unemployment benefits to hundreds of thousands of long-term unemployed workers at a time when 15 million Americans (9.7% of the workforce) are out of work. The bill also provided other emergency stimulus measures to save jobs; protect doctors from a 21 percent cut in Medicare reimbursement rates (possibly causing them to stop serving needy patients); and provided to the states’ additional Federal Medical Assistance Percentages (FMAP) program money so the states can continue paying Medicaid for the “poorest of the poor”. 

The Democrats: For the past two weeks, Senate Democrats led by Majority Leader Harry Reid (D-NV) attempted to push the Jobs Bill through the Senate after it had been stalled there for eight weeks. Reid filed for cloture on the debate with just days before a vote. Senate Republicans rallied their minority coalition that included some moderate Democrats. A 2/3 majority (66 votes) is needed for a cloture vote to end debate (filibuster) in the Senate. On June 24, 2010 the cloture vote failed 57-41 (short by 9 votes). 

The Republicans: According to Senate Republican Minority Leader Mitch McConnell (R-KY), Democrats were using this important legislation to add tens of billions of dollars in unrelated deficit spending at a time when the national debt (not the federal deficit) has reached $13 trillion for the first time in history. This equals nearly $42,000 for every man, woman and child in America. Check out the Republican counterproposal (6/10/10).  According to an ABC report , the sense in Congress is that for the first time in decades, there is no more money.  That Congress is broke wasn’t America’s best-kept secret. I have heard State Senator Andy Dinniman announce publicly for the past three years that Washington has no money left. So is this really why Congress is using the Jobs Bill to hold the line on pay-go rules. (Pay-go rules require every new appropriation to be paid for be an existing offset within the budget. This means that your appropriation would have to come from someone else’s funding.) If this was a turning point for Congress, they are a little late. 

The Economy: Without the Jobs Bill the economic forecast is bleak. Pennsylvania’s unemployment rate for May was 9.1% — only .6% better than the national average of 9.7%. Experts fear that Pennsylvania’s unemployment will grow if 1,000 state workers are laid-off in July, if thousands of nonprofits see their State contracts and grants cut, and if 1 million of the 15 million unemployed workers nationwide lose their $310 per week long-term unemployment benefits. 

What’s next? Last week’s failure of the cloture vote on the Federal Jobs Bill means that the Jobs bill will not be moving forward.– at least not in its current form. Its most important provisions may seek passage in separate bills. Sen. Olympia Snowe (R-ME) and others are now pushing for a separate bill to authorize the extension of federal unemployment insurance benefits and FMAP money for the States. This process could take weeks, if it even happens at all. States may not even get the FMAP funds they were promised if they get any at all. 

The PA State Budget: Governor Rendell’s original budget proposal for FY2010-11 (2/9/10) was $29 billion (That is $ 26.27 billion in state money plus $ 2.76 billion in ARRA money for a total of $29.03 billion). Without the $850 million FMAP money, the Governor’s budget proposal is over a billion dollars short. 

By Saturday night (6/26/10), House and Senate Democratic leaders said they would not approve a budget of less than $28.2 billion. Their plan included a $300 million increase for education. This would have required new revenue sources (tax increases). House Republican leaders were unwilling to support the 1% increase over last year’s $27.8 billion budget. Even at that level, Rendell claimed that it could lead to 1,000 teacher layoffs. 

Last week, Erik Arneson, spokesman for Senate Majority Leader Dominic Pileggi, (R-Delaware) indicated that the Senate Republicans would approve a budget of $27.5 billion. Their budget proposal takes into account the actual revenue that the state has received, and NO additional “revenue enhancements“ (pronounced “tax increases“). By Saturday night (6/26/10) Senate Republican leaders were willing to go as high as $27.8 billion with no tax increase, but that required cutting a Rendell priority of $354 million additional funding for school districts. By Saturday night, only $400 million separated Republican and Democrat positions on the state budget. If the agreement between the Governor and the four legislative Caucuses leads to an on-time budget, the total state budget for FY2010-11 would likely be $27.9 billion. 

According to the Harrisburg Patriot-News Editorial Board, “$28 billion is about as high as the state budget can reasonably go. The easy revenue sources have already been tapped, the Rainy Day Fund has been depleted, and there is no appetite in the Legislature for broad-based tax increases on individuals or corporations. To further chop programs — especially in social services and environmental monitoring — at a time when so many in the state are struggling and our gas drilling industry is expanding at a breakneck pace would be unwise. Make no mistake, there still will have to be painful cuts to balance even a $28 billion budget, but to go much lower than that would be to start balancing our state’s budget in detrimental ways to our citizens.”

As of last week, there was much speculation that the state would raid $340 million of its tobacco settlement funds, which are part of a $206 billion multi-state settlement with tobacco companies to compensate for smoking-related health expenses.  While there is much satisfaction over the $261 million that the state collected from its tax amnesty program, there is also much concern that creative accounting tricks could put-off a few hundred million in debt until next year’s budget. Beyond that, cut will most likely come from nonprofit programs. 

OPEN LETTER TO ALL NONPROFITS: 

AN URGENT WARNING WAS SHARED WITH ME BY A HIGH RANKING MEMBER OF THE GOVERNOR’S STAFF. I was explaining that another budget impasse like the one we had we had last year would kill smaller nonprofits with state or county contracts or subcontracts, and exacerbate the hole in the social safety net. Once these nonprofits scale back or close their doors, the business interruption costs, interest on borrowed money, and the loss of skilled labor can not be recovered– not to mention the impact on the communities they serve. His response was poignant and extremely concerning. He said “Unless nonprofits get their butts in gear and lobby hard for revenues and against draconian funding cuts, they will be closing their doors for good.” I am not sharing this with you lightly. THE SITUATION IS SERIOUS. 

Budget Impasse: So how long will it take to pass the state budget this year? What happens if lawmakers can’t get the job done by June 30? That’s the 28 billion dollar question. Last year (2009), it took the PA legislature an additional 101 days after the June 30 Constitutional deadline to pass the state budget. For three and a half months, the State withheld billions of dollars in payments that it owed for services rendered on contracts and grants. While big agencies debated funding priorities and lobbied to secure their budget line items, thousands of smaller nonprofits that relied on this money to service state or county contracts or grants, were forced to cut services, lay-off staff, or close their doors. Counties, schools and nonprofits continued to provide vital services in the absence of state funds, but at their own expense. Unlike counties and schools however, most nonprofits are small organizations, lacking sufficient reserves to absorb the cost of late government payments on contractual obligations. Nonprofits that survived the 2009 budget impasse, discovered the hard way that bridge loans must be paid back with interest; furloughed workers may never return; and late fees and business interruption costs depleted any reserves they had left. The result was cuts to human service funding, fewer nonprofit services, and an angry electorate who lost faith in State government. 

Budget Reforms: The 2009 Budget Impasse demonstrated that the only sure way to prevent another impasse is to reform the budget process.  Read Budget Process Reforms Can Prevent a Budget Impasse.

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Philadelphia’s New Lobbying Law Silences Grassroots Advocacy

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Storm clouds gather of Philadelphia's City Hall

Storm clouds gather over Philadelphia's City Hall

UPDATE (6/17/11): On June 15, 2011, the City of Philadelphia’s Ethics Board held a public meeting to hear comments on the city’s proposed Regulation No. 9 of the City’s recent lobbying ordinance. The ordinance was unanimously approved by the City’s Ethics Board in June 2010, but the registration and reporting requirements were not scheduled to take effect until July 1, 2011.

Now, just days before the proposed regulations would take effect, Philadelphia’s Bar Association and Chamber of Commerce are expressing serious concerns. While the Bar Association objects to lobbying regulations of lawyers that are engaged in the practice of law, the Chamber of Commerce objects to the regulations’ restrictions on small businesses and individuals.  Even the Committee of Seventy, one of the chief proponents of the lobbying law, offered amendments to both the regulations and the underlying law at the June 15th meeting. The Philadelphia law and regulations were drafted using the Pennsylvania law and regulations as a template.  Not surprisingly, the arguments against the Philadelphia law and regulations are the exact same arguments that I and others used (with some success) to oppose the state’s lobbying law and regulations. Philadelphians may have to learn these lesson the hard way.

[UPDATE: (7/29/11)] Due to these objections and many others, the Philadelphia Ethics Board did NOT vote to approve the proposed regulations. Instead, the Board stated that they expect to schedule another meeting within several weeks to review the public testimony and take final action on the regulations.

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THERE IS STILL MUCH THEY HAVEN’T HEARD.  It’s your right to petition city hall, to talk to your local government official and to engage in grassroots advocacy! Lobbying laws that are vague, complicated, or costly to comply with, chill advocacy rights for small businesses, smaller charities and average taxpayers.

URGE THE BOARD TO (1) raise the registration and reporting threshold to $5,000 per reporting period; (2) lower the registration fee to $100; (3) simplify requirements for tracking expenses; (4) lower the penalties to $50 per late day, maximum $2,000; and (5) reduce the ban on lobbying from 5 years to 2 years.

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Read my updated ANALYSIS below.

Also read the following:

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ANALYSIS (Updated 6/17/11)

On June 2, 2010, the City of Philadelphia added its name to a growing list of American cities that have enacted lobbying registration and disclosure laws. After watching New York and Pittsburgh enact lobbying laws, Philadelphia followed suit, but with a much stricter law — based on the current PA State law enacted in 2006. City officials hoped that this new law would help end corruption by their own City Council members.  By July 1, 2011, citizens, lobbyists and organizations seeking to influence Philadelphia city government must formally register with the City and disclose the how much they spend lobbying what issues and to whom. Regulations to carry out this new law will be promulgated shortly. Unfortunately, Philadelphia’s law as it was enacted, has the potential to do more harm than good.

Lobbying laws help. Generally speaking, lobbying laws are helpful. Lobbying laws improve transparency and accountability from our elected officials. They put on record who is influencing government policy decisions, on what issues, and how much they are spending to influence those decisions. This increased level of transparency in city government allays anxieties about undue influence by special interests. Elected officials also benefit from lobbying disclosure because it lets them know “where the hits are coming from”, so they can respond strategically. Organizations like the Committee of Seventy in Philadelphia and Common Cause of Pennsylvania (based in Harrisburg) are the chief proponents of lobbying registration and disclosure laws.  And to be fair, Common Cause has been very effective on this issue, in the name of preserving Democracy.  However, the questions to ask, are how much information is truly necessary, for whom, for what purpose, and at what cost?

Am I a lobbyist? You may be a “lobbyist” under Philadelphia’s new ordinance and not even know it. If the City’s Ethics Board approves the regulations (which could be as soon as July 1, 2011, you may need to register with the city, track your communications and expenses, and publicly disclose this information online. Still skeptical? Read the law.

The Philadelphia law. The Philadelphia lobbying law requires annual registration and quarterly expense reporting online by any person organization or business that spends more than $10,000 per year ($2,500 per calendar quarter) lobbying Philadelphia City government.  Lobbying is defined as any effort to influence legislative or administrative action of city officials or employees including direct or indirect communication, incurring office expenses; and providing any gift, hospitality, transportation or lodging to a city official.  The city law defines “Lobbying” as direct and indirect communications, as well as any gifts, hospitality or transportation expenses given to city officials. “Direct Communication” is any effort, written, oral or by any other medium, made by a lobbyist or principal, directed to a city official or employee, the purpose or foreseeable effect of which is to influence legislative or administrative action. “Indirect Communication” is any communication to the general public for the purpose of disseminating or initiating a Communication. Indirect communication includes mailings, telephone banks, print or electronic media advertisements, billboards, publication or education campaigns. When calculating the value of direct and indirect communications (for purposes of disclosure) the value of personnel and office expenses used to support these activities must be included. Reportable office expenses include office space, equipment or supplies. “Personnel Expenses” include any salaries or other compensation such as benefits, vehicle allowances, bonuses or travel expenses paid to a lobbyist, staff or consultant for research, monitoring, public relations, strategic or technical support, or clerical and administrative support. So you can see from these definitions that this law is much broader than the traditional federal definition of lobbying.

Who is exempt?  While the Philadelphia law is broad, the law provides a few exemptions. Individuals who spend less than $2,500 and less than 20 hours lobbying in a calendar quarter (3 months), need not register, track, or disclose their communications. These individuals are exempt from lobbying registration because their lobbying is “incidental” to their regular employment. “Incidental” is measured using a good faith prorated estimate of the value of time that the employee devoted to lobbying during that period. That said (which is a mouthful in itself), the value of the employee’s time and activities must still be reported under the employer’s lobbying disclosure, if the employer is required to report.

What’s wrong with the law? Philadelphia’s new law is based on the current State lobbying law. By using an existing law as a template, Philly also inherits the problems inherent in that other law. The state law took approximately 4 years to write, and another three years to develop regulations. By most accounts, it is still a “work in progress”.  Now Philadelphia’s lobbying law has the same problems: (1) Threshold is too low; (2) Registration fee is too high; (3) Compliance is too complex; (4) Penalties are too severe; and (5) Banning lobbying for up to 5 years is extreme.  Taken as a whole, Philadelphia’s new lobbying registration and disclosure law chills advocacy right of small businesses, smaller charities (thousands of them) and individuals (average taxpayers without “big money backers”).

Here’s what’s wrong with the law:

   (1) Threshold is too low. The Philadelphia law, requires registration and disclosure if a person expends over $2,500 per calendar quarter (or $10,000 per year) communicating with city government officials or employees. This is identical to the state’s threshold. However, the devil is in the details. It captures all direct communications as well as grassroots activity, research time prorated hourly, staff support time, and other overhead such as computer use, telephone rental, and office square footage. When calculating all of this together, a registrant reaches $2,500 very quickly– especially in Philadelphia where transportation, parking and rental space can be pricey.

  (2) Registration fee is too high. Initially the State law set the registration at $100 for a two-year registration period. A regulation increasing the registration fee to $200 for a two-year period was just approved by the Independent Regulatory Review Commission on June 3, 2010. The Philadelphia law however, carries a $500 per year registration fee –nearly 5 times the state fee. This is basically pay to play, and is beyond the reasonable means of the average person.

  (3) Compliance is too complex. Compliance requires specific tracking of every phone call, email and minute researching the issues, determining which category in which to report these activities, as well as compiling and filing quarterly expense reports and retaining source documents for 4 years. Each one of these tasks takes a substantial amount of time, adds burden, and adds cost.

  (4) Penalties are too severe. Any person who violates any provision of the new law or who makes a material misstatement or omissions in any filing could receive a civil fine of up to $2,000 for each violation. Any person in violation of the law could forever be disqualified from holding any elected or appointed City office or employment with the City, its agencies, authorities, boards or commissions.

* In 2011, a bill was proposed in the PA State House to significantly increase penalties for material nondisclosure under the state’s lobbying law. Read: (2/22/11) New PA Lobbying Penalties Bill Would Chill Grassroots Advocacy, for a clear example (albeit at the state level) of how the threat of high penalties could shut down grassroots advocacy.

  (5) Lobbying ban is extreme.  Additionally, any person in violation of the new law may be punished by debarment from any contract with the City for up to three years and prohibited from lobbying for up to five years. Being banned from lobbying for financial compensation for up to 5 years is excessive.

A more detailed analysis of the law is posted on PAGR’s website.

The Result. Philadelphia’s new lobbying registration and reporting law chills advocacy rights for small businesses, charities and average citizens.  This law silences advocacy of mom & pop shops, the handicapped, the homeless, and the charitable nonprofit organizations that assist them. The $500 registration fees and is just too expensive for small grass roots organizations, charities and individuals trying to make a difference. Hundreds of small Philadelphia charities operate on the front lines of society’s problems, possess specialized knowledge and experience. These critical grassroots organizations will be less willing to work with the City to innovate solutions, and will simply withdraw from the public arena. After all, why would they want to put themselves on the hook for potentially thousands of dollars in fines and negative publicity for a vague law that is open to multiple interpretations and even abuse of authority? When penalties are so steep that they actually inhibit compliance, the Citizens of Philadelphia lose.

HERE’S MY SOLUTION:

(1) raise the registration and reporting threshold to $5,000 per reporting period;
(2) lower the registration fee to $100;
(3) simplify requirements for tracking expenses;
(4) lower the penalties to $50 per late day, maximum $2,000; and
(5) reduce the ban on lobbying from 5 years to 2 years.

Contact David Ross at davidross@davidarossandassociates.com.

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About David A. Ross, J.D. Since 2006, David Ross has been nearly a lone voice advocating that strong lobbying laws silence advocacy of small businesses, grass roots organizations, charities and individuals trying to improve their communities. As Public Policy Officer of the Pennsylvania Association of Nonprofit Organizations, Ross organized coalitions, drafted and submitted comments for the record, testified on proposed regulations, and negotiated with members of the State’s Lobbying Regulations Committee to improve the proposed regulations.  Eventually, the Regulations Committee acknowledged Ross’ concerns, but determined that the Committee was limited in their ability to solve the problem through the regulations.  Instead, they felt that the underlying law needed to be amended to take into account the needs of smaller businesses and nonprofits that engage in grassroots advocacy.  Ross’ work continues at the advocacy consulting firm, David A. Ross and Associates. Contact David Ross at davidross@davidarossandassociates.com.

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